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Thursday, 18 August 1960

Mr BURY (Wentworth) .- One must have great sympathy particularly with honorable members from Western Australia in the difficulties which undoubtedly confront the gold-mining industry. All who have visited Kalgoorlie must, if they have had anything to do with the mines, admire both the absolute and relative efficiency of the mines in Kalgoorlie compared with mines elsewhere. As the honorable member for the Northern Territory (Mr. Nelson) has just indicated, the Government does in fact provide very extensive assistance to the mining industry as a whole. I will refer to gold itself very shortly; but over the whole field, starting with generous taxation allowances, facilities of one form or another and all kinds of concessions, the Government has done a great deal for almost every branch of the Australian mining industry. Lately it has begun to take more energetic steps towards the discovery of oil. It would be a great disservice if these issues became clouded by too much clamour for further assistance and we thus obscured the fact that the Government is already providing assistance to the gold-mining industry on a very large relative scale.

The output of gold last year, which unfortunately was slightly down for 1959 as compared with 1958, was about 1,100,000 ounces, the sale price of which was £15 12s. 6d. an ounce, giving a total return of £17,000,000 or £1 8,000,000. Bearing those figures in mind, the subsidy payments made to the gold-mining industry have risen very considerably. In 1957, subsidy payments, which represented a considerable increase on those for the previous year, amounted to £588,000; and in 1959 net subsidy payments to the industry amounted to £788,000, whilst in the first quarter of this year they amounted to £215,000. It is therefore evident that we are already providing assistance to the gold-mining industry, particularly Western Australia, on a very large scale.

All is not well when an industry has to be subsidized even now on this scale, and when undoubtedly it would like further assistance. We have to ask ourselves how far we can go in this matter and what principles ought to govern assistance to this industry. Clearly communities must be kept in being. This is not a party matter and never has been such; all parties accept the fact that big and important settlements must not be allowed to disappear overnight and that part of our motive for paying subsidies therefore must be to keep in being and in a reasonably flourishing state the town of Kalgoorlie and the gold-mining communities generally. But do not let us exaggerate the extent to which the industry is declining. It has made remarkable strides in efficiency, and despite all the difficulties which have surrounded it for many years it still achieves a very remarkable performance. If we are going to subsidize the industry beyond the point at which we have already subsidized it, we have to bear in mind apart from the direct subsidy payments which we make the very considerable taxation concessions also involved. So, the gold-mining industry, relative to other Australian industries, already receives a ver.y large measure of governmental assistance.

If the outlook for an increase in the price of gold was extremely rosy we would say, " Here is an industry which will shortly be of very great benefit to Australia and therefore we must keep it in being and make preparations for the future ". The first thing we should ask ourselves is: What is the future price of gold going to be? And when we ask that question, we must remember that over two-thirds of the world's production of gold goes into official currency reserves. As is well known to this House, gold and the values of currencies are closely tied together, and the formal position is now sanctified in the provisions of the International Monetary Fund Agreement whereby all the leading currencies have a par value in gold and exchange against each other on the basis of their par value. The strongest currency in this picture is, of course, the United States dollar; and what in fact governs the world's price of gold is the price the United States authorities are prepared to pay for it and for which they can obtain the agreement of other countries. If the United States authorities ceased to buy gold its price would fall to almost nothing, apart from its industrial uses. Therefore, we must first ask ourselves: What are the chances of securing an increased price for gold from the United States of America? American opinion has been pretty hard and fast in this matter for a number of years. Of course, everything changes', and providing we keep producing gold a new set of circumstances may arise, but on the experience of the last few years, when there has been a far better case for increasing the price of gold for international trade reasons than there is now, the United States of America has consistently set its face against an increase.

No country wishes to pay an unnecessarily high price to other countries for the things which it wants and if the price of gold were increased the value of United States gold stocks would increase, but the price which the United States of America had to pay for imports, goods and services would also rise. At the moment, of course, the United States of America is tending to lose gold, to ship gold to make up its payments to the rest of the world.

