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Wednesday, 17 May 1972
Page: 2649

Dr GUN (KINGSTON, SOUTH AUSTRALIA) - I ask the Treasurer: Is foreign investment flowing into Australia at an unprecedented rate? Do the investment guidelines laid down by the Gorton Government encourage rather than discourage overseas borrowing by companies operating in Australia? Has the Government just borrowed money overseas when the capital was readily available at comparable interest rates in Australia? Has the pegging of the Australian dollar at. the low end of the 21/4 per cent variation allowed by the International Monetary Fund encouraged further capital inflow. Is it a fact that neither the Treasurer's speech yesterday nor the Treasury document foreshadows anything other than continued inaction? Finally, when will the Government control inflation by restraining capital inflow rather than by putting people out of work?

Mr SNEDDEN (BRUCE, VICTORIA) (Treasurer) - The honourable gentleman has asked at least 5 questions. 1 lost count at that number.

Mr Calwell - Can you not count beyond 5?

Mr SNEDDEN - Not on only one hand. Many of the questions asked by the honourable member showed a misunderstanding of the whole basis of capital inflow. The first point is that capital inflow is at an unprecedented high level. If the honourable member had read the White Paper he would have understood the reasons for it, and he would have understood that there is at the present time in the world an extraordinary high level of liquidity and an extraordinary mobility of money, especially in the Eurodollar market. Now there is talk of the development of an Asian dollar market. Because of these circumstances those people who have a command of great amounts of funds channel them from place to place as it suits them. It so happens that many other countries have been, so to speak, attacked at a currency level. So far as the evidence we can gather shows, Australia has not been subjected to such an attack.

Imove to the next point, the guidelines. Those guidelines were adopted and are operating. The purpose of the guidelines was to maintain as high a level of Australian equity in the totality of Australian enterprises as was possible. The concept was to enable money in Australia to be used for equity investment. However, the result has been not merely the upholding of the level of Australian investment in equity but also the encouragement of people to borrow elsewhere because of a shortness of money in Australia or because the guidelines prevent them from borrowing. All this has contributed to the inflow at a time when a tremendous amount of money was available. The guidelines policy therefore has to be seen in its 2 aspects. I will look at the Hansard report of the honourable member's question and provide him with an answer to the other points.

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