23rd Parliament · 2nd Session
The DEPUTY PRESIDENT (Senator the Hon. A. D. Reid) took the chair at 3 p.m., and read prayers.
Assent to the following bills reported: -
Papua and New Guinea Bill 1960.
Flax Industry Act Repeal Bill 1906.
– I ask the Minister representing the Minister for Trade: Is it proposed to allow unlimited quantities of dairy produce from New Zealand and Denmark to enter Australia under the tariff charges now operating? If reduced local sales of locally manufactured dairy products result from increased imports, will the dairy produce subsidy of £13,500,000 be increased to offset any resultant losses.
– Import licensing has been eliminated on the major portion of Australian imports. The statements that have been made about the repercussions of that upon the dairy industry may or may not be exaggerated. Having regard to the importance of the question, I think that it would be wise to ask that it be put on notice rather than to attempt to deal with it now.
– My question is addressed to the Minister for Customs and Excise. Does the Mount Lyell Mining and Railway Company at Queenstown, Tasmania, participate in the copper bounty? If so, what was the amount paid in the year ended 30th June, 1959?
– Yes, the Mount Lyell Mining and Railway Company does participate in the copper bounty. Indeed, the copper bounty has played a very significant part in the development of the company’s mine. During the year ended 30th June, 1959, the company received £412,000 by way of bounty.
– I wish to ask the Minister for Civil Aviation three questions.
Has the Minister seen an American report that the recent crashes of Electras were due to vibration sensitivity, and that at certain speeds the aircraft were blown apart? Has the United States Civil Aeronautics Board ordered changes to Electra aircraft since the Minister last reported to the Senate on this subject? Is there any similarity of the Electra crashes to those of the Comets a few years ago as regards the fundamental causes of disintegration in mid-air?
– I am keeping closely in touch with the inquiry which is being held in America in respect of the unfortunate accident to the Electra aircraft which triggered off the present very extensive investigation. I do not think that it is right to say or to suggest that, as yet, any one specific cause has been uncovered. What might, however, be said, is that if there was present a condition of clear air turbulence, of a type and intensity not experienced in Australia, that may have been instrumental in causing the crash concerned. That, I think, is about as far as any one, expressing an authoritative opinion, has yet been prepared to go.
Next Thursday, there is to be held at Burbank, in America, a conference to which the representatives of all the airlines operating Electra aircraft have been invited. Our own Trans-Australia Airlines, Ansett- A.N.A., Qantas Empire Airways Limited, and Tasman Empire Airways Limited will all be represented at that conference. It is possible that at the conference there may be set down something which will be of assistance in ascertaining the cause of this accident. I should like to make it clear to honorable senators that the condition of clear air turbulence which was associated with this particular crash in America, while being experienced in America from time to time, to our knowledge does not occur in Australia. Indeed, it is only eighteen months ago that in a similar condition of clear air turbulence, another aircraft, whose structural design has never at any time been suspect, disintegrated in mid-air, just as the Electra did.
– Can the Minister explain what is meant by “ clear air turbulence “ ?
– It is a turbulence which occurs without there being any visible or recordable signs of such turbullence. For example, if a pilot is flying along a course and is aware that he will soon fly into a particular type of cloud, then he, of his own knowledge, is alerted that that cloud is in his path. Since the introduction of radar, which is installed in Electra aircraft, the pilot does not even have to rely on his own observations. He is told by his radar equipment what is in front of him. Because there is nothing to indicate the presence of clear air turbulence, however, he simply flies into it without being aware that it is there.
– It is like a “ whirly “.
– That is right. My friend, Senator O’Byrne, who understands these problems much better than I do, probably could explain the matter outside to Senator Brown more effectively than 1 can.
I think that is all I can say to the honorable senator, except to assure him, as I have assured the Senate during recent months, that this question of the Electra aircraft is under close and continuing surveillance. The officers of the Department of Civil Aviation, enjoying as they do international reputations in this kind of control, do not believe for one minute that the aircraft, flying as it is, is subjecting the Australian flying public to any danger at all. They will continue to exercise close observance of the situation which, I hope, may be settled for all time within a very short period, when the actual cause of the tragic accident is uncovered.
– I direct a question to the Minister representing the Minister for Trade. Is it a fact that Australia was the only overseas country that was invited to take part in the New Zealand Easter Show in Auckland this year? Will the Minister obtain for the Senate the estimated value of the orders taken for Australian primary and secondary products as a result of exhibiting at that show?
– I do not know whether Australia was the only overseas nation that was invited to participate in the show. I know that we had an exhibit there, and I have heard that it produced very successful results. A good deal of interest is expressed from time to time in> the policy of the Department of Trade of having Australian exhibits at overseas trade exhibitions, fairs and other national displays. In those circumstances, I think it would be desirable to put the question on the notice-paper in order to see whether the Department of Trade can give us any figures in relation to the cost of this exhibit and the amount of business that it yielded..
– Has the attention of the Minister representing the Minister for Health been directed to a statement, published in the Sydney “ Sun “ yesterday, to the effect that certain members of theBritish Medical Association alleged that that association had no say in drawing up the list of drugs covered by the Government’s pharmaceutical benefits scheme, and that it was nonsense to claim that practically every drug was listed? Will theMinister say whether these allegations are correct, and will he make a statement in reply to them?
– I understand that theMinister for Health refers to a committee the matter of the drugs to be included inthe list. I understand also that on the committee there are members of the B.M.A., but I may be wrong in that. If thehonorable senator will place the question, on the notice-paper, I shall get an answer for him as speedily as possible. I do not. like to give information off the cuff unless- 1 am sure of its accuracy.
– No doubt the Minister representing the Minister for Trade is aware of the recently announced Food for Peace agreement negotiated between India and the United States of America, which is said to be one of the biggest of its kind in history, involving some 17,000,000 tons of grain. Is the Minister in a position to indicate what effect this agreement may have on the Australian, wheat industry?
– I did see a newspaper report on the matter; it is part of the American mutual aid programme. I do not know by what name this programmeis known. I think it is the Disposal of*
Surplus Primary Products Programme. 1 noticed that in this particular case the sale to India was accompanied by assurances that it would run concurrently with normal commercial transactions. At the same time, I can well imagine that transactions of that consequence must have ramifications in many directions. I remember well that at the time the United States of America embarked upon this policy, the Australian Minister for Trade, Mr. McEwen, made very strong representations. My recollection is that those representations resulted in an acknowledgment by the United States Government that Australia had the right to make representations when any such transaction as this was under negotiation. If my recollection is correct - and I think it is - I feel fairly certain that in a deal of this size much water has run under the bridges, and that Mr. McEwen and the Department of Trade have been active upon it. The degree of activity, and the result of the activity, are not within my knowledge, so that I think that 1 must ask Senator Branson to put the question on the notice-paper in order that I may get <. correct statement of the facts.
– 1 direct a question to the Minister for Customs and Excise. Has the Australian Fish-Canners Association made a request that the Tariff Board should inquire into the protection accorded canned fish in Australia? If it has, can the Minister say whether the matter has been referred to the Tariff Board, and can he give some indication as to whether it is likely to be handled expeditiously? I may say, by way of explanation, that the South Australian fishermen inform me that the tuna industry has been very hard hit as a result of the lifting of import restrictions on canned fish by reason of the fact that the Japanese canner is able to obtain comparatively cheap cans and is also assisted by means of rebates from his government for every can he exports.
– I do know that the Fishermen’s Co-operative in Tasmania came to see me about a week ago about this same matter. At that stage I understood that the federal body was preparing a case for presentation to the Department of Trade with a view to having the matter placed before the Tariff Board as speedily as possible. If the case has not yet been received by the Department of Trade, 1 am sure that immediately it is received its transmission to the Tariff Board will be expedited and the necessary hearing will be conducted as promptly as possible.
– Last year, a trade agreement with Indonesia was signed by Australia and Indonesia. I ask the Minister representing the Minister for Trade whether it is possible to say at this stage what benefits have accrued to Australia as a result of those negotiations. Last year, too, the Government of Indonesia announced certain monetary measures which were regarded as being of a drastic character. Have these measures had any effect on the financial transactions of Australian importers and exporters? Would it be correct to say that Australian exports to Indonesia are not protected by the Export Payments Insurance Corporation?
– I am sorry, but I shall have to ask that this question also be put on the notice-paper. The honorable senator will remember that the Indonesian trade agreement to which he refers was the renewal of an agreement that had been in force for some years. I know there were some difficulties created when restrictions were placed upon the use of Indonesian currency; but as I do not think it is good enough to talk in generalities, I shall get a detailed answer for the honorable senator.
– I wish to ask a question of the Leader of the Government. It refers to an application by Public Service organizations to the Commonwealth Conciliation and Arbitration Commission for the application to salaries of public servants of the margins formula recently announced by the commission. Has this matter been before the Public Service Arbitrator? If so, how does the decision of the Public Service Arbitrator compare with the decision given by the Commonwealth Conciliation and Arbitration Commission in the margins case? If the application has not been before the Public Service Arbitrator, in what way does the matter come before the Commonwealth Conciliation and Arbitration Commission?
– I would have thought that Senator Wright’s knowledge of this matter would be more extensive than mine. As I understand the position, the Commonwealth Conciliation and Arbitration Commission gave a decision announcing a general increase in margins. My understanding is that separate decisions had then to be made in respect of different industries. The Government accepted the recommendation of the ‘Public Service Board that certain increases should be granted, but this decision has been made the subject of an appeal by the Public Service organizations to the Public Service Arbitrator, who has the matter before him at the moment. That is my understanding of the position, but if J am incorrect I will inform Senator Wright.
– I wish to ask a question of the Minister representing the PostmasterGeneral. Will the Postmaster-General cause an inquiry to be made into the rentals charged residents of ipswich, Queensland, for telephones, in order to ascertain whether such rentals are strictly in accordance with the Government policy?
– I could not be expected to give an answer to this question. I should be surprised if the tariff being charged at Ipswich was not in accordance with the overall arrangements approved by the Postmaster-General. I shall make inquiries, and if I obtain any information indicating that Ipswich is being treated on a basis different from that applying in the case of any similar Queensland town I shall let Senator Benn know.
– I desire -to ask the Minister representing .the Treasurer a question. Further to a report in the Adelaide “ Advertiser “ of Thursday last that the United Kingdom may soon adopt the decimal coinage system, can the Minister indicate to the Senate when the Commonwealth committee that was appointed to investigate this matter will be in a position to furnish its report and findings?
– I understand that the public hearings undertaken by the decimal coinage committee have now reached a very advanced stage. They may have concluded. I shall make inquiries and ask the Treasurer when he expects its report to be submitted and when, after that date, he expects to present it to the Parliament.
asked the Minister representing the Minister in charge of the Commonwealth Scientific and Industrial Research Organization, upon notice -
Has any success been achieved in the further rain-making experiments conducted since the Minister’s last statement to Parliament on this matter?
Senator -HENTY.- My colleague, .the Minister in .charge of the Commonwealth Scientific and Industrial Research Organization, has furnished the following reply. -
Four main rain-making experiments are at present being undertaken by the C.S.I.R.O., viz.: -
Snowy Mountains area. - This experiment has been in operation for five years and the results obtained indicate that significantly more rain has fallen in the seeded area than in the control area. The exact amount of the increase is at present being computed.
New England tablelands, New South Wales. - The experiment here is in its third year and very promising results are being obtained. It is likely that the increase in precipitation here will be greater than in the Snowy Mountains region.
Darling Downs, Queensland. - The experiment here is only in its second year and not enough results have yet been obtained to be significant. There are, however, relatively frequent occurrences of the right type of cloud for silver iodide seeding.
Warragamba catchment area, west of Sydney. - The experiment here is only in its first year. The experiment in South Australia has been abandoned as unsuccessful as there are only rare occurrences of clouds suitable for seeding with silver iodide.
asked the Minister for Civil Aviation, upon notice -
– I now answer the honorable senator in the following terms: -
As regards the necessity to import some structural mild steel the following is an extract from the supplementary report of the directors of Broken Mill Proprietary Company Limited, dated February, 1960: - “ At the 1959 annual meeting shareholders were informed that there was good reason to believe that the demand for steel, both at home and abroad, would rise during the current year and this, in fact, has happened. As a result we are now quoting longer deliveries for many types of steel and except in isolated instances have had to withdraw from an attractive export market. This very marked increase in orders may make it necessary for Australian consumers who need prompt delivery to rely to a degree on imported steel until our construction again bridges the gap.”
The following are some of the larger works undertaken by Electric Power Transmission Proprietary Limited:-
asked the Minister for National Development, upon notice -
– The answer, which is fairly lengthy, but, I think, interesting, is as follows: - 1. (a) Since the establishment of a station on the mainland in 1954, every Australian national antarctic research expedition had included a geologist, (b) Evidence of several economic minerals, namely, copper, manganese and iron, has been found, but detailed examination of these occurrences has shown that the minerals occur only as traces disseminated through the rock. A small vein of manganese silicate occurs near Wilkes station, but is far too small to be valuable. Coal has been found 200 miles south-west of Mawson; the seams are narrow and not high quality, and consequently are not economically important. Deposits of mirabilite (Glauber salts) around the coastline are ‘too small to be valuable. (c) It has been the practice of geologists, during field work, to check by geiger counter any areas or particular rocks likely to possess abnormal radioactivity. This procedure has not revealed any significantly high counts. (d) Airborne scintillometer surveys have been made of most of the rocky areas of the coastline of the Australian Antarctic Territory. Ground follow-up showed that the radioactivity at most anomalies was confined to narrow pegmatite veins; subsequent laboratory examination revealed that the radioactivity was due to small amounts of the thorium mineral monazite. In other instances, high scintillometer readings can be attributed to the cumulative effect of disseminated accessory minerals in granitic rocks. Neither case has any economic potentiality. (e) No uranium mineralization has been found by Australian geologists. 2. (a) The only report to date of uranium mineralization in the Antarctic has been by the Japanese. The report mentions two occurrences of pitchblende in pegmatite 25 and 50 miles south of the Japanese station, Showa. An assessment of the ore made at the station indicated “40-50 per cent. uranium content “. Presumably, this refers to the uranium mineral and not to the deposit as a whole. No other details are given, but the account suggests that the deposits are small, and probably not of economic value. (b) Coal of Permian age occurs in the mountains along the western and southern sides of the Ross Sea and Ross Ice Shelf. Reliable quantitative figures have not been published, but large reserves of good quality coal certainly exist. Coal has been reported also as occurring south of the Filchner Ice Shelf at the head of the Weddell Sea. The deposits south-east of Mawson are not economically important.
Minister representing the Minister for Trade, upon notice -
– The Minister for Trade has now informed me as follows: -
– On the 6th April,
asked me, as representing the Postmaster-General, the following question: -
As a large increase in postal revenue has been reported, will the Minister give consideration at an early date, or during the preparation of the Budget, to giving relief to small country newspapers, migrants’ newspapers, religious periodicals and trade union journals from the very severe postal charges that were placed upon them as a result of the last Budget?
The Postmaster General has now furnished me with the following information in reply:-
The publications referred to by the honorable senator would generally be eligible for posting at the very cheap bulk rate which applies to registered newspapers and periodicals printed in Australia. The rate which came into operation on the 1st March, 1960, represented a considerable concession on that which it was first proposed to apply to newspapers and periodicals. This concession was made following consideration by the Government of the views of a deputation representing all sections of the press which take advantage of the low bulk rate of postage.
Although the value of the present postage concessions extended to the publications which the honorable senator has in mind is considerable, he may be assured that the question of bulk postage rates will be carefully examined should the Government decide at a later date to make any adjustment in the existing postage rates.
It is, however, important to remember that the present postage rates on registered publications are well below handling costs. It is estimated that the Government is subsidising the distribution of these articles through the post to the extent at approximately £3,000,000 a year, almost half of the subsidy being due to the low postage on religious and similar publications.
– I move -
That the following order of the day, General Business, be discharged: -
As this motion has been discussed in the Senate, I see no purpose in keeping it on the business-paper.
Question resolved in the affirmative.
Motion (by Senator McKenna) - by leave - agreed to -
That Senator Toohey be granted leave of absence for one month on account of ill health.
Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Spooner) read a first time.
– I move -
That the bill be now read a second time.
The purpose of this bill is to give effect to a decision of the Government to increase the salaries of the holders of the statutory offices included in the schedule to the bill, the salaries of which are provided by special appropriation. As honorable senators will know, salaries for members of the Public Service were recently reviewed by the Public Service Board and substantial increases were provided. The board’s authority does not apply to statutory offices
Or to offices in the First Division of the service, but the increases which were approved in the lower divisions have led the Government to review the salaries of statutory offices, offices of the First Division and the amount necessarily available under section 182 of the Income Tax and Social Services Contribution Assessment Act 1936- 1959 for the payment of remuneration and travelling allowances to the chairmen and members of the boards of review appointed Under that act.
Except for lay commissioners and conciliators, and chairmen and members of the Taxation Board of Review, the increases amount to £900. Increases to lay commissioners and conciliators also include recognition of the status and responsibilities of these positions in existing circumstances.
In effect, these salaries have been increased by £250 per annum for the senior commissioner and commissioners and £150 per annum for conciliators. These new salaries have then been further adjusted in conformity with the basis applied in the Second and Third Divisions of the Public Service.
