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Tuesday, 19 February 1980
Page: 16

Mr BRADFIELD (BARTON, NEW SOUTH WALES) - Can the Treasurer inform the House of the long term effect on the Australian economy of the recent record inflow of overseas capital? What effect will this inflow have on internal interest rates and what guarantees does Australia have that this money will be invested long term and will not be speculative short term money?

Mr HOWARD (BENNELONG, NEW SOUTH WALES) (Treasurer) -I assume that the honourable member is referring to the capital inflow that occurred in tad month of January and which was in the order of $530m- a very large amount in terms of recent years. I should say to the honourable gentleman that one should never put too much reliance on one month's figures, whether those figures be good, bad rr indifferent. I think the honourable member will be aware that over the last six months we have had good months and bad months as far as the private capital account is concerned. There is no doubt that there is a strengthened perception overseas about the strength of the Australian economy. The strength of the Australian dollar has been demonstrated time and time again. I have no doubt that the private capital inflow figures for January contained a large element of portfolio investment in Australian equities. As to giving guarantees about its long term use in Australia, I am not in a position to do so and I do not think any Treasurer is.

Clearly this money has been attracted by the strength and greater competitiveness of the Australian economy. Our inflation rate now is significantly below the average of the Organisation for Economic Co-operation and Development countries. Increasingly, Australia is a country in which it is safe, profitable and entirely worth while to invest. The level of interest rates is affected by a number of factors and the extent to which the private capital inflow increases domestic liquidity can have an effect on the level of interest rates. I make it clear to the honourable gentleman that, so far as our approach in that area is concerned, we intend to maintain the firmest possible stance on our monetary policy objectives. We do not intend to allow anything to subvert them.

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