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Tuesday, 15 May 1973
Page: 2097


Dr GUN (Kingston) - I would like to raise with the Minister for External Territories (Mr Morrison) a matter that I cannot understand from my reading of the Bill. It relates to the future of the new nation of Papua New Guinea as regards currency and what will happen to this loan and other loans if Papua New Guinea establishes its own separate currency. Clause 5 of the Bill indicates that the value of the loan that is to be guaranteed by the Australian Government is to be expressed in United States currency and will be expressed in parity with the Australian dollar. That is all very well in the present circumstance where the currencies of Australia and Papua New Guinea are one and the same, but what happens after independence when the currencies may differ, if, for any reason, the parity between the currencies of the two countries differs, or in particular if, as so often happens with developing countries - I do not criticise them for so doing - it wants to devalue its currency? Will the Australian Government pay devaluation compensation, as it were, to the creditors of Papua New Guinea on this loan if that country wants to devalue?

This is a very important matter because I think that in this circumstance, with a government to government loan, Australia should underwrite the loan to the value of Australian currency and offer to offset any loss to the creditor in the event of any devaluation by Papua New Guinea. I do not believe that we should in any way try to pressure the Government of Papua New Guinea into having an over-valued currency. There is enough pressure on these developing countries as it is to have an over-valued currency. I . suppose for political reasons for a start they do not like to see their currency value going down. They think it is bad for the prestige of their country. They like to maintain their own credit rating and they feel that their international credit rating might fall if they have repeated devaluations. For various reasons of prestige - I do not say that in any pejorative sense - they want to develop certain prestige projects in their own countries to enhance their status as a developing country. So there is already enough pressure on these countries to hold what might be an artificially high parity for their own currencies. 1 am not a believer in developing countries maintaining over-valued currencies. If they want to devalue we should make it as easy as possible for them to do so. The most obvious reason for them doing so is that they want to maintain their balance of payments. This is always very difficult for a developing country. Papua New Guinea is a typical example of this, lt has a very limited range of exports. Most of them are agricultural commodities, most of which are in surplus supply on the world's markets. Apart from that, these developing countries have their mineral exports. Because they are all unprocessed minerals the revenue from them, while substantial, is not nearly so great as those governments would really like them to be. I do not think it is in the interests of developing countries to have an over-valued currency because this makes the importation of capital goods artificially cheap. Jt means that the countries may tend to go in the way of capital intensive development rather than in the way of labour intensive development.

If that happens the inevitable result is an increase in unemployment. Everyone knows that this is a tremendous problem for all developing countries and particularly for Papua New Guinea. Any honourable member who has ever been in the area knows the great problems of unemployment, particularly in the rural areas. As a result the people drift from the villages into the large towns find we find squatter settlements, with chronic unemployment, amongst the various other problems that occur in the larger towns and cities of New Guinea. I refer to such problems as petty crime and some of the other crimes that are not so petty. I think that the only answer to this is labour intensive industry being developed as far as possible in the smaller towns and villages of Papua New Guinea. I believe that an excessive preoccupation with capital intensive development is not in the long term interest of developing countries. For that reason we should not encourage such countries to have an over-valued currency because it makes their imports of capital goods artificially cheap, and what passes in the name of development is in fact antidevelopment. The result is a considerable degree of unemployment and all the social dislocation that goes along with it. We have to be very cautious of this. If the Papua New Guinea Government wants to devalue its currency I hope that under this Bill we will make it as easy as possible for that country to do so by saying: 'Go ahead and do not worry about your international creditors. The Australian Government will pick up the tab for my loss your creditors might otherwise have incurred.' I think it is most important that we make this clear. I am not quite certain of it from the wording of the Bill. Perhaps the Minister might be able to explain what would happen if subsequently the 2 currencies were to go their different ways and Papua New Guinea devalues. Would Australia pay the devaluation compensation to the creditors, or is Papua New Guinea expected to pay? If it is, I do not believe it should. The alternative understanding would be that only if Papua New Guinea defaulted on the loan altogether would Australia have to pay. I hope that Australia goes further than that and offers to indemnify the creditor country, bank or whatever body has made the loan against any devaluation of currency.

I am all in favour of this measure which helps to guarantee an official loan for the development of public works in Papua New Guinea. I do not know that we will be able to say exactly the same thing for private capital investment that takes place in Papua New Guinea. I do not know that we really want to underwrite a complete foreign takeover of Papua New Guinea. I have spoken to a number of people in Papua New Guinea and I believe that perhaps they are a little too eager at times to bring foreign investment into their country. I think perhaps the best thing we can do is to point out that all of the countries in the Asian area that were, previously underdeveloped and have really achieved industrialisation and near full employment are those countries - I am thinking particularly of the People's Republic of China and of japan - which have financed all their development as far as possible without importing foreign capital. I think that if countries can make it in their own way and standing on their own 2 feet without having recourse to foreign capital it will be in their long term interests. For that reason while I support this measure I think we should point out to our friends in the Papua New Guinea Administration that, while we approve of such ventures, we hope that they will look very hard before going too strongly after private capital investment in Papua New Guinea. 1 think this matter was referred to previously by the honourable member for Kooyong (Mr Peacock). 1 do not know whether he was referring to the civil aviation dispute, but I know that it poses very important questions for Australia. What will happen if the Australian Government decides that it does not want to become an imperialist power by becoming the landlord of Papua New Guinea and owning all the industry and investment in thai country? If we leave Papua New Guinea and our place is taken by Japan or some other country I am sure that many Australians would not regard that as being in our national interests. I just make that remark in passing, but I would appreciate it if the Minister would explain the terms of this loan and what will happen should the Papua New Guinea Administration decide to reduce the parity of its currency compared with Australia's currency.







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