It is also necessary to make additional financial provision for the personnel of the Taxation Boards of Review. There are three separate boards, each consisting of a chairman and two members. The additional amount proposed, that is £7,000, includes the extra cost of the proposed salary increases - that of chairmen from £4,500 to £5,325, and of members, from £4,000 to £4,725 - plus a small increase, namely £175, for incidental expenditure.
In assessing the salaries appropriate to the several offices affected by the proposed legislation, the Government has considered not only the general increase in salaries within the Commonwealth service; it has considered also the general trend of salaries for high executive positions as well as the responsibilities and complex duties of the positions concerned. I commend the bill to the Senate.
Debate (on motion by Senator O’Flaherty) adjourned.
– I move -
That the bill be now read a second time.
The principal purpose of this bill and two associated measures which I will deal with later, is to correlate the income tax laws of the Commonwealth with those of the Territory of Papua and New Guinea.
Consequent on the introduction last July of territorial income tax it became necessary to examine the taxation position of territorial residents deriving income from Australia and of Australian residents receiving income from sources in the Territory. This examination also took into account provisions of the Australian income tax law that discriminate as between the Territory of Papua and the Territory of New Guinea.
The principles to which this bill gives effect are -
Territorial residents, shall have no greater liability for Australian tax on their Australian income than would have arisen if territorial tax had not been introduced;
The combined Australian and territorial taxes payable by residents of mainland Australia on income having its source in the Territory shall be no greater than the Australian tax that would be payable if territorial tax were not imposed; and
Discriminations as between the Territory of Papua and the Territory of New Guinea shall be removed from the Australian income tax law.
The exemption from Australian tax that has for many years been available to territorial residents in respect of their territorial income will not be disturbed.
In order to give effect to the first of these principles, the bill provides that territorial residents shall be entitled to allowances against Australian income for the maintenance of dependants, medical expenses, life assurance premiums and like amounts for which deductions are available to residents of the mainland. Under the present law. allowances for the maintenance of dependants and medical expenses incurred on their behalf are available only if the dependants reside in Australia or Papua. It is proposed to make these allowances available if the dependants reside anywhere in the Australian Territories of Papua and New Guinea, Norfolk Island, Cocos (Keeling) Islands, Christmas Island or in Nauru.
The second of the principles enumerated will be effective in the case of an Australian resident who has paid territorial tax on income having its origin in the Territory. Australian tax has for many years been payable on that income, and following the introduction of the territorial tax it is proposed to allow against the Australian tax a credit to relieve the double taxation. In order to remove discriminations between Papua on the one hand and the Territory of New Guinea on the other, a number of provisions available in relation to Papua will be extended to the Territory of New Guinea.
Another discrimination to be removed is that a resident of an overseas country is required to pay Australian tax on income having its source in Papua, while income from the Territory of New Guinea is exempt from Australian tax in the hands of a person not resident in Australia. It is proposed that Australia terminate its taxation of territorial income, except in the case of residents of mainland Australia.
In addition to amendments related to the Territory of Papua and New Guinea, two amendments of a minor nature are proposed. The first of these will remove doubts regarding the interpretation of the provision governing the deductions for capital expenditure on prospecting or mining for petroleum in Australia, Papua or New Guinea. The. other amendment is consequential on an amendment made last year to the Education Act and will effect a formal alteration in the secrecy provisions. The amendments outlined: necessitate a considerable number of drafting alterations in the present law. My remarks indicate, however, the broad basis upon which the bill is founded. Honorable senators have available to them a memorandum explaining each amendment in detail and’ it is, I think, unnecessary for me to cover the ground encompassed by the explanations. I commend the bill to honorable senators.
Debate (on motion by Senator Armstrong) adjourned.
– I move -
That the bill be now read a second time..
The purpose of this bill is to remove from the income tax law a discrimination in the provisions governing the age allowance as it applies to married couples residing in the Territory of New Guinea as compared with those residing in Papua.
The age allowance is available to a married couple residing in Australia or the Territory of Papua if the husband has attained the age of 65 years, and the wife is not less than 60 years of age. At present, the allowance provides complete exemption from tax if the combined incomes of the married couple do not exceed £858. The allowance may also effect a reduction in the tax payable if the income exceeds £858 but is not greater than £1,181. The age allowance, as it applies to married couples, is not, however, generally available where a dependent spouse resides in the Territory of New Guinea. The bill is designed to remove this anomaly by extending the age allowance to married couples resident in the Territory of New Guinea and who otherwise satisfy the tests prescribed.
J commend the bill tohonorable senators.
Debate (on motion by Senator Armstrong) adjourned.
. -I move -
That the bill be now read a second time.
This bill is the third of three measures designed to correlate the Commonwealth income tax law with the Income Tax Ordinance of the Territory of Papua and New Guinea. The proposed amendments of the Income Tax (International Agreements) Act relate to credits allowed under international agreements to relieve double taxation by Australia and the countries with which those agreements have been made, namely, the United Kingdom, Canada and the United Statesof America.
The act contains a number of machinery provisions relating to the determination and application of credits and to taxpayers’ rights of objection and appeal on these matters. Corresponding provisions in the Income Tax and Social Services Contribution Assessment Act are now required consequent upon the proposed allowance to Australian residents of credits for tax paid on income derived in the Territory of Papua and New Guinea. These provisionswill be inserted in that act by the Income Tax and Social Services Contribution Assessment Bill, on which I have already spoken, and they will also be effective in relation to credits provided under international agreements. The provisions in the Income Tax (International Agreements) Act will accordingly becomeredundant and their repeal is proposed by the present bill.
Drafting amendments are also proposed in provisions governing the upper limit of the credits authorized by the international agreements and in a provision setting out the formula for determining the Australian tax payable on a dividend. As each amendment is explained in the memorandum made available last week to honorable senators, I have not thought itnecessary at this stage to embark upon more detailed comments on provisions of the bill.
I commend the bill to honorable senators.
Debate (on motion by Senator Armstrong) adjourned.
Debate resumed from 4th May (vide page 730),on motion by Senator Paltridge -
That the bill be now read a second time.
– The bill is for the purpose of increasing Australia’s contributions to the International Monetary Fund and the International Bank for Reconstruction and Development. Honorable senators will recall that in May of last year we dealt with a bill authorizing the Government to increase Australia’s subscriptions to both bodies, in the case of the fund by 50 per cent. and in the case of the bank by 100 per cent. The increase in the contribution to the fund was from 200,000,000 dollars to 300,000,000 dollars and the increase in the capital subscription to the bank was from 200,000,000 to 400,000,000 dollars. Those increases were not peculiar to Australia. They were initiated by a direction from the President of the United States to his country’s representatives on both bodies. The executive directors and the governors of the two bodies then put forward proposals which were submitted to and accepted by all members of the fund and to all members of the bank. I point out to the Senate that, in addition to the general increases, special increases were given at that time to three countries, and that other countries were invited to make application for special increases if they thought fit to do so.
– When was this?
– Last year. I am looking at a document entitled “ Proposals for Increasing the Reserves of the International Monetary Fund and International Bank for Reconstruction and Development, Reports by the Executive Directors “. It is dated December, 1958. That report initiated all of the increases that were made last year. The honorable senator will no doubt recall that we discussed this document, and the resolution of the governors, at very great length just a year ago in this chamber.
For the purpose of the point I want to make, I refer to page 9 of the executive directors’ report. At the time the general increases were given, special arrangements were made for some countries. This is what the directors had to say on that subject -
The Executive Directors have, however, received from a number of other countries requests for increases beyond SO per cent, of their present quotas. Some of these countries have present quotas of less than 20,000,000 dollars and have requested increases beyond the amounts available under the small quota formula increased by 50 per cent. It has not been possible within the time available to give adequate consideration to these requests, but the Executive Directors are continuing their consideration of them. The executive Directors will, as expeditiously as possible, reach their decision on these requests and on any other requests that are received early in 1959.
The report goes on to state that the recommendations would be dealt with quickly and referred to the governors in the form of new resolutions, and that they should be dealt with in time to let the extra increases take place prior to 15th September, 1959 - the date on which the general increases would become operative.
Very special increases were given to three of the major nations, owing to changed circumstances. They got a 50 per cent, increase in their fund quotas and a 100 per cent, increase in their capital contributions to the bank, and they were given also special increases. The countries concerned were Canada, the Federal Republic of Germany, and Japan. The latest report of the International Bank deals with this matter at page 6. This, of course, does not relate to the fund, although the bank is an associate of that body. The report states -
The Executive Directors also agreed to recommend additional increases, over and above the general 100 per cent, increase, in the subscriptions of three members, Canada, Germany and Japan; subsequently similar action was recommended regarding the subscriptions of fourteen other member countries.
The point that I am concerned to make at this stage is that in addition to the general increases of 50 per cent, and 100 per cent, in relation to the fund and the bank respectively, all countries were given an opportunity, if they thought they might need something extra, to make applications for special increases and to have the applications dealt with before last September. Similar arrangements were available for both the fund and the bank. As the Senate knows, membership of the fund is a requisite for membership of the bank. The two are linked. Any country seeking a quota with the fund is expected1, if not required, to make a corresponding capital subscription to the bank.
– It is obligatory, is it not?
– I am not quite clear on the point. I notice that the Minister, in his second-reading speech, put it not as strongly as that. He said that the country joining the fund was expected to join the bank. Of course, a country, on ceasing to be a member of the fund, automatically loses its membership of the bank. There is that nexus. But there is such a vast advantage to a country which wishes to join one or other of the bodies in that it has certain drawing rights as well as unlimited borrowing rights from the bank, the limit being determined only by the nature of the security or the hardheadedness of the bank directors or governors, I should think.
At the same time as the governors of the bank and the fund in effect extended an invitation to other countries to take up some portion of this additional amount, the whole thing was crystallized in a resolution of the governors which is set out in Annex D of the report of the executive directors. The Senate will recall that we approved an increase of ten billion American dollars in the bank’s capital. That is 10,000,000,000 dollars. The resolution that appears in Annex D of the report of the executive directors recites that it is desirable to increase the authorized capital stock of the bank by one billion - that is 1,000,000,000 - dollars in order to provide for the admission of new members and for future increases in members’ subscriptions. Then the report states -
In the absence of notice to the contrary from any member on or before the 1st September, 1959, the bank will understand that such member does not wish to subscribe its proportionate share of such increase.
So that there, quite obviously operative to the 1st September, was a wide-open opportunity for every country, including our own, to seek to participate in some extra contribution to the quota of the fund and the capital of the bank. At all events, we by-passed that opportunity with respect to both bodies. But, in January, 1960, according to what the Minister has told us, Australia made an application for a further very substantial increase to the fund, and to the bank, asking that the amount of 300,000,000 dollars, which was the amount of our quota to the fund, should be increased by one-third to 400,000,000 dollars, and that our capital in the bank should be increased by one-third from 400,000,000 dollars to 533,000,000 dollars. It is important to notice that neither of those applications was granted until 6th April this year.
Only last year, we dealt in this place, as I have said already with the purposes of the fund and the bank. I remember that I spoke on two occasions, my talk extending over two separate sessions. I dealt at such very great length then with the functions and purposes of both bodies that 1 feel it is quite unnecessary for me to review them now. But it is strange that, with an invitation and opportunity up to 1st September last to seek an increase, Australia made no move in the matter. Then, only some four months after the opportunity for approach to both bodies had lapsed a request for very great increases, having regard to those which had just taken place and that were to become operative in September, was made.
The reason assigned by the Government in the Minister’s second-reading speech was that the increased drawing rights on the fund which would be available if the application were granted would enable the Government to move with very much greater confidence in removing import restrictions.
– Is not that prudent?
– I should like the honorable senator to await the outcome of the argument 1 am developing. 1 shall show in a moment that the Government, on 22nd February, abolished import licensing with respect to 90 per cent, of the items in the field some months before the bank made up its mind on the application. That is exactly the point to which I am leading. The application was lodged in January, and there was no decision of the governors until 6th April this year, but abolition of import licensing was announced by the Prime Minister (Mr. Menzies) on 12th February, and, on the following day, the Minister for Trade (Mr. McEwen) said that the lifting of import restrictions would operate immediately except with relation to timber, in respect of which control would be abolished as from 1st April and for North American motor cars, in respect of which control would be abolished as from next October. That is the very point I have been leading to all the time.
If the Government gives as a reason for its application to both bodies the greater confidence that it would have in moving to the abolition of import restrictions, one must ask why it abolished import restrictions in February, before it had the decision of either the fund or the bank in connexion with its applications. When one follows that sequence of dates and events, one can only conclude that in February the Government was confident that the decision would be such that it could, with safety to this country, abolish import controls. When I say “ abolish “ I mean abolish in the terms that I have already indicated - that 90 per cent, of the controls would be forgone.
Let us look for a moment at what are the obligations of Australia with respect to both the fund and the bank under the two new arrangements which the bill purports to authorize and for which it seeks to appropriate whatever moneys are required.
– What degree of doubt was there in January as to the acceptance of the application?
– I invite the honorable senator to address that question in due course to the Minister. I do not know the answer.
– Have we been given any information as to communications between the Government and the bank?
– I have had no indication, and none was given in the course of the Minister’s speech.
– Is it not possible that some feelers were put up to the bank in this connexion?
– Why should not we know?
– lt is quite possible, but I do agree with the interjection by Senator Wright that this is a matter that might well have been confided to us when the question was floated in the Senate. I certainly would have liked to know what knowledge the Government had, if the fact is that it had some indication. Whether it had an indication, I do not know; but I should think there would be some doubt about it having regard to the number of the governors and the fact that they did not meet to pass their resolution until April. I conclude accordingly that the Government really felt that it could lift import restrictions quite safely and without: waiting for the determination of either the fund or the bank.
Before 1 proceed with that, let us look to what we are committed to with respect to both the fund and the bank. For the fund, we would have to find, immediately, some 25,000,000 dollars worth of gold. That would cost us some £11,000,000 in Australian currency. The balance of our increase, representing some £33,000,000 Australian, would be covered by a nonnegotiable, non-interest-bearing security to be deposited with the Reserve Bank of Australia in favour of the International Monetary Fund. That represents an uncalled liability of £A.33,000,000.
– An I O U.
– Well, it is that, yes. Quite obviously it has been regarded as a routine application to the bank, because we are asked to lodge, in gold or United States dollars, for an increase of 133,000,000 dollars, only £600,000, or less than £1,000,000 in Australian currency. Here we are required to deposit the equivalent of £5,000,000 only in a noninterestbearing, non-negotiable security, again to the credit of the International Bank, with’ our own Reserve Bank of Australia.
– That is all in. accordance with the formula laid down by the bank, is it not?
– Not in accordance with the original formula, but ir is in accordance with the agreement just made. The honorable senator will find the details of it in the two schedules to the bill, in which the resolutions of the Board of Governors appear. The one that I am now adverting to, with relation to the bank, is in the second schedule. The ordinary formula of the bank is not followed at all’. A very light obligation was cast upon Australia as to the down payment. It applied only in respect of half the increased’ capital. The other half was completely forgone and; left in a state in which it was capable- of being called’ up. The- amount uncalled, or unsecured’ by any kind of deposited note, would represent some £A. 53,000,000. So that from a capital and contribution viewpoint, Australia is in this year committed to a payment equivalent to £A. 12,000,000’ or thereabouts, and accepts an uncalled’ liability of as much as £A.9 1,000,000, some of which, and perhaps all of which, might have to be contributed in gold or currency if the bank exercises its full rights in the matter.
At this stage I direct attention to the fact that this commitment was not provided for in the Budget that was approved by the Parliament for this year, when the Government budgeted for a deficit. I do not recall such a commitment, nor do I remember its having been mentioned. It would have been extraordinary if it had been mentioned at the time, because up to the time the Budget was presented the Government had had the opportunity to accept the invitation extended to it by the Governors of the bank with relation to the extra increased capital. It is quite obvious that the Government, having budgeted for a deficit in this year, will find its position worsened to the tune of an overall immediate commitment of £12,000,000.
But, of course, it is very easy to accept an uncalled liability both to the fund and to the bank. Although we have not been called upon to honour any such obligation up to date, the fact remains that it is a. contingent liability facing this country, of an amount which is not insignificant, being of the order of £91,000,000.
– Would you agree that the contingency is very remote at present?
– I would not agree with that.
– For a number of reasons. Senator Vincent asked the obvious next question, and that will be my next answer. One cannot tell what lies ahead of this country. For instance, the discovery of oil in Australia and its export, and the full development of our bauxite deposits and our aluminium industry, could alter the whole pattern of the economy. These things may come about at some time in the future, and the economy may alter appreciably. We may find, because of the development of our own resources, other countries taking an interest in obtaining Australian currency. Looking at the bank alone, the bank relies upon this uncalled liability as its means of entering upon the money markets of the world and raising amounts in currencies that are in demand. Australian currency is not included amongst such currencies, which are seven in all, and include Canadian and American dollars, Swiss francs, German deutschmarks and Dutch guilders. But, as the bank pointed out in its report last year, what the lender looks to is the security of the uncalled capital in the bank’s structure, and it looks to that of no other country so much as that of the United States. Until the increase was made last year, the uncalled liability of the United States was some 5,725,000,000 dollars. This has been doubled in the intervening years, and the bank itself confesses that lenders to it rely far more heavily upon, the uncalled liability of the United States than upon that of any other country.
– What is the source of the money that has been made available from Australia - the Consolidated Revenue Fund or loans?
