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Monday, 2 December 1985
Page: 2653


Senator WATSON(3.41) —I move:

That the Senate take note of the paper.

The International Monetary Fund was established in 1945 to promote international monetary co-operation and to provide temporary financing for member countries experiencing balance of payment difficulties, thereby promoting an orderly exchange arrangement. Australia is one of the 148 member countries of the International Monetary Fund and as such our quota determines both our obligation to provide resources to the IMF, and our voting power, and our entitlements to financing facilities and to receive allocations for special drawing rights from the IMF. Australia's financial transactions with the Fund in 1984-85 included incurring a maintenance of value obligation to the Fund and the use of the Australian dollar under the Fund's quarterly operational budgets and payment of SDR charges. It is to these three particular aspects that I wish to direct the Senate's attention.

The SDR is an international reserve asset created by the Fund whose value is defined and calculated as the value of five major currencies-the United States of America dollar, the Deutschmark, the Japanese yen, the French franc and the pound sterling. In July, the falling value of the Australian dollar against the value of the SDR necessitated the payment by Australia to the Fund of a considerable amount of money-$548,586,365.99-in order to maintain the SDR value of the Fund's holding of the Australian dollar. This is a tremendous price to pay for a falling Australian dollar. In other words, if the value of a member's currency depreciates against the SDR in the course of a year, the member has to increase the amount of the currency which has been lodged with the Fund. This is just a price that the Australian Government has had to pay for the falling Australian dollar and for its poor economic management.

This payment was made by issuing to the Fund an Australian dollar denominated, non-interest bearing and non-negotiable promissory note to the value of $480,352,012.28 by crediting the remaining amount to the accounts that the Reserve Bank of Australia holds on behalf of the Fund. Again, one of the problems we have to acknowledge is that this indebtedness not only creates increased obligations to outside organisations such as the International Monetary Fund, but also that our interest payments to foreign financiers for public sector accounts or debts totalled $1.9 billion in 1984-85. Of course, our growing borrowings impose an increasing strain on Australia's balance of payments. The more money the Government soaks out of the domestic capital market, the less that is available to the private sector market. I would also like to quote from the accompanying Press statement from the International Monetary Fund, which says:

While the external debt problems of many developing countries remain serious, the Committee felt that good progress had been made in the implementation of the co-ordinated strategy of debtors and creditors to tackle these problems within the framework of adjustment programs-a development that has been facilitated by the recovery in world trade. The Committee stressed that a satisfactory resolution of debt problems would continue to require close co-operation among all parties concerned. In this connection, it is important that reasonable economic growth be maintained in industrial countries, that real interest rates come down . . .

The Press release states further:

The major industrial countries have a special responsibility to pursue policies that result in noninflationary growth, and permit developing countries adequate access to markets.

I think this is a real lesson that Australia has to acknowledge in this particular area. On the other hand, the borrowing countries themselves have to make a fundamental contribution by perservering with programs of economic adjustment that strengthen their external position-another lesson for Australia from the IMF.

In conclusion, I would like to mention the problem that the interest and principal repayments on our burgeoning debt has increased at a very rapid rate from $1 billion in 1974-75 to $10 billion in 1984-85. One of the problems with this increasing overseas indebtedness in that the funds have been used increasingly for current consumption rather than for productive investment. The fastest growing element of that is the Commonwealth sector-the Government sector-in this burgeoning deficit. Until the Government takes appropriate steps to overcome this problem, we are going to have a serious economic crisis in this country.

Question resolved in the affirmative.