EA 32-a INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CURRENT ECONOMIC POSITION AND PROSPECTS O)F ATT.qTRAT.TA February 23, 1954 Department of Operations A. NEaasNu BuANK FOR RECONSTRUCTIONANDODEVELOaPaM CURRENCYI EQ'cUIVA~LENTS U.S. $1 A 0.45 (8 shillings and 11 pence Australian) ?A1 - T.S. $2.24 £A 1,000,000 = U.S. $2,240,000 CURRENT ECONOK[C POSITION AND PROSPECTS OF AUSTRALIA TABLE OF CONTENTS Basic Data Charts Summary and Conclusions I. Recent Economic Developments 1 (a) National Income and Use of Resources 1 (b) Balance of Payments 4 (c) The Commonwealth Budget 6 (d) Mbnetary Policy 7 II. Tariff Protection and the Cost Structure 9 (a) The Determination of ,bney Wages 9 (b) Competition from Imports 10 (c) The Role of the Tariff 10 III. Creditworthiness and Conclusion 12 Annex - Wage Determination by the Arbitration Court Statistical Appendix Tables 1-15 Map Basic Data Peultion 5 aQ m4o114n Area 2,9170,000 sqjuar me ruuic huuLrLIUI! op0y Finc-cial Enterprises 44 Uross Ivate Investment 590 Personal Consumption 2493 Gross Domestic Expenditure 3982 Total Exports (1952/53) 852 Of which: Wool (inclu.ding sheepskins) 49.5% Whect and flour 10.5% Meats 7.7% Other foodstuffs 14.4 Mtals, manufactures and machinery 7.2% Total Imports (1952/53) 510.5 Of which: Machines and machinery 17.5% Oils, fats and waxes 14.5% Yarns, fibers, textiles and apparel 9.4% Mbtor vehicles and parts 5.7% Foreign Exchange Reserves Commonwealth Bank's holdings of gold and foreign exchange (October 1953) US$ 1,094 million External Public Debt US Million Total 1,301 Of which a) payable in sterling 958 b) payable in U.S. or Canadian dollars or Swiss francs 343 AUST R ALIA POPULATION NET IMMIGrATInN (MILLIONS OF PERSONS) (THOUSANDS OF PERSONS) If0 ,_ _ _ ,__ _ _ ,_ ,_ ,_ , ,_,_ - 0 END OF PERIOD TEN-YEAR YEARLY AVERAGES 8 i 50 ¶ 1- nn f i -150 Ou]'' ' 50· 1910 1920 1930 1940 '46 '50 '54 '10- '20- '30- '40- '47 '49 '51 '53 '20\ '30j '4 '50% AHOLESALE PRMC ONLYri z>rrI UP AND WAGE ES: NDEXE (AVERAGE OF THREE YEARS ENDING JUNE, 1939=100) I R ENDIP l 1 i li ii li i i i . i il iU YEAR ENDING MONTHLY MONEY SUPPLY JUNF 3 0 ...... ........ 400 ¯ . .... ... .. ........ . ...--... 400 WHOLESALE PRICS- 300 . ' j-300 %WAbt NAl (QUAN IELY I 200 200 l00 100 '47 '49 '51 '53 D J D J D J D J D 1951 1952 1953 1954 USE OF RESOURCES (BILLIONS OF AUSTRALIAN POUNDS) 5 YEAR ENDING JUNE 30 RESOURCES IMPORTED (NET)-._{ - -ROSS RESOURCES EXPORTED (NET)-=<. DOMESTiC NVEST MENT 53 GOVERNMEý,NT CONSUMPT\ON m Imt-ONSUMPTION O 0 2/12/54 No. 653 IBRD- Economic Staff AlIKTPAI 1A Gni L AKn FCOIrK ECVIANGE ASCC (1OEMkEACNT ANKI DANKIC (BILLIONS OF U.S. DOLLARS) L- 10 1 I-Y IT7 T II I 11 11 1 1 1 l 1 l 111-I---r.--1--------I----1--I--17 ~ - LAST WEDNESDAY OF PERIOD 2.0 -2.0 1.5 1.5 TOTAL |.0 - -- 1.0 .5 -5 FnPCKI YrWGNPANG AS T ...... GOLD 1938'47 '49 '51 '53 D J D J D J D J D *Commonleit Bank offly 1951 1952 1953 1954 TnTAfl Oii ^ nC2DT iDAVMNT EAi^r vAR) AS Fr DEEtABER 31, i5 (MILLIONS OF U. S.DOLLARS) Jj\' TOTAL 1t5 1 AMORTIZATION 301 + i30 20 20 1 0 ..., .& ....- - -- 10 INTEREST" "-'" ···.-- 1955 1960 1965 1970 1975 CONSOLIDATED PUBLIC AUTHORITIES REVENUES AND EXPENDITURES (BILLIONS OF AUSTRALIAN POUNDS) 2.0 ---2.0 YEAR ENDING JUNE 30 1.5 1.5 1.0 x--1- .0 ~EXPENDITURES - F~if REVENUES 1939 946~ 1947 1948 194 9 1I~1 k1| 195 l>1530 .7A -1A - W-TV4 W-? i t~ W"W 7 1 iz7,~jv zpýr 9rr JjI: 2/12/54 No.654 IBRD- Economic Stoff AlUSTRAL IA (COMPDnSITIOnl nF EXPORTC AmnD IMADCPR (TOTALS IN MILLIONS OF AUSTRALIAN POUNDS) EXPORTS (ExcI.gold) IMPORTS TOTAL: 122.5 YEAR ENDING ALL TOTAL:13.2 JUNE 30 OTHER 5 TOBACCO, CAPTA FOOD AND1,_ ~01 OTOER B EVER AGES LEAD AND 29% 35 B ZINO 40/ DRYDCC ~~~ F UE L V ANDr...n. MANUFACTURED PROUCT AN RA W . ... . ME AT 9% FLOUR I 1i7. GOOS TOTAL: 668.0 TOTAL: 1,049.7 7 % 4% 23% 6o 7% 3% TOTAL: 852.0 TOTAL: 509.6 6 % 5% 24% 5% 6 8%- EXPORT AND IMPORT PRICES:INDEXES (AVERAGE OF THREE YEARS ENDING JUNE,1939=1OO) 1.000 - i -r-,r- ,,r-,-,-,,r-- , 0 YEAR ENDING 1~ Ann1 JUNE 30 _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - 0 EXPORT PRICES (Inci. old)(MONTHLY) 600UU 600 400 - ---- .. 400 PkDORT PR] I v (OATRY 200 ---1200 '3q '47 '4q ''53 3 J fl J n J D J D 2/12/54 1951 1952 1953 1954 Nö. 655 iBRD-Economc Staf AllTRAL IA RALANCE OF PAYMEITS ON C.IRIT ACCOUIT (BILLIONS OF AUSTRALIAN POUNDS) YEAR ENDING JUNE 30 0 .5 1.0 15 1939 EXPORTS (f.o.b.) TOTAL IINVISIRLFS RECEIPTS PAYMENTS U.S.