– We have made available gold, and we have in fact actually authorized the bank to use it in its own lending operations. We have to be consulted about that. But our currency generally has not been deposited with either body. There is no demand for it in the world. On that point, however, I was rather interested to see, looking at page 39 of the report of the International Bank for last year, that the repayments’ to be made include one of some 70,000,000 dollars in. Australian pounds. As a matter of mild interest, and if the Minister happens to be in a position to tell me, I would like to know who was the borrower of that, and whether we in Australia have that amount included in our loans, or whether it is being looked after by some other country. I just make the comment in passing that I was interested to notice that although there has been no demand through the fund for Australian currency, there is owing to the bank something of the order of 70,000,000 dollars in Australian currency.
– That is owing to the bank, not to the fund?
– That is so, not to the fund.
– I was wondering whether the Leader of the Opposition might care to develop his point about the possibility of the discovery of oil or the development of bauxite deposits establishing a demand for Australian currency, and that we would suffer by membership of the fund or the. bank in that circumstance.
– I did not suggest that we would’ suffer. The honorable senator has misunderstood me if he attributes that meaning to my remarks. I could conceive of vast benefits to Australia flowing from either of those possible happenings, but the demand for Australian currency might arise from countries outside Australia, and the bank and the fund might then call upon our uncalled liability.
– They would!
– They wouldof course that is right.
– But in the event of an oil discovery that would be all right, would it not?
– I am merely making the point that one cannot regard lightly the obligation to find this capital in certain circumstances. They would be very happy circumstances for this country, I agree. But I embarked on this theme at the instance of Senator Vincent, who suggested that the possibility that our uncalled liability would ever represent a burden on us was very remote. I had embarked on that theme only for the purpose of not accepting that proposition. I would not regard it as a calamity if we found oil and sold it abroad, or sold our aluminium products abroad. It is one of the things, the honorable senator will recall, I have been pressing for. I gave these two things as instances of where both the bank and the fund might have approached us or other countries to make good our promise to supply other moneys if needed. The bank or the fund could well do that. When I look at the position, 1 find that the bank does not require our moneys for its lending programme; it looks to the uncalled share capital as backing for its borrowing programme in the world.
I have already referred to the fact that America mainly is looked to in relation to the security afforded by this uncalled capital. The point I want to make regarding the bank is that our increased capital contribution to that fund makes no difference to the amounts that Australia may borrow from time to time. Each loan is looked at on its merits and as to its purpose and the security for it. No limit in relation to one’s borrowing from the bank is imposed in the bank’s charter. It depends upon the nature and the quality of the project and one’s credit-worthiness, 1 should imagine.
– There are also the emergency aspects.
– The bank has shown very plainly that it will help in an emergency. Speaking, from memory, I think it was the fund which made available some 700,000,000 dollars to the United Kingdom at the time of the Suez crisis. The purpose of both bodies, particularly the fund, is to meet an emergency.
What does Australia get out of it after contributing the extra capital to the bank? It finds £600,000 Australian at the moment. It takes a tremendous contingent liability in respect of the uncalled capital. The one advantage, I think, is that it gets a few more votes. Each member of the bank is entitled to 250 votes on becoming a member and one additional vote for every share - each share representing 100,000 dollars. So, by virtue of this projected increase of £133,000,000 Australia will get an additional 1,330 votes– whatever that is worth.
I would be interested to know whether the Minister regards that as of major’ significance.
– We can go on the board if we have more votes.
– Yes; Australia has figured on the Board of Governors. But when I look at the total voting strength and see that America before the increase last year had some 32,000 votes against our 2,250 I find Australia well down the list. The position will be aggravated by the large increase last year - doubling the capital of the bank, and the 50 per cent, increase in the fund. I should say that the only reason we are committed to the bank in this case is the expectation that we will contribute to the bank when we ask for an increased quota in the fund.
– And the fact that we can assist other countries through the agency of the bank.
– I put it to the honorable senator that they will now get £600,000 Australian from us under this proposal of the Government, and an uncalled liability in respect to everything else.
– The bank can lend against that uncalled liability.
– Well, it does not do so. The bank uses it solely to borrow. Our uncalled liability is not of very much assistance to the bank. The lenders to the bank look primarily to countries in the dollar area, notably America with its colossal uncalled liability.
– But the whole purpose was to disperse that liability and not to concentrate it wholly on America, was it not?
– I put it to the honorable senator that that was the theory. But the bank has indicated - and some financial writers whose works on this subject I have read concur - that what the lender looks to is the American uncalled liability in dollars. The important point-
– The important point is what the bank looks to, and what the lender looks to to support the bank’s borrowing. The collateral that the bank presents to its lenders is the uncalled liability of the member countries.
– Yes, all 74 of them, I suppose. Undoubtedly that is thrown in as part of the security that the bank will offer and a borrower would take all the security the bank could offer him, including our own uncalled liability. But the consensus of the opinion of the financial world appears to be that the lenders to the International Bank have very little regard for a currency like our own and currencies of countries like our own.
– Is not uncalled capital a usual feature of financial institutions such as trading banks?
– Yes, it always is a factor. There is a lack of demand for our own currency in the world, and I am merely putting the proposition on the basis that lenders to the International Monetary Fund do not pay great regard to it. That is all.
– Well, I do not suppose that they rely on a McKenna when they have a Rothschild.
– That is right. That is the common sense of it. But it is merely stating a fact and whilst our uncalled liability is very small potatoes in the money markets of the world, the uncalled liability of £91,000,000 which might be translated into an immediate liability in certain circumstances is a not insignificant thing. I am not carrying it any further than that.
– If we have only one talent, let us not hide it!
– I am not carrying it any further than that particular point. If these proposals are to be justified at all, they have to be justified in relation to our additional quota with the fund. I recall the 50 per cent, increase last year, and the fact that we in Australia had an opportunity up to 1st September to accept an invitation to ask for more if we thought we might need it. I recall that import controls were abolished on 21st February this year without the Government waiting for the decision of the governors of the fund or of the bank on 6th April. I look, too, at the fact that our trade balance on current account is quite adverse. Remembering all those things, I question the wisdom of this further increase in quota. When I look at the trading deficit, I find that Australia on its current account was down £187,000,000 for 1958-59 and £177,000,000 in 1957-58. lt had a surplus of £90,000,000 in 1956-57, and in 1955-56 it had a deficiency of £237,000,000. In that period there is one year with a relatively small surplus. That deficit - it is generally a deficit running close to £200,000,000 on our current account in the balance of international payments - has been made good year after year very largely by capital movements in favour of this country. The point I make about those movements is that they are not dependable. Here we are abolishing import restrictions at a time when, on the trend of the world balance on current account, we are roughly £200,000,000 short, and but for the adventitious inflow of capital to this country we would either have to borrow that amount or reduce our holdings of overseas’ funds correspondingly.
– Have you the figure in your mind as to what overseas funds stand at to-day?
– Overseas funds at December last stood at £547,000,000. 1 cannot give the present amount. I do not see it recorded in the statistical information issued by the Treasury in April.
– It is there.
– It may be there but I have not seen it, although I looked at the story about the balance of payments.
Our present position of having to rely on capital inflow is not a practical one. We must face the fact that capital inflow is unpredictable; it may fluctuate enormously from year to year. It may be applied io purposes that are not conducive to the best interests of our economy. If capital inflow is directed into luxury activities, buildings or projects, or if it is migratory, by which I mean if it has to be repatriated fairly frequently, it is not in the best interests of the economy. Even if it is directed to the best productive purposes in this country it does build up an obligation to pay interest or dividends and, perhaps, to repay principal. It poses a repatriation problem somewhere along the line which, in turn, and in the future, will add to the difficulties of our balance of payments position.
In its report for the year 1958-59, issued in August last, the Tariff Board drew attention to this position. I think the Senate will bear with me if I read a brief extract from that report. Dealing with the balance of payments position, the board, which enjoys the confidence of all parties, said -
However, keeping in mind all the factors alleging the balance of payments, international reserves at the present time would not appear to be either so high or so stable that the Board can see in the results of the past year any reason for complacency about the outcome in future years. The fact that, in 1958-59, there was an increase in capital inflow of sufficient size to offset the effects of low export receipts was of great importance to the Australian economy and it permitted a further increase of £50,000,000 in the import licensing ceiling. But, clearly, .in the next decade the import needs of industry and the requirements of a growing population will reach a higher level than the present ceiling of £850,000,000.
It would not seem prudent to rely on capital inflow continuing to increase at a sufficient rate to permit further expansion of imports. Capital inflow and non-repatriation of funds invested in Australia cannot be taken for granted. The increased inflow in 1958-59, for example, was unexpected. Moreover, capital cannot be obtained without some increased service costs in the future in the form of dividend and interest payments.
– Is that not the very situation in which it is wise to create these arrangements, where you have an expectancy of being able to cushion any sudden dislocation of external finance?
– If there can be an assurance that moneys that come in will be fully productive and used in the development of this country - that they will earn sufficient, preferably in foreign exchange, to enable advances to be serviced - I would agree
– The Government is not borrowing this money and handing it to the bookmakers.
– The honorable senator is the only one who has thought of that. I certainly have not suggested it.
The Opposition believes that import controls were prematurely lifted and that regard should have been had to the position of industries that had grown up under import restrictions since 1952. The Government is now seeking greater drawing rights - one might call them borrowing rights - from the fund as a kind of safeguard or insurance against what the Opposition believes was a too-precipitate action on the part of the Government. That is why I have made such a point of emphasizing that import controls were lifted and the announcement of the lifting made before the fund had agreed to these greater drawing rights. 1 invite the Minister to look at the difficulty in which this country will find itself if circumstances make it necessary, through failure of capital inflow, to re-impose import controls. It will be pretty difficult to reimpose import controls, having regard to the terms of the General Agreement on Tariffs and Trade and to the complete lifting in this year of grace of import controls. If we go on drawing from the International Monetary Fund to make up defects in our annual income - that is what it comes to - we are building up trouble for future years when, in short order and short time, those loans or drawings must be repaid.
The fund keeps a pretty tight control on the drawings that it permits a member to make. It is true that the initial rate of interest is low but it is also true that that rate rises by one-half per cent, per annum. It is further true that the fund demands very quick repayments. These drawings or loans are not long-term loans and if a second loan supervenes the bank insists on the second loan being repaid before the first, and the second loan is for only a very short term. For instance, the Labour Government in October, 1949, drew some £20,000,000 from the International Monetary Fund. The present Government in 1952 drew a further £30,000,000, and was obliged to repay that sum in very short order - in 1953 and 1954. I think I am correct in saying that the fund compelled the repayment of the amount within two years. In the following two years, the Labour Government’s loan of £20,000,000 was repaid. So the day of reckoning comes.
The Government is now moving to increase our drawing rights to the tune of some £A.21 1,000,000. Repayment will have to be made in the near future. With a sequence of bad seasons and bad years in the realm of international payments those repayments to the fund could be a source of very great embarrassment to this country and could worsen our plight in respect of the balance of payments in the years that lie ahead. All honorable senators are aware that many factors can upset our international position and make us very vulnerable. We are dependent, in the first instance, so largely on primary production. We are a prey to bad seasons for one reason or another. We are very vulnerable and susceptible to fluctuations in world prices, over which we have no control. We are at the mercy of some of the larger countries which are our competitors and which subsidize agricultural products in world markets in which we have had a traditional stake and interest. I have only to refer to America and some other countries in relation to wheat. The charge that we make against the Government is that not enough has been done to increase our exports of primary products. We have nearly all of our eggs in one basket. Not enough has been, done to encourage the export of the products of our secondary industries, as a second line of defence. An export trade in the products of our secondary industries has not been developed adequately. One reason for that, of course, is that costs in this country are inflated, due to the failure of the Government to tackle the problem of high costs. That is a disability which affects our balance of payments position.
– Does the Leader of the Opposition agree with the decision of the Australian Council of Trade Unions yesterday to recommend an application for increases in wages?
– I do not know what the A.C.T.U. recommended or decided yesterday. I say to the honorable senator that I do not agree with the proposition that we should say to those who earn wages, “ You shall have no increase “, but that we should tell the entrepreneur, “You may increase your prices and margins of profit at will “. That is one of the things with which we charged the Government in a proposed amendment to the AddressinReply to the Governor-General’s Speech. The Opposition referred then to what Dr. Coombs had pointed to - namely, the tendency of industry not to attempt to absorb wage increases, but to add its measure of profit to the increases and pass them on to the consumers. Dr. Coomb:, commented on the extraordinary fact that the people have become accustomed to that procedure and do not now protest against it.
We of the Opposition say to the Government that its policy is endangering our overseas markets. In further reply to Senator Wright, T say that I would agree that there should be no increase in wages, provided that attention were given also to prices and profits. The Government has promised to take action in that field. Senator Wright will recall the promise made by the Government in the early part of its term of office to bring in an excess profits tax. That promise was made in an inflationary period - in a situation such as the Government faces to-day. Nothing has been done about it.
The Opposition thinks that the Government has gone about things in the wrong way. It is desirable to lift import controls, but the Opposition thinks that the controls should not have been relaxed until Australia had some real assurance of stability in relation to the balance of payments. This action of the Government in lifting import controls implies that we have that assurance.
– Is not it the thing that is most calculated to reduce the profits of the importing entrepreneurs?
– Let me ask the honorable senator: What steps has the Government taken to ensure that if lowpriced goods come into this country, the importers will not be allowed to increase the prices to the level of those charged for similar goods produced here? There is no safeguard against that. The danger is that the making of huge profits will shift from our own manufacturers to the importers. I invite the Government to tell us what precautions have been taken against such an eventuality.
– Would not imports increase competition to the benefit of buyers?
– I agree with the honorable senator. In theory, it should, in many cases, lower prices. I point out, however, that if overseas goods come into Australia at far lower prices than we are charging for similar goods which we are making ourselves, we will have to face a huge unemployment problem.
– What about the competition as between importers?
– And as between importers from different countries?
– My experience has been that these people will go to the limit that the market will permit. Unless something is done to prevent them, they will go to the limit of the Australian cost structure. You will see a new race of profitmongers, instead of the old race, but the profit-mongers will still be there.
The Opposition feels that the Government is altogether too ready to extricate itself from a purely temporary difficulty, such as an adverse balance of payments in a particular year, by drawings or borrowings. The Opposition has protested to the Government from time to time about that. The Government simply must face the fact that there will be a day of reckoning. Our drawings or borrowings from the International Bank are intended1 merely to meet a deficiency in our international income in a particular year. One does not need to be an accountant to realize that you cannot proceed along that road for too long. The day of reckoning will come. Drawings from the bank should be made in an emergency, but they are only a palliative. The Government should attend to some of the fundamental things such as encouraging our secondary industries to export to worthy markets and helping our primary industries by lowering costs, but it goes on blithely adding to costs by stepping up the sales tax and keeping on the pay-roll tax. In that way, it is adding £400,000,000 to the cost structure of this country year by year, as has already been demonstrated.
Although we of the Opposition, when in office, were responsible for Australia becoming a member of both the fund and the bank, and although we agreed to the very substantial increases that were made in Australia’s subscriptions to both the fund and the bank last year, we are opposed to this proposed increase. Australia is now acting on its own and is out of line with world movements in the matter. The Government had an opportunity up to September last to increase our fund quota, but did not take it. We feel that, by and large, it is bad business to commit this country at this stage to a payment equivalent to £12,000,000, to take over an uncalled liability of about £91,000,000, and to fail to lift import controls more gradually over a longer period. We feel that the problem that the Government is facing is one of its own creation. We believe that the Government got itself into its present difficulties and is choosing the wrong method to get out of them. For these reasons, Mr. Deputy President, we of the Opposition oppose the proposed increase.
– Senator McKenna has just said that the Opposition proposes to oppose this important measure. Although I have become accustomed to receiving shocks in this chamber from time to time because of the attitude of the Opposition to legislation, I must say that on this occasion I have received one of the greatest shocks I have ever had to absorb. The Opposition proposes to oppose a bill which I am certain that Mr. Chifley, if he were alive, would support most enthusiastically. I felt that Senator McKenna, in his very long speech, was not speaking with his heart in the subject. I suggest that the honorable senator welcomed much more than he usually does the interjections that were hurled across the chamber, because they gave him an opportunity to get away from the official Labour attitude to the bill.
Actually, Senator McKenna said very little about the official Labour attitude to the measure. He had spoken for more than half an hour before he stated Labour’s objections to the measure. It will be remembered that, first of all, he developed the argument that the Government had abolished import restrictions before actually knowing that the International Bank for Reconstruction and Development had approved the application for a new quota. That is certainly true, but surely it is no reason to object to the bill. Was it necessary for Australia to wait for a decision by the International Monetary Fund before lifting import restrictions? I remind the Opposition that the Government had progressively lifted import restrictions over a period of some years, and that it was perfectly obvious, from the state of our overseas reserves, that Australia could at that stage lift the whole of its import restrictions, subject to the minor exceptions referred to by the honorable senator. If he disagrees with me in that respect, I put to him that the establishment of additional overseas reserves under the International Monetary Fund would provide that much more additional reserve to enable Australia to lift import restrictions. Surely those reasons are not adequate for the Opposition to say that it will reject this most important measure.
Senator McKenna stated that the commitment involved in contributing to the increased quota was not included in the Budget. It could not be included in the Budget, and it is perfectly obvious why it could not be included. At that stage, Australia was not aware that its quota would be increased. Again, that is not an adequate reason for the measure to be opposed. Surely the honorable senator does not suggest that Australia’s resources are inadequate to find the comparatively small amount involved in establishing in New York the amount of the increased quota.
