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Wednesday, 3 April 1968

Mr BOSMAN (ST GEORGE, NEW SOUTH WALES) asked the Treasurer, upon notice:

1.   What were the estimated gold holdings of the 'Group of Ten' countries, plus South Africa and Australia in (a)1960 and (b) 1968?

2.   What assurances can be given that the United States will be able to withstand the current rush on gold buying and at the same time preserve the present price of gold at $US35?

3.   What assurances will have to be given to the central European banks to retain their support of not only the current price of gold, but also the United States dollar?

4.   What effect will a rise in the world price of gold have on (a) Australian reserves and (b) Australian economic policy?

5.   If the United States is forced to concede an increase in the price of gold, will this exacerbate her present balance of payments difficulties?

6.   If the United States is forced to introduce further curbs on overseas spending, what effect will this have on United States investment in Australia?

Mr McMahon - The answers to the honourable member's questions are as follows:

1.   The gold holdings of the 'Group of Ten' countries, plus South Africa and Australia totalled $US33,853m at the end of 1960. The latest figures available for these countries as a whole show their holdings at$US35,267m at the end of September 1967. 2 and 3. The Governors of the Central Banks of Belgium, Germany, Italy, the Netherlands, Switzerland, the United Kingdom and the United States met in Washington in March to examine the operations of the Gold Pool to which they were active contributors. The Gold Pool had operated from 1961 with the objective of keeping the free price of gold within a reasonable range of the official United States price of $US35 per fine ounce. In a communique issued after the meeting, the Governors supported the United States' policy to continue to buy and sell gold at the existing price of$US35 in transactions with monetary authorities. They decided no longer to supply gold to the free markets and agreed not to sell gold to monetary authorities to replace gold sold in private markets. At a meeting of the Group of Ten on 30 March these countries as well as Japan, Sweden and Canada re-affirmed their determination to co-operate in the maintenance of exchange stability and orderly exchange arrangements in the world based on the present official price of gold. 4. (a) A rise in the world price of gold would increase the value of the gold component of Australia's reserves. On 28 February 1968 Australia's holding of gold amounted to $A209m.

(b)   The effect of a rise in the world price of gold on Australia's economic policy would depend on the circumstances surrounding the increase. Any attempt to assess the effects would therefore have to take account of a considerable range of possibilities.

5.   The effect of an increase in the price of gold on the balance of payments difficulties of the United States would depend on the circumstances, the way in which the price was changed and other measures that might be adopted. For example, the effects would be different depending on whether or not the price was increased only in terms of American dollars or in terms of some or all of the currencies of the members of the International Monetary Fund.

6.   As the effect of any further curbs on overseas spending by the United States on American investment in Australia would depend on the nature of the curbs, on their administration and, possibly, on the decisions of individual investors, no reliable assessment would be possible at this point of time.

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