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Thursday, 25 May 1972
Page: 3191

Dr Gun (KINGSTON, SOUTH AUSTRALIA) asked the Treasurer, upon notice:

(1)   Is it the intention of the Government to obtain loans from the Governments of (a) Japan and (b) the Federal Republic of Germany in the near future.

(2)   If so, what is the amount of the (a) loan and (b) annual interest rate in each case.

(3)   Are the terms of the loan or loans favourable to the Commonwealth; if so, why.

(4)   Is it prudent to borrow funds from these overseas markets in present circumstances.

(5)   Are Australian reserves of foreign currency now at a record level.

(6)   Has an investigation been carried out as to whether the loans could have been raised in the domestic capital market; if so, what was the result of the investigation.

(7)   What would have been the likely rate of interest if the loans were negotiated in Australia.

Mr McMahon - The answer to the honourable member's question is as follows:

(1)   and (2) The Treasurer announced on 10th April that it is the intention of the Government to proceed with a public issue of yen-denominated bonds on the Tokyo market, subject to negotiation of acceptable terms and conditions and other arrangements for the issue. The borrowing is expected to be for an amount of 10 billion yen (about SA27m). There is no proposal before the Government at present for a public bond issue in the Federal Republic of Germany. However, the Government did borrow by way of a public bond issue in Germany last January. The amount of the borrowing was DM100 million ($A26m). The bonds were issued at par and carried an interest rate of 7 per cent payable annually. This interest rale was, at the time, the lowest paid by an international borrower on the German market for more than 2 years.

(3)   and (4) Terms of all overseas loans are considered carefully before they arc approved by the Commonwealth and other members of the Australian Loan Council.

Final agreement to the terms depends on their being considered fair and reasonable in the circumstances of the time. The Treasurer's Press statement concerned the proposed borrowing in Japan, a copy of which is being forwarded to the Honourable Member, explained that it would serve Australia's national interests in such important ways as establishing for Australia a position in a new capital market which will constitute an alternative to existing markets and which seems destined to grow substantially in the years ahead, and making a major contribution to the development of closer financial links (generally with Japan. In a Press Statement on 21st January announcing the terms of the bond issue in Germany, the Treasurer pointed out that it was considered prudent to maintain Australia's access to large and important capital markets, such as the German one. We had not borrowed in the German market for more than 2 years. (5), (6) and (7) The Government keeps under close review the availability of loan funds on the domestic market. However, the fact is that for many years past the proceeds available from Commonwealth loan transactions in Australiawhich represent the maximum amounts that could be raised with the interest rates and other terms considered appropriate by the Commonwealth and the Loan Council - have almost invariably been substantially less than the borrowing programmes of the Commonwealth and States approved by the Loan Council. Moreover, as indicated above, there are various considerations relevant to Commonwealth borrowing overseas in addition to the factors mentioned by the Honourable Member.

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