Senator McKenna then went on to concern himself with the contingent liability, particularly if oil were discovered in Australia. I think that was one of his worries. It is true, of course, that in those circumstances we could be called upon to find quite a large sum of our contingent liability; but if we found oil, surely we would have a very much better currency than Australian paper money with which to find that amount. We would have dollars, because we could sell the oil for dollars on the international market. We would be much better off in those circumstances. Therefore, the discovery of oil or large deposits of bauxite would not embarrass us so far as the contingent liability is concerned. In fact, such a discovery would enhance our financial situation, and we probably would not even be called upon to find a penny. If we were, however, we should have funds from the sale of oil or bauxite with which to pay. I am astonished that Senator McKenna should have put forward such a proposition, because when the matter is boiled down to the fundamentals I have just mentioned, it becomes one of rather elementary economics. Oil and certain other commodities speak all languages, as it were.
Finally, Senator McKenna got down to the real reason why Labour is now opposing the measure. He did not explain why, ten years ago, Labour very enthusiastically supported the establishment of both the International Monetary Fund and the International Bank, nor did he explain why Mr. Chifley availed himself quite readily of the facilities of those institutions.
– Did Labour oppose the increase last year?
– No, the Opposition did not oppose the increase then. I think I can sum up the Opposition’s attitude to this measure by saying that it considers that our balance of payments problem should not be solved by capital loans. That is the issue that Senator McKenna raised. He said that we were too ready to extricate ourselves from economic situations by means of temporary drawings from the fund. Without going into the merits or the desirability of bridging the gap between the debit and credit sides of our overseas current account by capital loans, I put to Senator McKenna the proposition that surely the whole purpose of increasing our quota overseas is to establish a reserve to assist us in our temporary difficulties in regard to the current account. I suggest with great respect to the Opposition that it has not properly understood the purpose of this measure. The legislation is designed to establish an overseas reserve. We are not proposing to set up a long-term capital loan procedure with the International Monetary Fund. The fund does not lend on a long-term basis. It was established entirely tor the purpose of assisting countries like Australia which find themselves short, as it were, on current account. Does Senator McKenna suggest that we should have smaller reserves when our trade is increasing? Should we not have more reserves then?
The purpose of this legislation is to set up a second line of reserve, with a view to making short-term grants to overcome our temporary financial difficulties. That, in itself, is nothing unusual. I refer to the example of Canada, and I am sure that no one would suggest that that highly prosperous country has a weak economy. Canada is a very heavy capital importer and also a very heavy drawer against the funds of the International Monetary Fund for the same reason that Australia utilizes such funds. Would Senator McKenna argue that Canada’s policy is unwise? Does he suggest that Japan’s policy also is unwise? I cannot understand an economic argument of the type advanced by him. The International Monetary Fund was established, not for the purpose of granting loans but to assist countries such as Australia to get out of trouble with their current account and to increase their reserves.
If honorable senators opposite look at the figures relating to Australia’s trade during the last decade, I think they will see what I mean when I say that it is desirable to increase our reserves. In 1948-49, the total value of our imports was £415,000,000. Ten years later, the value of imports had risen to £793,000,000. I interpose the very important observation that, in the meantime, that level of imports had been subject to quite violent fluctuations. If honorable senators consider the export position, they will see that in 1948-49 the value of exports was about £520,000,000, and that ten years later, in 1958-59, the value had increased to £809,000,000. Again, it was subject to violent fluctuations. Our trade pattern is always subject to the violent fluctuations referred to by Senator McKenna. Therefore, adequate reserves are required. Our reserves overseas were at a certain level in 1948-49, but surely that level would not be high enough now, having regard to the increased volume of our trade and to the fluctuations due to the fact that we rely for our export income so much upon primary production. The Leader of the Opposition has entirely overlooked ;the fact that our increased trade demands an increase in our overseas reserves, for the purposes I have mentioned. If we did not have that increase, we could be caught short. We have not as yet been caught short, but we do not want to be in the unfortunate position of being deficient on current account. If the level of our trade had fallen in those ten years, I would agree there would be no necessity now to increase our overseas reserves or to increase our quota in the International Monetary Fund.
Senator McKenna omitted to refer to another side of this picture, which was referred to in another place. He suggested that we were, in effect, overborrowing. It must be remembered that the people who are lending us this money and who have agreed to increase our quota in the International Monetary Fund arc pretty hard-headed characters. They would not agree to this increase in the fund quota or to the additional subscription to the International Bank without having a good look at our finances. That is referred to, incidentally, in a very interesting report issued last year by the Australia and New Zealand Bank Limited. I should like to read this passage, because it is germane to this part of the argument -
The most effective appeal to U.S. investors is probably on the ground that Australia enjoys rapid growth within a stable economic and political environment … An important attraction is that Australia not only constitutes a valuable market in itself, but provides the base from which nearby Asian markets with half the world’s population may be supplied, often on more economical terms than they can be supplied from the U.S.A.
No countries, other than perhaps North American countries, can go to the New York money market at present and obtain money on such favorable terms as can Australia. That shows that something is known of the stability of our economy, particularly within the International Monetary Fund organization itself.
– What is your authority for saying that?
– If the honorable senator reads the report of the fund, he will find that its analysis of our economy is most profound.
– What is your authority for the statement that no country other than a North American country can get such terms?
– I rely on a statement made by the Treasurer (Mr. Harold Holt) in another place, that we have consistently been able to get money in New York on more favorable terms than could any other country except certain North American countries. I invite the Minister, in his reply, to say yea or nay to that statement. I understand that we have been offered money quite readily. The mere fact that this additional quota has been granted in full is surely a measure of our stability.
– What interest would we pay?
– The interest varies in accordance with the times. I want to get back to the real argument that the Opposition adduces in opposing the measure, namely, that we are bridging the gap between imports and exports with overseas loans. Senator McKenna went so far as to imply that the only alternative was a reintroduction of import licensing. I am surprised that he is advocating the reintroduction of import licensing. That negative approach to this question would,
I suggest, have an effect exactly opposite to that which he seeks. The re-introduction of import licensing, with a corresponding reduction in Australian trade, would not have the effect of increasing our reserves. Over a period, it would have the effect of decreasing them. That negative approach is of course, the traditional socialist approach, which the Australian Labour Party must take. I appreciate that that is so, but why the Opposition has changed its attitude in the comparatively short period of twelve months is beyond my comprehension.
Let me carry further the propositions enunciated by Senator McKenna and the Australian Labour Party. Surely a restriction of capital inflow from time to time, as advocated by Senator McKenna, would have disastrous effects on some very important elements in our way of life. It would immediately attack the Liberal Party’s objective of full employment. I suggest that we could not maintain full employment if our capital inflow were interrupted from time to time - if we could not have recourse to adequate overseas reserves and were short on current account. A restriction of capital inflow would immediately affect our immigration programme. Our full employment programme and our immigration programme would be vitally affected if we were to follow the socialist line of reduction of overseas reserves. These matters are fundamental to this issue. I put them to the Opposition at this stage because I think somebody from the Opposition should, subsequently in this debate, say how we are, without adequate overseas reserves, to solve the problem of the maintenance of full employment and the maintenance of our immigration programme.
– A change of government will do that.
– That would not increase our reserves. I suggest it would have the effect of decreasing them. To round off that part of this argument, I refer to the reasons for the establishment of the International Monetary Fund. The articles show that one of its primary objectives is - to facilitate the expansion and balanced growth of international trade and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.
Senator McKenna mentioned that all other expanding nations had, upon application, been granted additional quotas. I think he mentioned fourteen of them. At that stage the Government did not, for some reason which it would probably be prepared to give, apply for its additional quota, but the mere fact that the increase in quota was not applied for at that time is surely no good reason for objecting to the passage of this measure now.
I wish to refer to one other relevant point in Senator McKenna’s argument. He said that a nation’s contributions to the bank made no difference to the amount of money that the nation could borrow. That, of course, is perfectly true. He queried the advisability of the legislation in that context. It was pointed out to him by way of interjection that contributions to the Internationa] Bank’s deposits, that is, not only Australia’s contribution but the collective payments of the almost innumerable nations contributing to the bank’s capital, have a very profound effect upon the rest of the world. I emphasize the point that was mentioned, I think by way of interjection, that the uncalled liability of the member nations is used with profound effect by the bank for the development of the backward countries. For instance, loans by the bank have been of the order of 4.4 billion dollars. Of that enormous sum 11 per cent, was loaned to European countries immediately after the war for the reconstruction of bombed cities. The significant feature is that 70 per cent, of the 4.4 billion dollars has gone to the under-developed nations of Asia, Africa and the Middle-East. The balance has gone for the development of such nations as Canada, Japan and Australia, which are no! quite so badly off.
Here is an argument which the Opposition is using against its own alleged principles, as I call them. It has sought to assert that, above all things, these international agencies should be primarily for the assistance of under-developed countries. Now, honorable senators opposite are saying, “ We do not like this idea because, after ail, Australia can borrow from the bank in any case “. They overlook the very important feature that the contributions by Australia and all other nations, together with their prospective obligations, are used very extensively by the bank for the development of under-developed nations which, the Opposition sometimes argues most vociferously, require development. I feel that the Opposition is not genuine in advancing the arguments that it has against this measure. Later I shall deal with some ot the reasons why I believe the Opposition is now taking a most amazing stand against the passage of this bill, thereby seeking to deny Australia the right to develop.
I should like to deal now with the merits of the measure, because I have some views that I want to put to the Senate. Senator McKenna referred to a fact which I feel ls not properly understood by all honorable senators. I should like to refer to it again because it relates to an important part of the measure. Actually, this measure seeks to do two things. First, it seeks to increase Australia’s quota in the International Monetary Fund and, secondly, it seeks to increase our subscription to the bank. The increase to be made to the fund is the figure mentioned by Senator McKenna - from 300,000,000 dollars to 400,000,000 dollars - and only a small part of it is payable at the moment. Part of the initial payment must be in gold. The proposed increase to the bank fs from 400.000.000 dollars to 533 000.000 dollars. Only a small fraction of the increase is payable, and again part of that small fraction must be in gold.
Although I have said so already. I think it is worth repeating that the fund quota is used only for the purposes of assisting us to meet our balance of payments problem. It is our second line of reserves overseas. I think I have illustrated quite successfully that, in view of the rapidly increasing trading activities of this country, and having regard to the fluctuations that occur, our reserves must be increased. That is a fundamental and elementary principle.
The second principle of the bill, that relating to the increase of subscription to the bank, flows from the first. I may be wrong - if I am, I shall welcome correction - but I understand that it is in fact, and in effect, obligatory to contribute to the bank’s subscription if the fund quota is to be increased. The one must follow from the other. Perhaps that position could be expressed in another way. It could be said that no country would get any increase in its fund quota unless it was prepared to increase its bank subscription. I think that would probably be the more correct way of putting it. It all boils down to the fact that Australia could not have obtained these increases from the International Monetary Fund unless she had been prepared to increase her subscriptions to the bank.
Dealing with the bank’s subscriptions, let me repeat that this money helps not only Australia, but also the undeveloped countries of the world. That is in accordance with good Liberal principles, and I think, so far anyway, it has been in accordance with good Labour principles. But honorable senators opposite have denied that today in this Chamber. They have said, “ No, we do not like this “. In effect, they have said, “ The undeveloped countries can go to the dickens, because we are not going to contribute any more “. I think that sums up briefly the attitude of the Australian Labour Party to this matter.
The increased contribution to the fund is important. Having dealt with Labour’s opposition to it, I want to deal now with some of the merits of the proposal because it is of the utmost significance to this country. Here, it is important to note the difference between the two international agencies. First, I emphasize that Australia can draw from the fund only the amount of her quota. She cannot draw an indeterminate amount. The maximum she can draw is her quota plus that part of the holding which she has paid in gold. Over the years, we have had to have recourse to that fund. For instance, in 1949, Mr. Chifley borrowed some 20,000,000 dollars on a short-term basis against Australia’s balance of payments trouble. That was repaid in due course. In 1952, Australia again had reason to obtain a short-term loan of some 30,000,000 dollars from this fund. Again the money was repaid.
Let me refer now to that aspect of the fund quota which relates to the holding of gold. It is obligatory to pay a proportion in gold, having regard to the quota approved. I notice that Australia’s quota in gold in proportion to her total quota is somewhat low. The figures are contained in the report of the fund for the year 1958. They show that Australia’s quota then was 200,000,000 dollars. Of that subscription, she was required to pay 8,400,000 dollars in gold and 191,600,000 dollars in currency. In other words, the proportion of gold to currency was of the order of eight to 190. A perusal of the reserves of gold held by other nations discloses some interesting facts. For example, in that year the Argentine’s quota was about 150,000,000 dollars, of which 37,000,000 dollars was in gold and 112,000,000 dollars in currency. Citing the figures for some comparable nations, Belgium had a quota of 225,000,000 dollars, of which 56,000,000 dollars was held in gold and the balance in currency. Canada’s quota of 300,000,000 dollars consisted of 75,000,000 dollars in gold and the rest in currency. Japan’s quota was 250,000,000 dollars, of which 62,500,000 dollars was in gold, the balance being in currency.
– You are referring to the fund now?
– I am referring to quotas, and I am pointing out that the proportion of gold to currency in the case of Australia was extremely low, compared with the proportion in the case of other countries. I go further than Senator McKenna in this matter; I go to the other extreme and say that our holdings are not enough, and that our reserves are not sufficient, particularly our reserves of gold. I invite the Minister to explain, when he is replying, why our gold reserves in the fund quota represent one of the lowest proportions of all, certainly lower than those of other nations comparable to Australia. I would also invite him to say whether the Government would be prepared to consider increasing these gold reserves, because, as I again emphasize, our drawings from the fund can. be only as much as the quota plus the gold reserves. The greater the gold reserves the more can be withdrawn from the fund in a time of crisis against current account.
I repeat that our proportion of gold in the quota is too low. I believe we should have something of the order of one-third of our quota in the International Monetary Fund held in gold. This would mean increased production of gold in Australia. 1 do not intend to talk about that at the moment, although I will have something to say about it at a subsequent time. This country could easily afford to produce a good deal more gold and to use it foi purposes such as I have suggested, amongst other things. I feel that we have failed, as a nation, to appreciate the importance of gold in matters connected with overseas reserves. I believe it is time the Government had a good look at this question, because for a very small investment the production of gold could be substantially increased. I have said this many times in the Senate: in fact I am tired of saying it. We have, of course, a gold subsidy. That subsidy is based upon the proposition that it should be adequate to ensure only the maintenance of existing mines. I have said more than once that this is a policy of despair, because of the wasting nature of a goldmining industry. It is impossible to maintain a large goldmine without providing sufficient money for that mine for the development of reserves. Any other policy would ring the death knell of the mine.
I do not want to get on to such arguments in this matter, because they are not strictly relevant to the issue. What is relevant to the issue, I suggest, is that Australia’s gold production could be increased, and that increased production could be very beneficially used as a reserve to increase our drawing capacity in the International Monetary Fund. I ask the Government to consider seriously increasing our gold reserves. This may necessitate, and, in fact, will necessitate, a consideration of the much more complicated problem of increasing gold production. The two questions are bound up together, but I feel that it is essential to increase our production of gold for the purpose of depositing further gold reserves with the International Monetary Fund. Many times have I said in this chamber that gold is of the utmost importance internationally. Now we have the chickens coming home to roost. Australia has one of the smallest gold reserves of all nations, when we could, with a very small increase in our investment, have one of the largest gold reserves among countries comparable to ours.
– Why do we export our gold?
– For the simple reason that we cannot eat it here. I am not trying to be facetious when I say that.
– But it is a valuable stand-by; we can eat other things.
– If the honorable senator would like to consider how gold can affect our overseas exchanges - and it is not a very difficult subject to study - he would realize, I think, that an ounce of gold can be used hundreds of times for the purchase or sale of goods. It is a commodity that does not disappear. It exists permanently and can be used by banks, or by the International Monetary Fund, or by Australia for the purpose of increasing its trade.
– But why is it not so important to build up large gold reserves in our own country?
– I simply put the proposition that it is important in connexion with the International Monetary Fund, because we can withdraw from that fund our quota plus the value of the gold we lodge with the fund. It does increase our capacity to withdraw. It has this additional advantage in the fund: Outside the fund it will earn only its bread and butter when goods are bought with it, but inside the fund it can be used for that purpose and also for increasing Australia’s drawing potential.
I do not think this .matter need be pursued any further by me. I merely want to add these concluding remarks. I find it impossible .to understand the attitude of the Opposition in opposing this bill. Both the fund and the bank were instituted during the regime of the Chifley Government, and were ardently supported by Mr. Chifley. We see now a rejection of the principles which the Chifley Government very heartily supported not so long ago. The International Monetary Fund quota is being increased so that our trading problems will disappear. A rejection of that increase could affect Australia’s trade and prosperity, and also the employment situation and the immigration programme. All these matters are bound up with the question we are discussing.
Referring to the International Bank, our responsibility as a prosperous nation must surely go to the extent, as must that of other nations similarly placed, of being prepared to increase our subscriptions so that backward countries can participate in the benefits to be enjoyed thereby. It is nonsense to say that this will not increase the potential of the bank, lt will increase that potential in two ways. It will increase the bank’s capacity to lend by the actual amount deposited. It will also increase the bank’s potential by the amount of the contingent liability of Australia, against which the bank definitely lends, 70 per cent, of those loans being to backward countries.
