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Thursday, 24 August 1972
Page: 379

Senator O'BYRNE (TASMANIA) - My question is directed to the Minister representing the Treasurer. Does the Minister agree that it is a widely held view among economists that the under-valuation of the Australian currency is one of the major factors in Australia's high rate of inflation? As the Budget gave nothing extra to the 112,000 people registered as being out of work and as the people who are receiving the inadequate unemployment benefit are those suffering most from inflation, would it not be an economically and socially desirable move to revalue the Australian dollar?

Senator COTTON - 1 suppose one of the worst things one can do in a responsible sense when one is involved in Treasury affairs, even if one is distantly involved or is in loco parentis to them as I am, is to involve oneself in speculation on the potential movements of currency. That is perhaps the greatest disservice one can do to a community and an investing public. Therefore I will not involve myself. But I would like to say very briefly in regard to the claim that the supposed undervaluation of the Australian dollar is producing inflation that there is not much economic warrant for saying that. Although there are economists who think that it is, there are also economists who think that it is not. So it is a matter of fine balance. Perhaps I should draw attention to a quite useful article which appeared in the finnancial pages of the 'Sydney Morning Herald' about 2 days ago. It pointed out that the capital inflow into this country is not composed, as is supposed, only of hot money looking for speculative gain but substantially of money from Australian companies borrowing abroad and reinvesting here. Their reinvestment programmes demonstrate once again the great confidence which the world has, and Australians have, in our economy and in our country.

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