$ ACCOUNT INVISIRLESI I RECEIPTS* \IMPORTS (f.o.b.) PAYMENTS p l950 190TOTAL RECEIPTS XXXAAA AA , PATIMitNIb U.S.$ ACCOUNT RECEIPTS PAYMENTS II TOTAL RECEIPTS U.S.$ A C COUNT RECEIPTS TOTAL RECEIPTS PAYMFNTS U.S $ ACCOUNT RECEIPTS PAYMENTS I QR-A (Proliminnrv) TOTAL RECEIPTS PAYMENTS U. S. $ ACCOUNT RECEIPTS PAYMENTS *Trade with U.S. and Canada 2/12/54 No.656 IBRD- Economic Staff Summary and Conclusions 1. The persistent inflationary pressure which has characterized the Australian economy during most of the postwar period was brought to a halt in early 1952 owing to the combined effect of Government anti-inflationary fiscal and monetary policy and to a large influx of imports which led to uncomfortably high inventories. created temporary difficulties for ocail industry and greatly reduced the liquidity of the banking system. During 1943 the forward movement of the economy was resumed but the previous rapid increase in prices was largely avoided. The balance of payments, which C!OSA Iaih M M1cetntiq1 dAfic!it in 1951/52. nroduced a sizeable surplus in 1952/53 owing to combined effect of import restrictions and a lower 1e.,,.1 e ,wnmm . r+iuit.v Fnrthp current year the indications are that the international accounts will be approximately in balance. An important inlnce .. +, at+n1i+.vi of thp Au.qtrnlinn ecnomy is the price of exports, particularly wool, and a significant part of Australia's diffi- ct..:es over t+e last t ears has been thp rpqiit of the violent fluctuations in the price of wool. However, since its fall from the As long as it continues so, the prospects for Australian stability are nuch iLmprovesU 2. ~ ~ 11 V.Lth th-vrta cessation of th i nflation --d the disappearaneo the seller's market, not only in Australia but elsewhere, there has been uneasiness a'LVut the level of costs wihthe ifa Inhas left in its wake. Some industries have demanded higher tariffs and although the Govern- ment asUmd it clar ha mpr restrIctions woulda be- as tempora-r a.s possible, some currency has been given to the idea that the restrictions wouldhave to be maintained in order to protect vulnerable industries. The Bank has now become associated with Australian secondary industry through its loans and it is therefore desirale to give some account of the prsent situation. Accordingly in Part II of this report there is a description of the Australiai wage determination system, which plays an important part in influencing the cost structure of industry as a whole, ad an outline of the principles undeTlying the utralian tarni ZyseM, 3. The report ends with an account of the dollar position and its relevance to Australia's creditworthiness. It is there concluded that Australia would encounter difficulty in dealing with its dollar debt only in the event that she could not rely on the central reserves of the sterling area and therefore had to rely solely upon her own dollar earnings. While there is little reason to doubt that in these circumstances she could meet her obligations, it would ental1 some difficult adjustments and would almost certainly mean a slowing down in the rate of economic development. But since the purpose of the loan is to develop and strengthen Australia, the benefits from the loan should well outweigh any risk involved. CURRENT ECONOIC POSITION AND FROSPECTS OF AUSTRALIA I. Recent Economic Developments 1. During the past eighteen months the Australian economy has been much more stable than at any other time since the war. For most of the postwar period the economy had been experiencing a greater or lesser degree of inflation which was particularly severe from about mid-1950 until 1952. In 1950 the Government took strong anti-inflationary action which, in combination with the deflationary impact of a substantial balance of pay- ments deficit brought about a very marked change in the economic climate In 16hrch 1952 the Government was forced to impose restrictions upon the import of commodities from sterling nountries in ner tn pntt s. exchange reserves. In that year the sharp upward movement of prices vir- tuallv ceased. thern was a temporry chnek upn o en anmsco f pre-+-- and some unemployment appeared for the first time since 1945. 