On these grounds I believe the bill should be supported by all of us. The Australian Labour Party is making a terrible mistake in opposing this measure. I believe that practically everybody in Australia will demand its passage. It is isolationism gone mad to oppose it. We sometimes accuse the Americans of being isolationists, but I believe the Labour Party is demonstrating the very essence of isolationism, what everybody knows as the “ Jack “ principle. We cannot afford to live by that principle to-day. For these reasons I very heartily support the measure.
.- We of the Opposition oppose this measure, for the very good reasons advanced by the Leader of the Opposition (Senator McKenna). I believe that instead of allowing ourselves to fall into a double trap in this field of international finance, we should be endeavouring to extricate ourselves from the control of international financing authorities. I acknowledge that Australia was a subscriber to this fund when it first came into operation, but conditions then were entirely different from what they are now. At that time, a great need existed to rehabilitate devastated countries throughout the world. Fortunately, practically none of this country was devastated by war. The stage is now being reached when further assistance must be given to develop under-developed countries of the world. Australia has assisted, and is still prepared to assist, in this regard. I for one believe that we should be endeavouring to make ourselves financially as independent as we possibly can. The Minister for Civil Aviation (Senator Paltridge) said in his second-reading speech -
The purpose of this bill is to obtain the approval of Parliament to an increase in Australia’s International Monetary Fund quota and International Bank subscription. The increase in Fund quota is one-third, from 300,000,000 dollars to 400,000,000 dollars, and the increase in bank subscription is also one-third, from 400,000,000 dollars to 533,000,000 dollars.
Last year, the approval of Parliament was obtained for an increase of 50 per cent, in Australia’s fund quota from 200,000,000 dollars to 300,000,000 dollars and an increase of 100 per cent, in Australia’s bank subscription from 200,000,000 dollars to 400,000,000’ dollars. Those increases were part of a general move, in. which all fund and bank members were, entitled to participate, to enlarge the resources of those two international institutions.
As the Leader of the Opposition (Senator McKenna) has pointed out, this Government is prepared to resort to almost any expedient to overcome the difficulties into which it has drifted during the years that it has been in power, the most recent being the present inflationary period. Instead of doing something tangible to counter inflation, this Government is resorting to all kinds of expedients, of which the measure before the chamber is one. Another was the removal of import restrictions, to which our leader referred. The removal of import, restrictions obviously must have adverse effects on the national economy. Instead of seeking, by consultation with the States, or by an alteration of the Constitution, to obtain power to control prices and profits in this country, the Government has resorted to the expedient of removing import controls, thereby opening the gates of this country to a flood of goods produced by cheap labour. When the Leader of the Opposition was asked by way of interjection whether this would lead to undue competition with Australian-made goods, he replied that, in the absence of any restriction on the prices charged or the profits made, very soon the prices charged for goods produced by cheap labour would be very little if anything below the prices of Australian goods. As was pointed out at the time, this would have the effect of transferring profiteering from one section of the community to importers generally.
When this Government decided to remove imports control the Prime Minister (Mr. Menzies) - and I think, also, theTreasurer (Mr. Harold Holt) - appealed to the business people of Australia to exerciserestraint in relation to profits and prices. Immediately after that announcement was made, every aircraft leaving Australia was filled with representatives of Australian business people who were going overseas to place orders for goods produced by cheap labour.
The Government’s decision to remove import controls was noted by the people most likely to be affected, including those engaged in the textile and clothing industries which always feel the impact of cheap imported goods. A resolution on import policy that was adopted by the federal committee of management of the Australian Textile Workers Union, at its meeting in Sydney on 23rd March, 1960, showed what the members of that union thought about the removal of imports control. The resolution reads -
This- Federal Management Committee of the Australian Textile Workers Union, having- studiedcarefully the implications of the Commonwealth Government’s recent decision to discontinue import licensing, and- being fully aware of the presence of a number of representatives of Japanese exporting, associations at a recent Tariff Board enquiry on the man-made fibres section of the textile industry, declare our anxiety as to the future effect on- the continued employment of our members in the light of these developments.
We are aware of the claims of the Commonwealth Government that import licensing was not instituted as a means of protection for secondary industry, but we declare unreservedly that such action should not have been taken without first providing an alternative means of protection per medium of prompt Tariff Board inquiry . . .
As everybody knows, even when a matter is referred’ to the Tariff Board, irreparable harm can be done to. the industry concerned before the board reaches a decision. The resolution continued -
We are also aware of assurances emanating from Japan from time to time that exporters will voluntarily restrict quantities of goods exported so as not to damage local industry . . . but we are not impressed by such assurances.
I do not think anybody else would be, either, because once the Japanese people engaged in the textile and clothing trades are given an opportunity to export their produce to Australia, they will be concerned primarily with benefiting their own industry.
I should not like you to think, Mr. Acting Deputy President, that the objection, to the removal of import controls is entirely a trade union objection. Other people in the community are. very gravely perturbed about the action of this Government, as an article that appeared in the Melbourne “Herald” of Monday, 14th March- that is not very long ago - shows. The article carries the heading, “ ‘ Import move at bad time ‘ says Chamber “ and reads -
The Federal Government’s sudden decision to lift almost all import restrictions could hardly have come al a worse time for manufacturers, according to “ Industry To-day “, the official publication of the Victorian Chamber of Manufactures.
This shows that not only was there concern on the part of the trade unions; there was also concern on the part of the manufacturers. The newspaper report continued -
Disastrous results for Australian industry could stem from the influx of an estimated £100 million’s worth of imported products, it says.
Many of these are already made in adequate quantities in Australian factories by Australian workmen.
To import them amounts to importing unemployment.
That is the very aspect of the matter that we have placed before this Government from time to time. Our opinion has been backed by no less an authority than the Victorian Chamber of Manufactures and it is backed, also, by the persons who would suffer most, the trade unionists working in the industries most likely to be affected.
Sitting suspended from 5.45 to 8 p.m.
– Prior to the suspension of the sitting I was dealing with inflation and the expedients employed by the present Government to combat ii, particularly the removal of import controls. Now the Government, under the measure that is before us, is proposing to place a further millstone around the necks of the people of Australia. The Government is proposing to bind this country to international finance, the ramifications of which I will deal with later.
I have already dealt with the concern that is felt throughout the country at the lifting of import controls. I have mentioned in particular the concern that has been expressed by the Australian Textile Workers Union and by the Victorian Chamber of Manufactures. In a recent television interview in Melbourne the Prime Minister, Mr. Menzies, dealt with inflation and, in answer to questions, said that the present inflation was a demand inflation. At the same time he said that wages should not be increased. Me said nothing at all about prices and profits except that he deplored the popping up of prices and profits, neither of which, he said, was sacrosanct.
As I said earlier, nothing of any importance - nothing concrete - has been attempted by this Government in order to halt inflation. In the interview to which I have already referred, Mr. Menzies said that monopolistic tendencies were causing concern. I suggest that the measure before the Senate now will help to build up what is in fact a financial monopoly - a world financial monopoly. The International Bank for Reconstruction and Development has simply taken the place of the Bank for International Settlements, which met at Basle, Switzerland. All of us are aware of the ramifications of that institution. The powers of the Bank for International Settlements have been transferred to what are now known as the Internationa] Bank for Reconstruction and Development and the International Monetary Fund.
Senator Spooner, the Leader of the Government in this chamber, when speaking in the debate on the motion for the adoption of the Address-in-Reply to the Governor-General’s Speech, said that the Government should take any step necessary to restrain inflation. But the only things that have emanated from. this Government, from the Prime Minister down, have been appeals to big business to show restraint with regard to profits and prices. What an inane appeal for the Prime Minister of Australia to make in a time of crisis
– What would you do?
– I certainly would not make inane statements. Fancy appealing to big business! As soon as the decision to lift import controls was announced every aircraft leaving Australia was packed with buyers seeking cheap-labour goods overseas. In the speech to which I have already referred, Senator Spooner, in addition to stating that the Government should take any step to restrain inflation, pointed out that in Australia to-day only 1.6 per cent, of the population was unemployed. Even that low percentage, however, represents something like 60,000 or 70,000 unemployed people. The people who are unemployed are deeply concerned about their plight. There should not by any unemployment in this country. Senator Spooner also said that prices had risen by only 76 per cent, whereas wages had increased by 91 per cent. Even if those figures are correct Senator Spooner was shrewd enough to cite the figures covering a period of fourteen years. He included four years of Labour administration, under which the economy of this country was the most stable in the world.
The Government states that this bill involves not a general borrowing programme but ability to borrow for a shortterm during a crisis in our balance of payments situation. That statement would indicate that the Government is expecting a crisis and is afraid that Australia will not be able to meet her commitments by longterm loans or by means of the 300,000,000 dollars already in the fund. The Treasurer (Mr. Harold Holt), in answer, I think, to a question, said that our adverse balance of payments from 1950 to 1959 was £1,056,000,000. Of course, that means that we spent overseas £1,056,000,000 more than we earned during that period. When the Government came to office in 1949 our overseas balances amounted to £700,000,000. Very soon afterwards, owing to the earlier activities of the preceding Labour Administration, that figure had risen to £850,000,000. Now our balance of payments is down by at least £300,000,000 owing to the inaction, inertia and ineptitude of the present Government.
– What do you say the figure is now?
– lt is down at least £300,000,000.
– What is the figure at the moment?
– 1 do not know, but if it is down about £300,000,000, it would be about £500,000,000.
– What was the figure when this Government came into office?
– lt was £700,000,000. Very soon afterwards, because of the earlier activities of the Labour Government, it rose to £850,000,000.
One of the first things the Prime Minister did after his Government was elected to office in 1949 was to go to America looking for dollars, just as the representatives of governments of a similar political colour have done over the years. The present Government and governments of the same political colour are not satisfied unless they are placing a millstone around the necks of the people of this country by borrowing overseas. The Government has borrowed from many countries since it has been in office. It has borrowed 300,000,000 dollars from the International Bank and 200,000,000 dollars from New York, lt has also borrowed from Switzerland. When Sir Arthur Fadden was Treasurer he even climbed the Swiss Alps seeking a few dollars. He got a bite at the Swiss roll to the tune of 120,000,000 dollars. The Government has also borrowed large amounts in Canada and in London.
We know how bankers have acted throughout the years. The basic policy of bankers to-day is the same as it has been for many years. We know the ruthless and merciless manner in which the bankers impose their will on the people. I will have more to say about that later.
We must pay due regard to the interest rate, which has been continually rising. In 1950 we borrowed 100,000,000 dollars from the International Bank for Reconstruction and Development. That amount was issued at par at an interest rate of 4± per cent. In 1956 we borrowed 50,000,000 dollars from the same source, again issued at par at 4$ per cent. From New York we borrowed 25,000,000 dollars, at 99 bearing interest at 31 per cent. In 1958 we borrowed a further 25,000,000 dollars from New York, issued at 97i at 5 per cent. In 1952 we borrowed £11,800,000 from London, issued at £98 at 4i per cent. In 1958 we borrowed a further £15,000,000 from London, issued at £98 and bearing interest at 5i per cent. Again in 1958, we borrowed £16,000,000 from London, issued at £99 10s. and carrying an interest rate of 6 per cent. Since this Government has been in office our trade deficit has increased at an average rate of £150,000,000 a year. I have dealt with the embargo that was recently placed on trade. We remember that in 1951-52 this Government, without warning and greatly to the detriment of many Australian industries, placed a blanket embargo on imports. That caused great damage and harm to many Australian industries at that time.
Now let me quote some of the opinions that have been expressed on the subject of inflation. The president of the Australian Toy and Games Manufacturers’ Association is reported as having had this to say -
Thousands of Australian workers would become unemployed if the Federal Government continued its policy of allowing an ever-increasing quantity of Japanese goods into Australia without some form of quantitative restriction.
Honorable senators will agree that the Sydney “ Sun “ does not incline towards Labour’s views, but in the issue of 18th February of this year that newspaper had this to say -
At this stage most Ministers do not favour any large-scale measures aimed at halting price increases.
On 15th April, 1953, Mr. Menzies, in a speech made at Bundaberg, said -
When the present Government came before the electors in 1949 it had put forward a constructive policy. Eighty per cent, of that policy has now been magnificently performed.
I turn to a statement which appeared in the Melbourne “ Age “ of 4th September, 1959. It was as follows: -
Big business leads the nation into continuing inflation in three major ways: (1) by making new profits out of every increase in production costs, including wage increases; (2) by systematically raising prices in order to accumulate capital for further expansion; and (3) by unrestrained pressure for sales, which reduces savings and increases consumer debt . . . Still another aspect of big business’s responsibility for inflation is ils increasing reliance on high sales prices to finance future expansion . . . This policy of overcharging the consumer to finance future expansion leads our economy further and further away from competitive private enterprise. The giant monopolies not only have a nearmonopoly on supplying the present consumers but they are staking out a monopoly on future consumers as well. How can any new business be established to compete with the existing giants? A new venture would have to depend on outside financing, namely, private savings - but these are being reduced in value by the very profit and price policies by which the consumer is compelled to finance the expansion of the giants.
The General Manager of the Midland Bank, in November, 1955, said -
Australian’s central Government seems to lack any central coherent economic policy adaptable to changing current conditions, while its actions seem to be limited to improvisations.
The Melbourne “ Herald “, on 3rd January. 1951, said -
The promise to put value back into the £1 was one of the cardinal undertakings on which the Menzies Government was elected, but little has been done towards redeeming the promise.
Tt is important to remember that the Commonwealth Arbitration Commission, in its basic wa.ee judgment of 26th November, 1959, said -
If marginal increases cannot be granted in times of economic prosperity, such as the present, it is difficult to imagine when they can be granted.
Yet we hear a great deal from Government members in this chamber and in another place about the grave and disastrous effects that the increase in the basic wage had at that time.
Another article on inflation which appeared in the Melbourne “ Herald “ will give honorable senators some idea of how inflation has been galloping in recent years. I repeat that the Government has done nothing whatever to endeavour to rectify the position. This article appeared in the Melbourne “ Herald “ on 23rd March, 1960. It is headed “ Prices steadily go up and up “. It reads -
Here are 23 rises officially announced since January 1. Many more have “crept in” without announcement. On January 1 doctors’ fees rose by 2s. 6d. and bread in country areas by id. a loaf.
On January 18 10-oz pots and 4-oz glasses of beer rose by id. and Id. and city bread prices went up by Id. a loaf on January 30.
The same day Colonial Gas Association charges went up by about Id. a day.
You have even to pay 6d. more now to go to a football match in Melbourne. The article continues -
Eggs rose by 3d. a dozen on February 4. and onions by £3 a ton on February 7.
Wood and briquettes rose by 15s. a ton on March 1 and coal and coke by 5s. a ton the same day.
Tram fares went up by Id., 2d. and 3d. onMarch 6, dental fees on March 10.
Cakes and pastries were 3d. to 6d. a dozen dearer from March 15 and pies Id. more.
Men’s haircuts went up 1s. yesterday, and new minimum prices for dry cleaning will operate from April 4. Kents of controlled flats will rise on April 1.
That is in Victoria. The article continues -
Other official rises were on biscuits, bottled beer, university fees, bank fees, and entrance to the zoo.
Rises expected are in hospital charges from 36s. a day to 60s. a day, and in the price of milk and sugar.
Beef prices have gone up again and are expected to hit a new peak in the winter.
Furniture and electrical goods are also expected to be dearer this year.
This is a matter that must be viewed with very grave concern. 1 mentioned earlier that private banking practices and private financial practices are basically the same to-day as they ever were. We know of the treatment meted out to the people by the banking and financial institutions in the past. It is not a bit of good saying that such a thing will not happen again. It cart happen again, and it will happen again.
Through its legislation, this Government ha3 in the past few years rendered the Commonwealth Bank almost impotent. It has split that institution into three or four parts, rendering it impotent to compete against the private banks. This Government has acted in a way similar to that in which the BrucePage Government acted in the 1920’s, when it placed the effective control of the Commonwealth Bank irrevocably in the hands of the private banking institutions of this country.
The people remember only too well the conditions obtaining during those years. 1 am suggesting that at the present time we are tying ourselves to international finance in the same way as we have done in the past. We remember when the Bank of International Settlements, at its own behest, sent what was called “ the Big Four “ to Australia during the depression years. In spite of the fact that there was ample production in this country, either actual or potential, and in spite of the fact that millions of people were dying of starvation or were out of work, the emissaries of the Bank of International Settlements told us that we had to tighten our belts. That was during the period of the depression. In order to soften the blow, the Liberal Party - or whatever it used to call itself then - referred to a recession or an economic blizzard. Apparently they did not sound as bad as a depression. I have here a passage taken from a book written by the late Frank Anstey. It is headed “The Right to Draw and the 1924 Crisis “. Some honorable senators opposite may say that the Commonwealth Bank was in operation at that time. I repeat that the bank had been effectively placed under the control of the private banks by the then anti-Labour Government. According to Anstey, this is what happened then -
The War governments gave the Associated Banks the “ Right to Draw “ Commonwealth notes without any gold payment or any deposited security. The mechanism of this scheme, and the way it operated, were set forth in detail on 13th July, 1924, by the then Treasurer, Earle Page-
I usually say “ Blank Page “, politically speaking -
For all notes drawn under the scheme, the banks had to pay interest at rates varying between 3 and 4 per cent. Under the 6th War Loan (1918), 3 per cent. Under Soldiers’ Gratuity Scheme, 4 per cent. For instance, £6,000,000 of the War Gratuities had to be paid in cash. The Government arranged with the banks to pay out and charge to the Government on a 5i per cent, loan basis. For this the banks had the “Right to Draw” Commonwealth notes to an account paid to ex-soldiers. Thus, the banks were out nothing and scooped the difference between the 4 per cent, notes and the 5i per cent. “ loan “.
