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Thursday, 20 May 1965

Senator BISHOP - When the Minister for Civil Aviation (Senator Henty) introduced the Bill, he indicated that at the annual meeting of the Board of Governors of the Fund in Tokyo last year, which the Treasurer (Mr. Harold Holt) attended, it had been decided that Australia should accept an increase of 25 per cent, in its quota and that there would be special increases in the quotas of 16 member countries to bring their quotas into line with those of comparable countries. The Minister also mentioned that Australia, had on three occasions made drawings from the Fund and that the situation externally was serious enough for the need to support the Fund to be recognised; that the United Kingdom very recently had made drawings from the Fund totalling 2,400 million dollars, and this was an additional reason why there should be the greatest support for the Fund; and that Australia would have drawing rights totalling £A290 million. The Minister very properly indicated that the Fund was a necessary adjunct to trading and stability and that it was an insurance against balance of payments difficulties of a temporary nature. We agree with this general approach to the question. When the Chifley Government introduced the legislation it sought to persuade the United Nations to encompass the objective of full employment and economic stability. A device was established to enable member nations to draw funds to offset emergency problems or balance of payment problems of a temporary nature.

While the Opposition does not oppose the Bill, it seems to me that while the Fund is serving a useful purpose it is limited, and self-satisfaction as to our ability to draw upon the Fund should not be of great comfort to us, because we must have regard to still wider problems that face this country and, for that matter, the United Kingdom and the United States of America. On this occasion some mention should be made of the wider problems that face Australia. In view of the late hour, I do not intend to occupy very much time on the question, because the various matters involved have been placed on record in another place. While the Government has suggested that our international reserves are very satisfactory, it is obvious that our position is not very sound. Our balance of payments position is relatively good only because we are dependent on the inflow of capital. This is illustrated by a statement in the " Treasury Information Bulletin" of January 1965, which reads -

Australia's holdings of gold and foreign exchange at the end of December 1964 amounted to £825 million, a decline of £13 million in the December quarter and of £30 million in the first half of 1964-65. Exports in the recent December quarter were £19 million lower in value than in the December quarter of 1963, while imports were £79 million greater. Whereas exports exceeded imports in the December quarter of 1963 by £96 million, in the recent December quarter imports exceeded imports by £2 million. On current account as a whole there was a deficit of £70 million in the recent December quarter compared wilh a surplus of £38 million a year earlier.

In many debates we have made it a point that there ought to be some reassessment by the Government of this dependency on capital from overseas. There has been some slight recognition of the situation. In a letter dated 12th March 1965 to the President of the United States of America, the Prime Minister (Sir Robert Menzies) stated -

Ordinarily Australia has a large current account deficit with the United States. In 1962-63 Australia's exports to the United States totalled 297 million dollars while her imports from the United States amounted to 478 million dollars. Her net invisible payments to the United States in that year were 181.2 million dollars giving a deficit on current account of 362.2 million dollars.

This current account deficit with the United Slates has been offset in part by capital inflow from the United States, most of it on private account. In 1962-63, the annual inflow from the United States and Canada (by far the greater part being from the United States) of private oversea investment (including undistributed income) in companies in Australia was 201.6 million dollars, and this increased to 220.2 million dollars in 1963- 64. In the latter year, the inflow from the United States and Canada was not far short of half of the total of 481.6 million dollars of private oversea investment in companies in Australia.

In this connection, we feel constrained to point to the contrast between the rapid expansion of the United States exports to Australia - Australia now being the fastest growing of the United States major commercial markets - and the manner in which United States policies impede Australian efforts to expand exports to the United States of some major Australian export commodities.

The position is not very satisfactory. Australia must reassess its position in relation to its dependence on overseas investment. We do not resist the importation of capital when it will produce wealth for Australia but we object to the continuing dependence on funds which create a liability for the future.

In his speech when presenting the Budget for 1964-05, the Treasurer reported -

Externally, the results of the year were quite spectacular. Exports reached £1,374 million which was £309 million above the high total of the previous year. Even though imports rose strongly in the latter part of the year, our receipts from abroad greatly exceeded outgoings and our overseas reserves increased by £228 million to a total of £854 million. By a considerable margin, that is the largest amount of overseas reserves we have ever held at the end of a financial year.

I want to refer to a document which has been prepared by the Bureau of Census and Statistics titled "Appendix II - Balance of Payments - Summary ". The document provides figures for the years 1949 to 1964 but I shall refer only to those for 1964. In our current account the value of our exports amounted to £1,372 million and our imports to £1,117 million. When we take account of the invisible credits and invisible debits which have been estimated by the Bureau we have a balance on current account of minus £13 million. This position is restored by the inflow of investment from overseas which totalled £215 million. There was a net identified capital inflow of £199 million. We believe that this state of affairs should concern us deeply. It has been illustrated elsewhere. We have such strong international reserves only because we are dependent on continuing capital inflow.

The Opposition has asked the Government on many occasions to reassess its position. Wc do not complain about continued support for the International Monetary Fund. We think that basically it was formed on good premises. The schedule to the Act sets out its objectives as the organising of co-operative action between member countries and the provision of a fund upon which member countries suffering from termporary balance of payments problems can draw. We believe that it is necessary for the Government to consider the wider field. In this wider field we are interlocked with the United Kingdom and the United States of America in matters which have been the subject of representations. The factors I am mentioning have been recognised by the Treasurer. In the statement which he circulated to members of Parliament following his visit to Washington he made certain comments which support the approach that we make to the inflow of foreign capital. On page 24 of the statement he said -

Local borrowings by overseas controlled organisations are, on the other hand, different in certain respects from share issues by such bodies since they carry a commitment to pay interest, normally at fixed rates, instead of dividends and the Australian lenders have no standing in the management of the enterprise.

We would not, for example, wish to see money borrowed in Australia by overseas interests for the purpose of facilitating the remittance of funds abroad. That would amount to an export of capita] and, in the main, we are not in a position to become exporters of capital except perhaps for limited and specific purposes which are of clear advantage to Australia.

The Opposition puts to the Government that we should have regard to this situation. We should make a firm analysis of our position in relation to overseas borrowings, not wishing to retard borrowings which will help to produce wealth in Australia but rejecting by every means investment in Australia which will be a liability on future generations. 1 know that this aspect has been mentioned by the Deputy Prime Minister (Mr. McEwen) and by some Government members, but there has been no positive Government action. We have given expression to it. The Opposition has also suggested an inquiry into franchises which operate in Australia which prevent Australian companies, subsidiaries of overseas organisations, exporting to near markets.

These are the general broad submissions that the Opposition makes. We do not intend to hinder the passage of the Bill. Rather are we trying to relate the main purposes of the Fund to the wider purposes of planning, having regard to our dependence on overseas borrowings which are not, to the extent that they should be, creating wealth in Australia. Otherwise we raise no objection to the Bill.

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