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Wednesday, 24 September 1958

Mr MENZIES (Kooyong) (Prime Minister) . - I move -

That the bill be now read a second time.

In this bill, Parliamentary approval is sought for a borrowing of 13,000,000 dollars by the Commonwealth from the Chase Manhattan Bank of New York and associated banks to finance the purchase of aircraft and equipment by Qantas Empire Airways Limited. Legislation is required to appropriate the loan fund to enable the proceeds of the loan to be paid over to Qantas, and to appropriate the Consolidated Revenue Fund to ensure that principal repayments and interest and other charges due on the loan will be met. The loan agreement with the Chase Manhattan Bank was signed in New York on 17th June by the Australian ConsulGeneral, acting on behalf of the Commonwealth.

This borrowing will furnish part of the dollar funds required by Qantas for the purchase of five Lockheed Electra turboprop aircraft and related spare parts and equipment. As payments are due on these aircraft, the Commonwealth will receive advances from the lenders and will re-lend these amounts to Qantas. Under a formal agreement to be entered into with the Commonwealth, Qantas will assume full responsibility for the payment direct to the lenders of all interest charges and principal repayments on the loan. However, other charges associated with the loan will be met in the first instance by the Commonwealth, and these will be reimbursed by Qantas.

As already explained in connexion with the Airlines Equipment Bill, it was decided, after the loan from the Chase Manhattan Bank had been arranged, that Tasman Empire Airways Limited should purchase three Electras, one of which would be made available to Qantas on a charter basis from time to time. Qantas accordingly needed to operate only four Electras in its own name. As the loan agreement specifically covered the purchase of five aircraft, the full consent of the lenders was obtained for Qantas to transfer one of the Electras to TransAustralia Airlines, which has also decided to purchase two of these aircraft. A bill covering a borrowing on behalf of T.A.A. to finance the purchase of its second Electra will be introduced into the House immediately after the present bill.

The sale of the fifth Electra to T.A.A. did not require an amendment of the loan agreement. However, the agreement has been amended, as indicated in the letter appearing as the second schedule to the bill, in order to permit advances to be made to the Commonwealth, and thence to Qantas, in units of 1,300,000 dollars instead of 1,000,000 dollars as originally agreed. This amendment was made to meet the mutual convenience of both the lending banks and of Qantas. As this was a borrowing in the name of the Commonwealth under the authority of the Commonwealth loan programme for 1957-58, the proposed terms and conditions were submitted to the Australian Loan Council before the loan agreement was signed, and received its full concurrence.

The loan agreement is reproduced as the first schedule to the bill. Interest is payable at 41 per cent per annum on three fifths of the loan and at 43/4 per cent per annum on the remainder. Honorable members will realize that these are by no means unfavorable rates. The loan is repayable in ten equal semi-annual instalments between 30th June, 1960, and 31st December, 1964. A commitment fee of i per cent per annum on the undrawn amount of the loan is payable from the date on which the Chase Manhattan Bank agreed in principle to make the loan, namely, 15th May, 1958. All of the funds are expected to be drawn in the second half of 1959.

In effect this borrowing is very similar to the loan raised by the Commonwealth in November, 1956, on behalf of Qantas for its Boeing jet aircraft. The Commonwealth in each case merely acts as an intermediary between the lender and Qantas, incurring no net financial liability but giving Qantas the benefit of its high credit standing overseas.

I commend the bill to honorable members.

Debate (on motion by Mr. Crean) adjourned.

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