They did not even pay 4 per cent. In fact, they did not even draw the notes at all. Instead, they operated on their right to draw and scooped the whole of the 5i per cent, interest charges. The article continues -
But the banks did not draw the notes - they traded on their “ Right to Draw “ as if the notes were actually in their vaults. Thereby, they avoided interest payments to the Government, but upon these “ Rights “ they issued credit, and drew interest from the Government and the general public.
There is more interesting information to come. According to Anstey -
In 1920, the note issues passed from the Treasury to the “ Note Issue Board “. The banks continued in exercise of their rights and, on the basis of these “ Rights “, increased their “ bankmanufactured cheque currency “.
– What bill is the honorable senator speaking about?
– Senator Pearson would be too dense to know. The article continues -
On 23rd June, 1923, these “Rights to Draw” totalled £8,000,000. The Board made a demand that the banks should exercise their “ Rights “ - draw the notes, and pay interest thereon. The banks refused. Early in 1924, the banks made a demand that these “ Rights “ should be extended by another £3,000,000.
They are never satisfied’ -
The Chairman of the Board, Mr. John Garvan, stated that these “ Rights “ were equivalent to an issue of notes to the banks without interest. He described the proposition as “ madness “. The Treasurer upheld the view, but the banks’ demand was conceded. Later in the year the banks made a demand for another £5,000,000. It was refused. Thereupon the banks pulled in overdrafts, restricted credits, imposed increased charges on exports, placed a banking boycott on industrial and commercial expansion, and caused a general economic slow-down; unemployment doubled.
In August, 1924, the Associated Banks notified the Wool Councils-
I note that not many Australian Country Party supporters are in the chamber at the moment -
– I rise to order, Mr. Deputy President. I am reluctant to interrupt the honorable senator’s speech, but
I have sat here for ten minutes listening to quotations from a book by the late Frank Anstey, and from other documents, concerning matters that are completely divorced fi om the subject matter of the debate. I suggest, Sir, that it would be only reasonable to expect the honorable senator to confine his remarks to the measure before the Senate.
The DEPUTY PRESIDENT (Senator the Hon. A. D. Reid). - Order! I have listened very carefully for quite a while to what Senator Sandford has been saying. The Senate is debating a bill which deals with specific matters, and I am satisfied that the honorable senator has gone outside the realms of the bill. I uphold the point of order. I ask the honorable senator to refrain from proceeding along the lines that he has been following.
– I expected the point of order to be raised, and I expected that decision.
The DEPUTY PRESIDENT. - Order!
– However, I do not see how you can divorce banking and banking practice from the financial practice to which we will be further tied by means of this legislation. Those subjects must be relevant because, as I mentioned earlier, the banking system and the private financial institutions have operated in a certain way in the past, and I have emphasized that the basic principles of banking and finance are exactly the same to-day as they were in previous years. I am trying to point out that if there were to arise economic conditions similar to those that we have experienced in the past, the banks would impose just the same conditions as they imposed then. I have cited facts and figures. There can be no denying the accuracy or the authenticity of the statements to which I have referred. That being so, why should not the people, and particularly the supporters of this Government, be reminded of what happened in the past?
The DEPUTY PRESIDENT.- Order! I have informed the honorable senator that he must not continue on those lines. The bill deals with a specific subject - international banking. The honorable senator is definitely out of order, and I ask him to refrain from continuing in that strain.
– Let me deal with international finance and again emphasize that we are the prisoners of international finance as the result of the arrangements with the International Monetary Fund and the International Bank, just as we were in the period to which I have referred. We have only to recall the Bank of International Settlements, in the days when it met in Basle, when Montagu Norman was Governor of the Bank of England. Herr Schacht was the Chancellor of the German Reichs bank, and they both sat on the board of governors of the Bank of International Settlements, Only about three months before the out-break of World War 11., the Bank of England lent Germany £52,000,000. The Bank of England was then under the governorship of Montagu Norman. When he was challenged on the matter, he said that the loan would never be repaid but that it was a good investment.
If we consider this matter a little more closely, we may remember that we were even paying interest on money raised during the Napoleonic wars. During that time the French, whilst at war with England, raised £5,000,000 on the London money market. Let us consider the activities of the financial house of Warburg during the First World War. There was one brother of the Warburg family in Germany financing the Central Powers, and another brother financing the Allies. It has been said quite truthfully that money knows no boundaries and no patriotism. The conditions that applied in the periods to which I have referred also apply to-day.
We are at present experiencing in Australia the terrific increases of prices that I have mentioned. Not only in Victoria, but also in every State of the Commonwealth, urgent public works are awaiting attention. For instance, in front of the Royal Melbourne Hospital there is to be a dental hospital on which work was commenced years ago. Only the foundations are there: nothing has been done on the construction work for years. Surely it is not suggested that we are short of bricks and mortar, cr men. The only thing of which we are short is the necessary finance to carry out our works programmes. Even the Liberal Premiers in the States are criticizing this Government for not making sufficient money available to them. The Government, because of its interest in private finance, has effectively tied up the activities of the Commonwealth Bank. We hear a great deal from the supporters of the Government about the virtues of free enterprise and a free banking system. In Victoria to-day there are seven private banks, whereas only a few years ago there were 23. lt is said that there is competition among those banks, but their terms of operation are fixed by all the banks in association and there is really no competition.
– It is 70 years since there were 23 banks in Victoria.
– No, it is nothing like 70 years.
– It was in 1890.
– No, my friend, you are entirely wrong. There were 23 banks in Victoria much later than 70 years ago - in fact, only about 20 or 30 years ago.
– Give me the date.
The DEPUTY PRESIDENT.- Order! The honorable senator will address the Chair.
– The honorable senator may go back to 1893, if he likes. I do not know how many banks were in existence then, because I was not in existence.
– In 1893 they refused to pay.
– And they refused to pay in 1924. The Minister raised a point of order and his point of order was upheld. Government supporters do not like the truth. The conditions I have described can, and will, operate again. That is why we object to tying ourselves more closely to international finance. We have had experience of that in the past, and we do not want a repetition if we can possibly avoid it. What happens when we borrow 100,000,000 dollars from America? We do not get 100,000,000 dollars to spend here. All that we get is 100,000,000 dollars worth of American goods or services. To the extent that we are getting goods and services that we need and that cannot be supplied in this country, that is all right. But what do we find? A little booklet issued by the Department of Trade shows that 900 parent firms in the United States of America are operating subsidiaries in Australia, so we are coming increasingly under the control of American and international finance.
Mention was made earlier from the Government side of the chamber of the help that had been given to Great Britain by the International Monetary Fund during the Suez crisis. Let us not forget that it was America’s refusal to finance the building of an Egyptian dam that precipitated the Suez crisis. America’s refusal - not necessarily a refusal by the bank or the fund we are now discussing - to finance Nasser in the building of the Aswan dam precipitated that crisis.
The Leader of the Opposition pointed out that any loans made by these institutions are made subject to their own conditions. I think I am correct in saying that prior to the Government’s obtaining 30,000,000 dollars some years ago from the International Monetary Fund or the International Bank, a representative of the organization came out to see what was to be done wilh the money. So it is relevant to point out that the further we become indebted to the fund, the more strongly will we be under its influence and subject to its dictates.
I could go on at length on this subject, but honorable senators opposite do not want to learn the truth. They do not want to hear the facts. Therefore, I will let the matter rest by saying that I support the Leader of the Opposition in opposing this measure. I do so because we are becoming more and more tied to the international financial oligarchy. One could point to the ruthlessness and mercilessness with which it has, over the years, imposed its will upon the people. It has dictated policies in this country. From the mutilation of the Commonwealth Bank in 1920 until the outbreak of World War II. in 1939, the policies of this country were dictated by the private banking system. Only by Labour’s banking legislation of 1945 was the Commonwealth Bank placed on a proper footing. The bank was mutilated again recently by this Government’s legislation, which split it into four sections, with the object of subjecting the bank to the dictates of the private banking monopoly. These things can, and will, happen again. I oppose any further embroilment with international finance as it is conducted at present. I support my leader, Senator McKenna, in opposing the measure.
– Like Senator Vincent. I cannot understand the attitude of the Opposition to this measure, because I have quite a vivid recollection of a debate that took place in this chamber last year on a measure which had as its object a substantial increase in the funds of the International Monetary Fund and the International Bank for Reconstruction and Development. I remember very clearly a speech that was made then by Senator McKenna. I think that I too had a few words to say. They were very few, because it is only with some temerity that I make a speech on a technical matter such as that which we have before us now. I very clearly remember giving Senator McKenna due credit for the splendid address that he gave on that occasion. I do not want to detract in any way from Senator McKenna. As a matter of fact, I am a great admirer of his ability, particularly on financial matters.
– It is misplaced.
– It may be, but he has a vast knowledge and vast experience behind him. His speech last year on the occasion I mentioned was quite outstanding. I enjoyed it very much indeed, as, I think, did the Senate as a whole. We heard him to-day in a somewhat different role. On the last occasion we did not hear the sort of rubbish that Senator Sandford spoKe this evening. Senator McKenna gave full credit to the Chifley Government as one ot the original members of these organizations, which it supported to the full. He said that the financial structure of the International Bank was inadequate to meet the emergency of the times. He said that it had done great work in international rehabilitation after the war but that there was a crying need for further assistance by the bank and the fund to underdeveloped countries.
To-day Senator McKenna has completely reversed his attitude. I cannot understand how a man who spoke with such authority on this subject only last year could so completely reverse his attitude when discussing this measure. Judging from the remarks made by him and by Senator Sandford, the International Bank and the International Monetary Fund are not now worth supporting. In fact, honorable senators opposite will not support this legislation. The Opposition is opposed to the strengthening of the organizations that we hope to achieve by the legislation, and it will vote against the bill. I think that, somehow or other somebody is dictating the Opposition’s attitude to this matter. Senator McKenna spoke with tongue in cheek. I honestly believe that he is a supporter of the bank and the fund and believes that they have a great purpose to serve.
When he spoke last year, I was inclined to agree with him. He referred to the inadequacy of the organizations to carry out the vast task that they had before them. We must realize that in this world there are vast numbers of people who have a very low standard of life. Having completed its urgent work of rehabilitation and reconstruction, the International Bank had another task to tackle forthwith. It could transfer its activities from the wardevastated regions and devote itself to improving the lot of the peoples of countries that are undeveloped and have a very low standard of life. So I say that the Labour Party’s attitude is somewhat puzzling.
I am not sure that I should comment on Senator Sandford’s speech because I do not think that it was relevant to the bill in many respects. He said that conditions have changed, and he implied that the need for rehabilitation no longer exists. He went on to say that we would get into the grip of the international financiers, in whose hands he claimed we were formerly. I do not think many people will agree with him. I am confident that anybody with any common sense will realize that we must have an international structure to assist the world to raise its standards. We must all recognize that whatever shortcomings these organizations may have they have done a great deal of good and will do a tremendous amount in lifting the standards of the world.
Last year, when we were discussing the measure by which we adopted the report of the executive directors, it was stated that, because of the expansion of the economies of many countries, a greater amount of capital was needed for both the International Bank and the International Monetary Fund. On that occasion, we had the support of the Opposition, which makes me wonder why the Opposition now objects to Australia’s asking for and receiving an increase in her quota with the International Bank and the International Monetary Fund, especially when both these organizations concur in our action.
– I think caucus decides it.
– We know that these things are decided in caucus and that, as the whip is cracked, so do honorable senators opposite have to behave. Be that as it may, I believe that many members of the Opposition do recognize that the step they are taking in objecting to this legislation is shortsighted and will not receive the approval of the majority of the people of Australia.
Senator Sandford said, as did Senator McKenna, that this legislation is the result of the Government’s desire to maintain the easing of import restrictions which it brought into effect quite recently. I do know that the great majority of the Australian people were very glad indeed that the Government saw fit to ease import restrictions. I believe that in the main the Government’s action is supported by the people of Australia. Senator Sandford referred to the attitude of the Victorian Chamber of Manufactures to the removal of import controls. We know that Australian manufacturers have always opposed any easing of import restrictions. We cannot wonder at that, for import restrictions are in the nature of a second line of protection to them.. First they have the protection of tariffs, and then they have the protection afforded by import restrictions. It is only natural that manufacturers’ organizations oppose any lifting of import restrictions. Import restrictions were a godsend to them, but I say without hesitation that we must have efficiency in our manufacturing industry and it is time we realized that the Government’s step in easing import restrictions will lead ultimately to an improvement in the efficiency of manufacturing industries.
Senator Sandford also spoke of the attitude of the textile workers’ union to the removal of import control, but it has to be remembered that on every occasion on which we have entered into an international trade agreement, whether it be with Japan, or any other country, both the manufacturers and the textile workers have predicted the ruin of Australia’s economy because a flood of imports would put our people out of work, and so on. All I can say is that those forebodings have never proved correct, and I do not think any such dire results are likely to take place. I believe that we can improve our efficiency, and I do not believe that either our manufacturers or our unions need the protection afforded by import restrictions, in addition to what they enjoy from our tariff, to bolster their activities. On the contrary, I believe that a freer flow of goods into Australia will have a material effect in checking the inflationary processes with which we have been threatened in recent months.
I believe that the Government’s policy of easing import restrictions is very sound. I believe also that the Government’s action in seeking an increase of quota with the International Monetary Fund is sound. Our reserves with this fund are what might be termed a long-stop for the protection of our overseas reserve position. This increase means that we have with the International Monetary Fund further moneys upon which we can call if ever we are confronted with an emergency or adverse conditions in our agricultural economy. It must be appreciated that Australia is a country which is subject to drought conditions and other adverse acts of nature. Indeed, we are more susceptible to the vagaries of nature than are any other countries. Large parts of the Commonwealth can be adversely affected by natural conditions. That being so, it is essential that we take every possible step to protect our overseas reserves.
The Government has made representations to the International Bank and the International Monetary Fund for increases in our quotas with both bodies. Senator McKenna has asserted that we have put the cart before the horse in that we eased import restrictions before approaching the International Bank. It is my firm belief that this Government had had certain communications with the bank. I do not believe that the Government would be so precipitate as to apply our new policy in connexion with imports without first having taken the matter up with the International Bank. I fully acknowledge that it is not without risk that we ease import restrictions. We know that by easing import restrictions we could get into a serious situation with our overseas balances, but we must all realize that this is a process in which certain calculated risks are taken. Therefore it is to our advantage to avoid those risks and provide for any eventualities by having further protection in the International Monetary Fund. The Government was perfectly justified in providing such further protection for the Australian economy and the Australian people.
The object of the Government is a very worthy one indeed. I believe that the fund itself is of valuable assistance to the economy, not only of Australia, but also of all other countries concerned. We know that emergencies arise from time to time in all countries. Mention has been made of the Suez crisis, and I say without hesitation that the whole economy of the United Kingdom could have collapsed during that emergency if assistance had not been obtained from the International Monetary Fund. Emergencies could similarly arise in Australia. We do not know what the future holds for us. We have a country that frequently suffers from droughts. We also experience, as was mentioned in the Minister’s second-reading speech, considerable fluctuations in our overseas balance of payments. This can be illustrated by our experience since this Government has been in office. In the beginning we had very large overseas reserves and a very favorable position existed for some time with regard to our overseas balances. Then a set of conditions arose that reacted against us, and our overseas reserves dropped considerably.
A very important factor is the prices received overseas for our exports. We know that in one year the prices received for a commodity may be particularly high, as was the case some years ago with wool, and at that time the country can be quite prosperous. But in the following year the reverse situation may arise, resulting in adverse effects to the economy. Through a combination of such circumstances our overseas reserves fell from a very high level to a moderate one. We felt some concern because of this and found it necessary toapply import restrictions at the time. Those restrictions remained in operation for some years. We have been able to build up out reserves gradually by fostering our export trade and improving trade relations with other countries, and at the end of last year our overseas balances showed a credit of about £547,000,000. But we do not know what is going to happen in the future. We will always have to contend with overseasprice fluctuations.
When I was in New York recently attending the United Nations General Assembly there was a great deal of discussion by the economic committee with which I was associated on the factors affecting, various countries, particularly primaryproducing countries. I know the attitude that the Australian Government took on this matter. It claimed that Australia was one of the countries most adversely affected. We experienced tremendous swings in the prices received for our exports, and it was pointedout that this could affect us very severely. In this connexion there are many factors that must be considered. Australia is not the only country experiencing such difficulties. Fluctuations in prices have had a most adverse effect on the overseas balances of other countries, particularly those depending on primary production. It is for these reasons that I say that many factors are involved.
At the present time there is in existence a European Economic Community. We donot know how this will affect us in the final analysis, but it could have a most adverseeffect. We have seen the application by some countries of a policy that we call agricultural protectionism. I think I referred to this matter during my speechon the Address-in-Reply. Certain countries, including, unfortunately, some industrial countries, have adopted this policy of agricultural protectionism. Industrial countriesthat have followed this process are also primary-producing countries. France is an example. In that country some primary industries have been heavily subsidized. This has had a most adverse effect on the exports of countries like Australia which are principally dependent on their exports of primary commodities.
