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Wednesday, 21 September 1949

Mr LANG (REID, NEW SOUTH WALES) - In a broadcast on Monday morning the Prime Minister stated that the Australian Government had decided to retain the existing exchange rate between sterling and the Australian pound and to devalue the Australian pound in relation to the dollar in the same proportion as the English pound had been devalued. "When did the Australian Government reach that decision? Was Cabinet consulted prior to the Prime Minister's announcement and after the British Government's decision was known? If Cabinet was not consulted, how did the Australian Government reach its decision? Did the right honorable gentleman consult the

Governor of the Commonwealth Bank, Dr. Coombs, at a conference in a car in a Sydney street on Saturday? Did he inform Dr. Coombs of the proposed move, or did Dr. Coombs inform him? Does the Commonwealth Bank act as the agent of the Bank of England in these matters ? Who controls the dollar pool for countries in the sterling bloc - the Bank of England, the Chancellor of the Exchequer, the International Monetary Fund, or the World Bank, or do the individual countries control their own dollar resources ?

Mr CHIFLEY - There had been Cabinet discussions at various times about what should be done in the event of any devaluation of sterling. The Chancellor of the Exchequer had intimated on a number of occasions that the United Kingdom Government did not intend to devalue sterling but I, and I think other Ministers, had formed the impression that a devaluation of European currencies, or perhaps other economic circumstances, might ultimately result in the devaluation of sterling although I agreed entirely that there was absolutely nothing to be gained .at that time by devaluation. The Australian Government discussed this matter at considerable length on two or three occasions, although there was no such discussion during the last six weeks or so. Finally, after I had obtained the opinions of Ministers regarding the course of action that should be adopted in certain eventualities, Cabinet left to me the making of any decision, keeping in mind the opinions that Ministers had expressed concerning the possibility of devaluation.

Mr Holt - Irrespective of the rate?

Mr CHIFLEY - I do not think that I need go into all the details. Cabinet left the making of decisions to me, knowing that I was aware of its opinions. The Commonwealth Bank was not informed by the Bank of England or by the United Kingdom Government of any change, or possible change, in the rate of exchange. That information, when it finally arrived, I think last Friday or Saturday, was conveyed only to me by the Prime Minister of the United Kingdom. It is perfectly true that later I did discuss with the Governor of the Commonwealth Bank and the Deputy

Prime Minister the matter of the rate and what should be done about it. The Governor of the Commonwealth Bank came into the matter because if there was to be an announcement by me on Monday morning, it was essential to find out whether it would be necessary to close the banks on Monday, as was done in a lot of other countries. I did not desire the banks to be closed merely because exchange transactions could not be carried through. That is what I discussed with the Governor of the Commonwealth Bank. It is also true that I arranged with him that he should make a statement immediately after my statement on the mechanics of the banking arrangements. That was done. The decision on the rate was made entirely by the British Government. I understand that the Bank of England was not informed. Anyway, exchange rate control rests with the Lords of the Treasury in the United Kingdom. The Bank of England acts as agent for the British Government. That arrangement did not originate with the present British Government; certainly it existed during the time of the Churchill Government, and' I think its introduction dates back to the time of the Chamberlain Government. Under the arrangement, decision on exchange and the control of foreign exchange is a matter for the Treasury. I do not think I can supply the honorable member with any further information other than to say that, acting on behalf of the Government, and knowing the minds of my colleagues, I made the decision.

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