2. But by early 1953 the effects of the import surplus seem to have been there was no clear evidence either of inflation or of deflation, although of overtime working, began to re-appear. It is probably true, though it is too ear'l-y too be~ cetan, t1A-- , thl prbe 4L-L! J but it is at least clear that it has been reduced to manageable proportions. AnXJ of uh investment and consumption backlogs which played a prominent part in adding to the inflation have now disappeared. The economy as a whole is much less asuid, the total money supply having fallen from an amount equal to 45% of the national income in December 1948 to only 39% in December 1:52. Reflecting this general change in the economic climate is the shift in the subject matter of public economic debate; whereas previ- ously it had turned upon methods of halting inflation it now concerns itself much more with the problem of the high cost structure in Australian industry WH the iflation has lelT behin[e 3. From 1945/46 to P951/52 the Australian economy had at its disposal a constantly increasing total of real resources. Without allowing for any increase in internal productivity in industry (always extremely difficult to measure), it.has been calculated that the available resources in the form of gross national pro6uct plus imports less exports increased on the average by about 7% per annum over this period. This increase has been due, in roughly equal proportions, to an increase in internal production end to an improvement in the terms of trade. In the early postwar period (up to 1948) this increase was used to build up stocks end to increase both consumption and private investment from low war-time levels. Later on, after 1949/50 public capital expenditure began to absorb a larger pro- portion of the available resources at the expense of consumption and private investment. From 1948/49 to 1951/52 only 20% of the increase in the availaole resources has been devoted to consumption (which, in view of the rising population, has meant a slight fall in real consumption per head) while the remaining 80% has gone into either public or private investment. 4. With the year 1952/53 there came a reversal of all these movements. The available resources in money terms fell by 10%. At the same time both public and private investment also declined and there was a large scale liquidation of stocks after the exceptionally heavy imports of the previous year. The resources thus released were sufficient to prevent a fall in aggregate consumption and to make possible additional expenditure on defense (See Table 15 of the Statistical Appendix). The fall in invest- ment reflects the slowing up in economic activity during the year. 5. The rate of investment measured as a proportion of available supplies had been increasing steadily from mid-1947 to mid-1952 (see table below). Table A Investment and Available Resources Year Proportion of Resources Devoted to Investment (excluding xtock,) 1938/39 20.2 1947/L8 18.L 1948/49 21.5 19L9/0 21.2 1950/51 25.9 191/Cq 26 . 1952/53 27.5 In 192/q, this increase camn almost to an and This Y-mould clearly from the table if allowances were made for the very high imports i-11-15, whic Case -an, a-oMl inres in avial resoV .LLdL.L~L Vurces in that year, part of which was carried forward and used up in the public capital expenditure in the interests of inflation control. One of the reasons wythis proved extbremel.y diicult was that during the earlier years, owing to easy monetary conditions, State and local aLtoritis undrova rge co"m tments wc greatly restricted the flexibility of public capital expenditure as a whole. This condition has been 'largly overcome so that it is now easier to plan and execute publio investment programs within the economic capacity of the country. -3- 7. An analysis of public capital expenditure over the last five years shows that an increasing share of the total has been taken up y electricity and railways. Expenditure on electricity increased from £17>1million in 1948/49 or 11% of the total to £88 million in 1952/53 or 22.2% of the total. Ex7endi- ture on coal and briquette rroduction also increased ravidly up to 1951/52. after which the greatly eased supply situation brought a sharp reduction. 