Unfortunately Australia does not earn a great deal of overseas income from secondary products, although I believe that the reduction of protection afforded to secondary industries by the removal of import restrictions will have a beneficial effect on those industries, in that they will become more efficient and will be able to take up some of the load of responsibility for preserving our overseas balances that has been borne for so long by the primary industries. Over the years secondary industry has been afforded a large measure of protection by tariff barriers and import restrictions. It is about time that our secondary industries applied themselves to improving their efficiency, so that they might be able to export their products and assist us in maintaining these vital overseas balances.
I say without hesitation that the Government has looked very carefully at this matter and that it knows the risks that are involved. It knows what fluctuations can take place in overseas prices and the adverse circumstances that may arise from time to time. It has seen fit to increase our quota to the International Monetary Fund in order to provide us with further protection, and I think it is quite justified in doing so.
It appears from the Minister’s secondreading speech that Australia’s quota to the fund is to increase from 300,000,000 to 400,000,000 dollars. We will eventually have extra drawing rights on the fund to the extent of 473,000,000 dollars or £21 1,000,000 more than we now enjoy. This will give us a total overseas reserve of something in the vicinity of £750,000,000, which will afford very substantial protection to our economy.
I noted with interest the additional amounts that we are to be responsible for. In the case of the International Monetary Fund our commitment is 25,000,000 dollars in gold, or £A.l 1,000,000. The balance of the amount of 100,000,000 dollars will be met by the lodgment of non-interest-bearing securities with the Reserve Bank, which will act as a depository for the fund in Australia. The increased contribution to the International Monetary Fund is one that we can fully justify. In respect of the International Bank, the amount of increase is 133,000,000 dollars, or about £60,000,000 Australian.
But the actual amount in gold represents only 1,330,000 dollars or about £600,000 Australian.
Sir, we have to remember that these two organizations are extremely important in world affairs. I have before me an article dealing with the International Bank, written by a gentleman named Paul Heffernan. 1 think that copies have been distributed to honorable senators. I was very interested to notice in the article that the subscriptions that are made to the International Bank by outside countries have been steadily increasing compared with subscriptions from America. Included in the article are a couple of graphs dealing with the World Bank. The graphs show the amounts of loan money raised and subscribed capital. The amount of the subscribed capital of the International Bank from the United States of America has remained somewhat stationary over the years, whereas the amount of capital subscribed from outside countries has gone up very considerably.
Back in 1952, the amount subscribed by the United States to the International Bank was the overwhelming sum of about 700,000,000 dollars. In 1959, the amount of capital subscribed to the International Bank by outside countries was in excess of the amount that was subscribed by the United States. The same can be said about the issuance of bonds, that is, loan money which is raised on the backing of the subscribed capital. The ownership of the World Bank bonds has gone up even more strikingly in relation to United States investors, from 400,000,000 dollars to an amount of about 900,000,000 dollars today. But the outside world has taken the level to 2,000,000,000 dollars, which indicates to me that outside investors have invested an amount slightly in excess of the amount invested by United States investors. While the United States carries the great burden in this regard, we know that outside subscribers and investors are playing a much larger part than hitherto in the affairs of the International Bank.
So 1 say, Sir, without any hesitation, that 1 am perfectly satisfied that we are doing the sensible thing by increasing our quota in relation to the International Monetary Fund and the International Bank. 1 know that an enormous task confronts the world to raise the standard of under-developed countries. We must have capital for this purpose; there is no question about that. In spite of the fact that the dimensions of these two funds - the International Monetary Fund and the International Bank - are very large indeed, I am inclined to agree with people who say that they are not really meeting the world situation. It is for that reason that the new fund called the International Development Association was established.
The banking structure of the International Bank is based on strictly correct banking practice. There is no question about that. A bank must be run on proper lines. It requires proper security for any loan that it grants. From our own experience, we know that a member country does not get a loan merely because it tells the International Bank that it wants so many dollars to carry out a project in connexion with its development. The applicant has to prove to the bank that it is credit-worthy. Therefore, access to the International Bank has not been as wide as it might have been for some of the countries whose circumstances are somewhat different from those of Australia.
We have had no difficulty in raising money from the International Bank because we have good assets and good security; we are a good risk. That is why I say that we have benefited very greatly at the hands of the International Bank. It has been of very great benefit to the economy of Australia, as evidenced by the fact that we have been able to obtain from the institution loans of a sufficient amount of money to carry out great developmental projects. Unfortunately, many countries to-day are not in that position. That is why the International Development Association has been brought into being. I was present in the General Assembly of the United Nations when the association was born, and I believe that it has a prospect of meeting a much wider need than the other two funds.
The International Development Association, which is a complementary body to the International Bank, will, I am sure, prove its worth in the years to come. Its lending policy will be somewhat different from that of the International Bank - I know that legislation dealing with this aspect of the matter will be introduced later - and it is interesting to note that the countries which have the necessary capital are living up to their responsibilities, not only to this new body but to the other organizations. I believe that the association will be of very great advantage to the world at large.
Sir, this is a straight out proposition for Australia, as far as these two funds are concerned. We will benefit from the Government’s action in bringing down this measure. I believe that we do require this added protection in view of the circumstances that I have mentioned and in view of the fact that in any economy changing circumstances are inevitable. I believe also that the added protection that will be available to us from the Monetary Fund will be adequate for our needs, will be of great benefit to us, and will act as a backstop in times of adverse circumstances.
I believe that honorable senators opposite have adopted a completely wrong attitude by opposing this measure. I think that they probably believe that the International Bank and the International Monetary Fund are valuable bodies and I do not think they will really go back on their previous policy. I cannot believe that they will now adopt a contrary attitude to the one they held in the years immediately following the war. In view of Senator McKenna’s statements last year with regard to international finance I think the Opposition is adopting a rather paltry and negative attitude towards this measure. We on this side of the chamber have great confidence that the measure will serve Australia well. We are confident that the Government’s policy in regard to our international reserves is sound and that we require assistance from time to time from the International Bank. We are also satisfied that this country needs the protection that a greater contribution to the International Monetary Fund will give. I support the bill with enthusiasm.
.- On 28th November, 1951, Professor W. R. Crocker, Professor of International Relations in the Australian National University, delivered a lecture, under the chairmanship of Sir John Latham, entitled, “ Can the United Nations Succeed? “ During his lecture Professor Crocker scathingly criticized the United Nations Organization as it existed in 1951 and later. Referring to the International Bank for Reconstruction and Development and the International Monetary Fund, Professor Crocker quoted Lord Keynes, who stated that he was shocked by American plans for staffing the bank and the fund. Lord Keynes said that a feature of those organizations would be high pay for their employees and gross overstaffing. Professor Crocker referred to the work of R. F. Harrod - “The Life of John Maynard Keynes “. That book is well worth reading, particularly by those who are in the habit of taking far too much for granted in the field of international finance and, for that matter, internal finance. In his day Lord Keynes was a leading English economist and his text book is still being used by universities in Australia. Mr. Harrod worked in collaboration with him.
Lord Keynes referred to the meetings that were held by representatives of America, England and other countries and stated that he was disgusted with the negotiations. He eventually died heartbroken at the way in which the negotiations were being conducted. Professor Crocker stated that the United Nations is predominantly an American organization trading in the name of an international organization. He also stated that the International Bank is, for all practical purposes, controlled by American bankers or financiers with the idea of ultimately controlling world economies. Of course, they will not succeed.
In his lecture Professor Crocker said that he was only attacking cant and unrealism, which, in his view, lead to peril. In my opinion events since 1951 have proved that Professor Crocker was correct. He was acting at that time in collaboration with Dr. Evatt and Mr. Paul Hasluck.
In his book Mr. Harrod states that a world central bank would be in an extremely powerful position owing to its ability to create credit. The over expansion of credit is inflation, and nobody denies that our currency to-day is notoriously inflated. This position cannot continue indefinitely. As Senator McKenna said, a day of reckoning must come. What is the Government doing about this situation? Things are going from bad to worse. The extent that prices are increasing, inflation is increasing. Citing the Chancellor of the Exchequer in England as my authority, the £1 sterling to-day in terms of gold is worth only 4/- compared with its value in 1914. Taking into account our adverse exchange rate of 25 per cent., that means that the Australian £1 is worth only 3/- compared with its value in 1914. As prices increase, the purchasing power of money is reduced. In addition, the number of hours that wage and small salary earners must work is increased. The Government must admit the truth of my statements or admit that it does not understand the position.
I want to know what the Government proposes to do about re-organizing our cost structure. Is the present situation to be allowed to continue until we reach the stage that was reached by several countries just after the First World War, when their currencies collapsed and when people who held bonds and who had deposited money in banks lost almost everything? The only people who benefit in times such as those are people who own capital in the form of land, machinery, buildings and stock. That was the position in Germany in 1924. This Government is just following the lead, so to speak, of overseas financiers.
Reference has been made to the abolition of import restrictions. The object of abolishing import restrictions is to allow the importation o’f goods produced at cheap rates in cheap-labour countries, lu those cheap-labour countries, American and other capital is invested for the purpose of reducing the standards of living in Australia and other countries to the level existing in the cheap-labour countries. A large amount of American capital is invested in Africa, at the expense of the unfortunate coloured workers, and enormous profits have been made. The investment of capital in cheap-labour countries is very profitable, and is the reason why import restrictions have been lifted in Australia.
My opinion is that the most important task before the Government is the reorganization of the Australian economy. Australia should be as self-contained as is physically possible. What is physically possible is also financially possible. We have more land than we can use. We have the materials and everything else that is necessary to enable us to re-organize our economy and make it self-contained and self-supplied. To re-organize the economy in the manner 1 suggest would not be to carry out an isolationist policy, to which Senator Vincent referred, lt would be a policy of reorganizing the national household so that we could supply our people with all they needed of the necessities of life.
Reference has been made to unemployment. Between 70,000 and 80,000 people are unemployed in Australia. Why should they be unemployed in a country like this? lt is well known that there is any amount of work to be done. There is a tragic shortage of housing, there are roads to be built and all sorts of public works to be undertaken, but these people are unemployed. Honorable senators opposite refer to the fact that only 1 per cent, of the work force is unemployed, the implication being that it does not matter if 70,000 or 80,000 workers are living in a state oi semi-starvation. The Government is not concerned about Liar
In addition, there are about 650,000 of what I have termed destitute wards of the State. Many of them, particularly some of the age pensioners and widows, are quite capable of earning a decent livelihood if given the opportunity to do so. There is no need for them to be dependent upon a dole from the State. However, in this highly-mechanized age, in this era of private monopoly control, it is cheaper to employ juniors on the machines and to pay a dole to these unfortunate people than it is to provide them with an opportunity to earn a decent livelihood. When I suggest that our economy should be re-organized so that we will become self-supporting and self-contained, I am putting forward a perfectly reasonable and necessary proposition, but the Government is not prepared to take it into consideration.
As I said before, what is happening is that the Government is accepting its orders from Washington. Before the Second World War, when Montague Norman was in charge of the Bank of England1, it accepted them from London. International finance is developing into what I shall term international fascism, as distinct from national fascism. When Mussolini and Hitler were in power, we had national fascism. The objective now is to establish what has been called a world government, which would be a government controlled mainly by America. Professor Crocker referred to England and France as being only minor members of the organization. Another sixteen nations he referred to as midget members. What is implied is that virtually the whole scheme of things, financially speaking, is to be controlled1 by America.
The position is that the economy of this country and those of other capitalist countries are based upon the principle of maximum production for the owners of land and capital and minimum consumption for the wage workers. That principle leads automatically to an unbalanced economy such as we have to-day. The monopolists are becoming wealthier and fewer in number, and non-owners of land and capital are becoming impoverished in ever-increasing numbers. That situation is not peculiar to Australia; the same thing is happening in other countries. So far as Australia is concerned, the Government has a responsibility, not to follow the lead of people overseas, but to do something to try to establish a balanced economy. That is within the realm of practical politics. As was suggested by Senator McKenna, a day of reckoning will come. In my experience, there has been a day of reckoning on several previous occasions after culpable damage has been done to practically helpless men, women and children.
Similar conditions are developing at the present time, but the Government is very complacent. It is looking forward to something unforeseen happening that will restore the balance and make things better than they are at present. But that is not going to happen. The Government must try to do something on its own initiative to establish a reasonably well-balanced economy in which all men and women who are able and willing to work are given the opportunity to work. The Australian Government is in a better position to do that than are most governments, because Australia has a small population. The position in some European countries, such as Spain and Italy, is tragic, and it is tragic in the East, too. The International Bank was established in good faith in the hope that something would be done for the under-developed countries, so that the peoples of the world who really needed help might have their living standards raised to reasonably high levels. But nothing has been done, and nothing will be done unless there is sufficient pressure from the people in those countries to force the issue.
I have often said that Parliament operates on the principle of the wheel-barrow. It goes just as far and as fast as it can be pushed by the people. When there is no pressure from the people, nothing is done. The people will tolerate a lot, and they have done so. I have said many times that one of the main obstacles with which we are faced is the readiness of the majority of the people to acquiesce in an old subjection. They are doing so in many countries, including Australia. In this country we have the opportunity to do something very different from what has been done in other countries. There are better opportunities in Australia because of its small population and vast resources.
Let me refer again to the abolition of import restrictions. As a result of that action, unemployment will increase and there will be a greater number of people in receipt of unemployment benefit. That is not a desirable state of affairs or in keeping with the principle of respect for human personality. Men, women and their dependants should not be reduced to the lowest economic levels and subordinated for the benefit of those who hold capital. That is what is happening to-day. The Treasurer (Mr. Harold Holt) is reported, I think in to-day’s newspapers, to have spoken of the prosperous times ahead. There will be no prosperous times ahead for Australia unless the Government re-organizes the economy and the cost structure, to which Senator McKenna referred. There are two ways to assess costs. That can be done either in terms of labour time or in terms of gold. In terms of inflated currency, costs were never higher than they are to-day. Inflation of the currency means that those who inflate it receive, in effect, millions of pounds’ worth of goods and services for pieces of paper that are intrinsically worthless. As I have said before in this chamber, the only difference between the counterfeiter and the inflater of the currency is that one operates outside the law and the other inside it. If the gentleman who operates outside the law is detected and found guilty he goes to gaol, but gentlemen who operate inside the law control the machinery of government.
I maintain that this bill should not be supported because I am of the opinion that we are quite capable of carrying on the work of this country without borrowing money overseas. The war proved that that could be done. I remember that during the war it was said that we could not do this and we could not do the other thing, particularly in relation to aerial warfare. It was said that we could not build certain machines in Australia, but nevertheless they were built. Many other things were done, too, simply because of the pressure behind the people and the Government at the time. As always, it was a case of needs must when the devil drives. The devil in those circumstances was economic interest, selfpreservation and self-interest. This Government does not propose to act as the Labour Government acted.
I urge honorable senators to read the lecture by Professor Crocker, a member of the United Nations secretariat, to which I have referred. I also commend the reading, if honorable senators are sufficiently interested, of the book I have mentioned which sets out in detail the conditions with which people were faced mainly as a result of the manipulations of American bankers. During the war, under the system of lend-lease there was an exchange of goods and services. That is the way in which our international trading should be organized. However, the moment the war ended there was restoration of the status quo ante; we returned to the old system.
– The “ blow you Jack “ system.
– Yes. The result is that the position in every country, including Australia, is going from bad to worse. The supporters of the Government must ask themselves, and also supply the answers to the questions: What are we going to do about this state of affairs? Shall we just apologise for what is being done, or shall we try to do something very different from, and much more useful than that which has been done during the Government’s term of office?
– I support the bill, which is designed to increase Australia’s International Monetary Fund quota from 300,000,000 dollars to 400,000,000 dollars and its International Bank subscription from 400,000,000 dollars to 500,000,000 dollars. Last year, I understand, there was a 50 per cent, increase in the fund quota, from 200,000,000 dollars to 300,000,000 dollars, and a 100 per cent, increase in the bank subscription. from 200,000,000 dollars to 400,000,000 dollars. The idea behind the increase in our fund quota is that in time of stress Australia will be able to borrow up to £211,000,000 from the fund.
Senator Cameron told us that the Government’s removal of import restrictions tended towards an increase in unemployment. I have always believed, and have been told by the Minister for Trade (Mr. McEwen), that if we removed import restrictions there would be a bigger flow of goods. These would not all be consumer goods but would include goods needed for industry. The latter would actually create additional employment. Senator Cameron spoke about the large amount of unemployment in Australia, although it stands at only 1 per cent. Such a low figure was never attained by any other government since the war. Senator Cameron should look back on the record of the past. I am firmly convinced that no nation can expect to have every employable person employed all the time. There are always people changing from job to job, being unemployed for a period. There is, unfortunately, in every community a small percentage of people who are unemployable. I do not think that it is possible for any country ever to achieve a condition wherein 100 per cent, of the work force is employed for 100 per cent, of the time. Some of Senator Sandford’s statements were completely untrue. He said that when this Government came into office our overseas reserves were £700,000,000.
– He was not sure.