In the United States there are gold producers, but unfortunately any moves that are made in that country to increase the price of gold are extremely weak. This is largely because the companies which mine gold in the United States are also interested, and to a far greater extent, in other minerals, gold being very largely a byproduct of other mining activities. The whole banking community in the United States is against an increase in the price of gold. The basic conviction in the minds of those involved in the United States - and it is a pretty sound one - is that an increase in the price of gold would be inflationary. One of their main concerns for many years has been to restrain inflation, and so the position does not look like changing for a considerable time to come. Therefore, when we consider the basic question - the chance of obtaining an increase in the price of gold - we must see, if we are realists, that the chance is pretty slim.

Apart from a general increase in the price of gold, the price to the Australian producer could, of course, rise as it did in 1949, because of a devaluation of the currency. When the sterling area generally decided on devaluation, the return to the Australian gold producer was correspondingly increased. But the outlook now appears to indicate that if Australia in fact decided to devalue, the resultant general inflationary forces might be such that costs in the gold-mining industry would be increased, and the net benefit, therefore, very small. As of now, however, the one real prospect that the Australian gold producer has of obtaining a higher return is through a possible devaluation of Australian currency.

The honorable member for Fremantle (Mr. Beazley) referred to the usefulness of gold resulting from its penetrating power in hard currency areas. First, of course, we should now dismiss the dollar area from this consideration, because the United States dollar has, for some time past, been soft rather than hard. In any case we must always remember that we can buy gold in other markets. Provided our general export position is sound, we pan always buy gold from other countries and ship it in any direction we wish. If Communist China is, in fact, purchasing gold, then it must be providing goods and services in some form or other in order to acquire the currency to buy the gold. It may be particularly useful for Communist China to purchase gold in this way, if in fact it is using it in order to finance propaganda. It may be a useful way of achieving this purpose. But we should remember that it is not difficult for any government to acquire gold. The incentive that may at one time have existed, because of the acute dollar situation after the war, to encourage the production of gold for its use in penetrating hard currency areas has now, I think, almost entirely disappeared.

I suggest, therefore, that the outlook for any increase in the price of gold, on a realistic assessment of the situation, is pretty bleak. But no one can say that the Australian Government has not done its level best to bring to bear whatever influence it could to persuade the United States and the monetary authorities of the world to increase the price of gold. In this matter we have consistently joined with the South Africans to make a case for increasing the price of gold. From the producers' angle, of course, it would be very nice if this could be achieved. But let us look at it once more from the United States point of view. The authorities in that country feel, quite apart from their own domestic considerations, that the main beneficiaries as a result of an increase in the price of gold might well turn out to be Soviet Russia and the Union of South Africa. The latter country is not particularly popular at the moment, and certainly the idea of benefiting Soviet Russia, by conferring upon it greater purchasing power in the world's markets as a result of an increase in the price of gold, is not one which appeals in the United States.

So we have to ask ourselves this question: Since the outlook for an increase in the price of gold is pretty bleak, how far can we go in stimulating gold production in Australia? It is a fact, of course, that gold is an earner of overseas currency, but so are the products of any other Australian industries which can export their goods. If the gold-mining industry is to be subsidized because it brings in supplies of overseas currency, then there is an equally good case for subsidizing other export industries. The main reason, surely, why we should keep our gold-mining industry in as healthy a state as possible is to sustain the economy of Western Australia and to prevent a serious and steady decline in activity in Kalgoorlie. Another reason, which must, I suggest, be weaker, is that at some future time the world pattern may change and the demand for gold may increase. At the present time, however, gold must, from our point of view, be considered in the same way as any other export commodity. If we want gold for a particular purpose we can always buy it with the proceeds of our exports. Unfortunately, the forces of inflation in Australia are likely to confront the mining people in Kalgoorlie with ever-increasing problems. But they are extremely astute, keen and efficient people, and I have no doubt that they will take suitable steps to keep their activities at a fairly high level.

Let us always remember this: We are already assisting this industry on quite a large scale, and for this assistance Western Australia, no doubt feels a sense of gratitude. Even with the present subsidy arrangements, the cost of subsidizing the gold-mining industry of Western Australia is steadily continuing to rise. So whatever conclusion the House reaches now, we can be almost certain that even under our existing arrangements we shall, in fact, subsidize on an ascending scale the Western Australian gold-mining industry for some considerable time to come.

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