– But I am sure. That is the difference. He said that they were approximately £700,000,000, that they rose to £800,000,000, and that they were now about £500,000,000. In fact, in June, 1949, our overseas reserves were not £700,000,000 but £447,000,000. I shall not bother, for the purposes of this exercise, with the shillings and pence. In December, 1959, ten years afterwards, our overseas reserves were £547,000,000, representing an increase of about £100,000,000. I am not denying that they rose to £800,000,000 in 1951 or 1952 and fell, at their lowest level, to £300,000,000. Those are the figures, As we have in Australia a rural economy-
– It is not all rural.
– About 80 per cent, of our export income is derived now from rural industry. Therefore, the prices that we receive for our goods are subject to large fluctuations. Taking this into account, is it not sound banking policy for us, in good times, to create additional reserves so that, if we are running into bad times, we may draw on this fund, so giving ourselves a breathing space in which to alter our economy to cope with the hard times? lt is quite realistic, and any banking business would act in the same way. As a result of actions taken by the Government over the last ten years, there have not been wide fluctuations of inflation and depression. At one moment members of the Australian Labour Party talk about unemployment. Next they talk about inflation. Even to-day, one Opposition senator spoke about inflation, but his colleagues who followed him warned against unemployment.
– The Government introduced a little horror Budget.
– We are not ashamed of having introduced the horror Budget. We brought it down as a corrective measure and it achieved the results desired. We can say that the last ten years have been very prosperous for Australia. An increase in our fund quota and bank subscription will be another step in the right direction.
When the International Monetary Fund was established under the Bretton-Woods agreement in New Hampshire, United States of America, its objectives were to promote international monetary co-operation, to facilitate the expansion of trade, to promote exchange stability, to maintain ordinary exchange arrangements and to avoid competitive exchange depreciation. It was decided to establish a price for gold, and a percentage of all of the increases in our subscriptions has to be in gold. In 1944 the price of gold was fixed at 35 dollars an ounce. Since then the cost of producing gold has risen by about 400 per cent. Yet the International Monetary Fund, despite repeated approaches by various nations in the free world, including Australia, Canada, England and South Africa, has not agreed to an increase in the price. The various goldproducing nations are finding it increasingly difficult to maintain their production. Gold production in the free world in 1956 was 28,000,000 ounces, which was worth about £436,000,000 in Australian currency. Of that quantity, the Union of South Africa produced about £280,000,000 worth. This country is finding it increasingly difficult to keep its mines operating.
– You said that South Africa did not agree to an increase.
– No, I said that the fund did not agree to an increase, despite the fact that the South African, Australian, Canadian and British Governments made an approach.
– That is not what you said. I am only trying to help you.
– I think I put the matter correctly. I do not think you were listening carefully to me. The actual cost per ton of ore milled in South Africa has risen from 29s. 7d. in 1950 to 40s. 5d. in 1955 and 42s. lid. in 1956, according to the latest figures available to me. Tt is stated in the authority to which I have referred that this increase forced three mines to close down and at that stage twenty other mines were working on a losing margin.
In South Africa, 90 per cent, of the labour employed in the mines is native labour. We have heard over the radio and read in the press recently of the conditions under which these miners work. We are given to understand that mine-owners have to send officers out to the adjacent territories to seek recruits and bring labour back to the mines. After having been employed in the mines for twelve months, the workers have saved approximately £10.
– I think it is a shame. When they return to their territories, these workers can remain at home for only three or four months and then must come back to the mines. I emphasize that the price of gold is set by the International Monetary Fund. If the price remained at the present level and the wages of the workers in the
South African mines were increased to an amount comparable with what is paid in Australia at present, from 50 per cent, to 60 per cent, of the goldmines in South Africa, the country which produces 60 per cent, of the world’s gold, would have to close down. So the mine-owners of South Africa must have cheap labour, or the International Monetary Fund must agree to an increase in the price of gold; otherwise, the mines will close down.
As Senator Willesee knows, we in Australia - and we in Western Australia in particular - are facing increasing difficulties due to rising costs on the goldfields and a fixed price for gold. There is not very much the Government can do about it, But I do know that the Government takes advantage of every possible opportunity to press for an increase in the price of gold.
In all the circumstances, it is my opinion that unless the price of gold is increased very shortly the International Monetary Fund will not be able to continue to insist that a proportion of the contribution be paid in gold. I suggest that it might be a good thing if the fund automatically granted a substantial increase in the price of gold. According to the book I have before me, large amounts of gold were held in America in 1956, but those amounts have been depleted considerably in the last three or four years, and I think they will continue to be depleted. I repeat that one way out of the problem is a steep increase in the price of gold.
I have heard all sorts of arguments for and against this measure. I cannot understand why the Labour Party is opposing it, especially when we remember that prior to 1944 a renowned leader of the Labour Party, a man who believed in the fund, borrowed £20,000,000 from it to carry Australia over a difficult period. Evidently the Labour Party when it is in office is quite a different party from what it is when in Opposition. When in office it says, “ We believe in the fund; we want to borrow some money from it “. When in Opposition, it says, “ We do not believe in the fund, or in borrowing from it “. Tt is mv opinion that the more overseas capital we can encourage to Australia the more prosperous she will become. Therefore. I have no hesitation in supporting the bill.
– in reply - I would be less than gracious if 1 did not express my thanks to my colleagues on this side of the chamber who have spoken to this measure. All of them made excellent contributions. As the debate proceeded, their contributions demolished the arguments advanced by the Opposition. Therefore, I feel that my own contribution to this debate does little more than formally wind it up.
As has been remarked by three speakers on this side, the most remarkable outcome of the debate has been the inconsistency of the Labour Party’s attitude in connexion with the bill. It might be convenient here to recall briefly what the purposes of these twin organizations, the International Bank and the International Monetary Fund, are. Stated briefly, the bank’s function is to provide money for long-term loans for capital development in undeveloped countries. One of the features of the debate has been the lack of attention given by the Opposition to that aspect of the bill. I think it can be fairly said that this institution, virtually born during the stress of war, and having as its acknowledged purpose financial assistance to undeveloped countries, has amply demonstrated during the twelve or fifteen years of its lifetime that the faith then expressed in an institution of this sort was not misplaced. In many countries there are projects that bear ample witness to the success of this undertaking and that give evidence of the real use it has been in helping the undeveloped countries of the world.
The other leg of the double - if I may so describe it - the International Monetary Fund, has been of remarkable assistance in its own sphere to the trading nations of the world. I look at the Articles of Association of the International Monetary Fund and find its first two purposes worth reading to honorable senators -
One has only to examine the performance of the fund to test whether it has met the objectives set out for it by those who established the fund soon after the war. One of the interesting points, from the point of view of Australian observers, is that when the fund was established the government of the day, headed by the late Right Honorable J. B. Chifley, enthusiastically supported the concept of it. I think we can accept, as a matter of plain common sense, that, having regard to the prohibitions and restrictions that existed before the fund was set up, and having regard to the particular difficulties that were placed in the way of trade by countries experiencing a short-term currency difficulty, this organization has proved the answer, in many respects, to the difficulties that existed before the war.
I have no doubt that the government of Australia of that day was induced to participate in the fund because it saw, quite clearly and accurately, the vulnerability of Australia’s trade position, depending as it did, and as it always had done and continues to do, so largely on primary production. It saw the vulnerability that could arise from bad seasons, from an ever-changing supply position overseas and from the fiscal and pricesupport policies adopted by governments overseas, and which were referred to tonight by my colleague, Senator Hannaford. It saw the effect of fluctuating prices on the economy. It had regard to the importance of minerals in our export trade and it knew how vulnerable they were to fluctuations in price. It foresaw the particular difficulties that would confront our manufacturing industries as they developed.
All these considerations induced the government of that day to embrace with enthusiasm the concept of the fund and to become a member of it. Is it not surprising that, after Mr. Chifley and his government had realized the importance of these matters and had assessed them correctly, we should hear to-night from Senator McKenna the proposition that all these difficulties - bad seasons, fluctuations of prices, pricesupport policies adopted by countries overseas - should constitute reasons not for continuing to support this organization but for abandoning it? Support for the fund shows an outlook of hope and of faith in the future, while the policy expressed by Senator McKenna is the policy of despair that we have become so used to hearing from the Labour Party of to-day.
As I understood the argument, Sir, the Opposition bases its case upon the suggestion that the removal of import restrictions would make it necessary for us to borrow temporarily - I repeat, “ temporarily “, although Opposition senators did not so qualify the argument - from the International Monetary Fund to overcome some exchange difficulties that we might run into. My only comment on that argument advanced by the Opposition is that it appeared to defeat itself, because there was no agreement between those who spoke on the Opposition side as to the effect that the lifting of import restrictions might have on prices charged within this country. From some speakers we heard the contention that there would be an immediate and catastrophic inrush of imported goods to be sold in competition with Australian produced goods at prices which would not permit of economic operation by Australian manufacturers. Then we heard from other Opposition speakers that this would not be the case, but that in fact the goods admitted to Australia would be sold at prices equal to Australian prices for similar goods, the importing agencies and those selling imported goods in Australia taking advantage of a situation which they felt they could exploit.
Well, it is a little difficult to answer an argument based on two contradictory premises. We believe, of course, that the virtual cancellation of import licensing will result in a situation in which we will have cheaper goods, and in which, for the reasons advanced by my colleague, Senator Scott, we will not experience any disadvantages from unemployment. I put it to the Senate that neither of the arguments advanced by the Opposition, that concerning import restrictions and the other relating to the inflow of capital, on which it is alleged we rely too much, has any relation, when viewed in its correct perspective, to this particular problem. If import licensing were re-imposed to-morrow, and if at the same time we adopted a policy of discouraging or even prohibiting the inflow of capital from overseas, I suggest that we would not reduce the desirability or the need to build up our resources - our secondline resources in this case - to guard against an adverse trade year.
The matters brought up by the Opposition are not relevant to such a situation. Whatever we might do in respect of import licensing or capital inflow, it will always be necessary for this country, vulnerable as it is, to have established resources overseas sufficient at all times to look after an adverse season. This is, of course, purely and simply the purpose of the provision in the bill relating to the International Monetary Fund. Mr. Chifley saw this, and I ask myself whether we now have another case of the Labour Party denying the doctrine of a man whose name the members of that party frequently refer to with something approaching reverence.
I want to say something about the policy of the Opposition on import restrictions. This is a matter on which there have been from time to time - almost from day to day - great changes of thought; so much so that I am induced to the sad conclusion that this is a matter which the Labour Party has used from time to time for purposes that are purely political. In 1947, the White Paper on Full Employment clearly stated what would be the Labour Party’s policy in respect of import licensing in certain circumstances. By one of the ironical twists of politics, in 1951 we took up something which came very close to the Labour Party’s policy as laid down in 1947. We were wrong in 1951 when we adopted that policy - so the Labour Party said - and we continued to be wrong in 1952 and until 1960. When we took the restrictions off this year, we were wrong again. The plain fact, of course, is that this Government and this party are *v>t tied to any dogma. This party meets the situation as it occurs. Having regard to all the variable factors that have come into this situation over the period since import licensing was introduced I suggest that, by and large, the Government has done a job which on any judgment can only be regarded as a satisfactory job.
– The criticism was not confined to the Labour Party, was it?
– My friend says that the criticism was not confined to the Labour Party. Indeed, I noticed in connexion with that matter, as in connexion with most political matters, that people with an axe to grind were in the thick of the criticism at all times.
On the subject of capital inflow, I shall make only the briefest of remarks because the policy advocated by the Labour Party, it seems, seeks to deny history. It is incredible to me that the Labour Party does not see the abundant advantages that flow to it and to those it claims to represent from a policy of attracting capital to this country. The Labour Opposition has claimed from time to time that we depend too much on this capital inflow. It is worth putting on record that 10 per cent, of our net investment in the last year for which I have figures - 1958 or 1959 - was attributed to overseas capital inflow; 90 per cent, came from our own savings. I put it to the Labour Party that if we did not have that 10 per cent, of resources available from overseas for capital investment then employment, about which honorable senators opposite express so much sorrow, would not be at the high figure at which it stands in Australia to-day. In that connexion, I think that the remarks of Senator Sandford should be sent round to every union in Australia, particularly those unions among whose members are men who are employed as the result of investment in this country of capital from overseas. I would like Senator Sandford to come with me to a few industrial plants in his own State and advocate there the policy that he was trying to advocate in this chamber to-night.
Senator Vincent, not unexpectedly, and Senator Scott, made some interesting comments on gold and the use of gold in the International Monetary Fund. Senator Vincent quoted figures from the annual report of the fund for 1958, showing that Australia’s gold subscription amounted to only 8,400,000 dollars out of a total subscription of 200,000,000 dollars. He said that the gold proportion of the subscriptions of many other members was much higher and, indeed, it was.
The proportion of a member’s subscription paid in gold is fixed by the articles of agreement of the fund. When Australia joined the fund in 1947, the articles gave members the choice of paying either, (a) 25 per cent, of their subscriptions in gold, or Cb) an amount in gold equivalent to 10 per cent, of their holdings of gold and convertible currencies. Australia decided to pay the 10 per cent., an amount of gold equivalent to 8,400,000 dollars. Many other countries did the same. The balance of Australia’s subscription, amounting to 191,600,000 dollars, was paid in Australian currency.
Subject to certain limitations, the articles of agreement also provide that those members paying less than 25 per cent, of their subscriptions in gold should pay each year more gold to the fund if their gold and convertible reserves increased during the year.
In the fund year ended 31st March, 1959, Australia incurred an obligation to pay a further 14,100,000 dollars in gold to the fund. This was done by re-purchasing from the fund an equivalent amount in Australian currency. After the re-purchase, Australia’s total subscription to the fund of 200,000,000 dollars was paid, 22,5000,000 dollars in gold and 177,500,000 dollars in Australian currency.
When the general increase of 50 per cent, in fund subscriptions took place in 1959, the fund decided that members should pay the full 25 per cent, of the increase in gold. Australia’s total subscription then increased to 300,000,000 dollars, of which 47,500,000 dollars was paid in gold and the balance, 252,500,000 dollars, in Australian currency.
The proposed special increase in Australia’s quota of 100,000,000 dollars is payable, 25,000,000 dollars in gold and 75,000,000 in Australian currency. This will increase Australia’s total subscription to 400,000,000 dollars, of which 72,500,000 dollars will have been paid in gold and 327,500,000 dollars in Australian currency. I emphasize those figures - 72,500,000 dollars out of a total subscription of 400,000,000 dollars will now be paid in gold, compared with 8,400,000 dollars out of a total of 200,000,000 dollars in 1947. It will be seen that there has been a steady increase, which is probably a reflection of the policy of the Government as referred to by Senator Scott, in respect of the disposal of gold.
Sir, I again thank honorable senators who have spoken during this debate, and I commend the bill to the Senate in the earnest hope that this is something which will enable Australia and, indeed, all countries of the world to achieve a very real and desirable objective.
Question put -
That the bill be now read a second time.
The Senate divided. (The Deputy President - Senator the Hon. A. D. Reid.)
Question so resolved in the affirmative.
Bill read a second time, and passed through its remaining stages without amendment or debate.
Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Paltridge) read a first time.
. I move -
That the bill be now read a second time.
The purpose of this bill is to authorize the payment to South Australia in 1959-60 of a special grant of £1,027,000, representing a final adjustment of the special grant received by that State in 1958-59. Payment of this grant has been recommended by the Commonwealth Grants Commission in a special report which has already been tabled.
At the Premiers’ Conference in June, 19’59, the Premier of South Australia gave an undertaking that, unless exceptional circumstances arose, his State would not apply for a special grant during the currency of the new revenue grant arrangements. In accordance with this undertaking, South Australia withdrew the claim which it had previously lodged for a special grant for 1959-60. Under the Grants Commission’s procedures, however, part of the special grant recommended for a claimant State in each year is an advance payment which is subject to final adjustment by the commission when the actual budget results of that year are reviewed. Thus, at 30th June, 1959, there were outstanding, in respect of South Australia, claims for adjusting grants in respect of the years 1957-58 and 1958-59. It was agreed at the conference that these claims should be considered1 and reported upon by the commission.
South Australia’s claim in respect of 1957- 58 was dealt with in the commission’s last annual report and payment of an adjusting amount of £399,000, recommended by the commission, was authorized by the States Grants (Special Assistance) Act 1959. In the normal course, the final adjustment of the special grant for 1958-59 would not have been dealt with by the Grants Commission until next financial year, which would have meant that South Australia would have been receiving a special grant two years after it had agreed to become a non-claimant State. To avoid this, the Government asked1 the commission to forward its recommendation on South Australia’s claim in respect of 1958- 59 in time to enable any legislation required to implement the commission’s recommendation to be considered by the Parliament during the current financial year.
South Australia submitted a claim for an adjusting payment of £1,027,000 in respect of 1958-59, this being the amount of its budget deficit for that year. For the reasons set out in its report, the commission has now recommended that South Australia’s claim be met in full. The Government considers that the commission’s recommendation is reasonable and that it should be adopted. I therefore commend the bill to honorable senators.
Debate (on motion by Senator Ridley) adjourned.
The DEPUTY PRESIDENT (Senator the Hon. A. D. Reid). - Order! In conformity with the sessional order relating to the adjournment of the Senate, I formally put the question -
That the Senate do now adjourn.
Question resolved in the affirmative.
Senate adjourned at 10.30 p.m.
Cite as: Australia, Senate, Debates, 10 May 1960, viewed 22 October 2017, <http://historichansard.net/senate/1960/19600510_senate_23_s17/>.