8. Unfortunately no complete analysis is possible of the direction of nrivate 'investment as there are no data on investment in agriculture and rural industries. The most important fields for private investment were engineering and vehicles (including nrivate motor vehicles) which has absorbed on the average 22% of private capital expenditure (excluding rural industries) and fnol nrn.Pssi-nr_ eirink nnl tnbnnn which innrns its shPre nf the total from 8.8% in 1948 to 14.6% in the first half of 1953. For further details con- _.. Itiuate ieastmieny -VV--i~ i,4~abu ~~fn investment in Australia upon production and productivity. In April 1952 the Owing to an exceptionally favorable season many of these targets were reached -L11 C-7J/ L U ±ILULLI, W.L ULI U, AjU4%U-_ _U1 UJ.L U.L4V WUU-JL Uci.Lg U, LV U ± LO 11U U that they will be maintained. There are several public land development and -Lad sttlmen- pojects inl Austala some o.L which~L ar proceeding satisf~4ac- torily although it is now expected thnt the most marked increase in agricul- bural output over the next few years wil. come from increased production from existing farms owing to mechanization and improved farming methods. The con- sequences of increased mechanization of Australian farming are only just begin- ning to be felt; no firm statistical evidence is yet available but the Bureau of Agricultural Economics is confident that the results will be marked over the next few years. Of particular importance is the increase of wool produe- tion owing to the initial success of the myxomatosis campaign against rabbits. 10. It is not possible ,at the moment to say what the ultimate results of myxxomatosis may be. This is the first time that it has been possible to observe the effects of the introduction of a new epidemic disease into a population of mammals on a large scale. It is thus a scientific precedent. The success which has already been achieved has been largely due to a favor- able relation between the density of the rabbit populetion and thct of mos- quitoes which transmit the disease. When either of these falls below a certain critical figure the.disease ceases to spread. There is therefore no possibility of the rabbit population being eventually reduced to near zero. What can be hoped for is that it may be held to a much lower figure than formerly. 1uch will depend upon whether resistance to the disease can be transmitted'from one generation to the next. No one can be certain on this point but there has been no evidence of such a development so far. It has been very roughly estimated that the rabbit population has been reduced by something like a third. Wool production in 1952/53 was 20% greater.than in the previous year; some of this, though not all, can be ascribed to myxomatosis. 1/ Throughout this report the sign E refers to Australian pounds. - 4.- 11. The productivity of Australian agriculture has been increasing fairly steadily over the past two decades. Indications of productivity have to be read over a long period as figures for any one year reflect largely seasonal conditions but there has been an upward movement in output per man of about 50% since the 1920's. Output per acre and per unit of livestock have also increased by nearly 14% over the last 20 years. Table B Agricultural Production Estimate Target Pre-war 1952/53 1953/57 1957/58 Wbol (m.lbs. greasy) 997 1280 1300 1200 Wheat (m.bushels) 165 193 170 191 Meat ('000 tons) 982 1151 1080 1175 Sugar (1000 tons) 805 967 1277 1228 Butter (r000 tons) 191 163 159 170 Milk im-rllons) na. 1228 1175 130 Cheese (1000 tons) 25 47 43 40 12. Very little information is available concerning changes in vadne.iry i n inictrv_ T. is wirly holioraA +.in. Anrrina +.ho + period in Australia, although there has been a considerable addition tc capt,rf q1_1J-"rna+ pr,n - r. Un+ rec ,na+lr --bh of the re-1_ ,Iing poiale.4h improvement was offset by the reduced labor and managerial effort caused by +I.a- --4 -... - .rA4+4 - IPI,,. -;+ - .- 1a1 1- +,-+ 1- l~aa- ar S4-.h --;1 4 4- - ~ 4J.I. ..~. ~ J ..A.L1U.L UJJAJo &1J I. JLCLy sj V11,av. Lvu gre te V IILv.LJ.J.V of the last two years has brought a more rapid increase in output per head. (b) Balance of Payments 13. From the end of World War II until the Korean boom the Australian current ba'lance of payments eXhibi_Lted niterm Lauredeict nm.LLor LU large sur- pluses. In 1946/47 and 1949/50 there were moderate deficits and in the! two utervenlAg yeaie were were b!abq urpluses. But after June Yu50 te cur- rent payments position underwent violent fluctuations. The increase in export prices led to a current surplus of 1u millon in 19>0/1. This caused an intensification of the internal inflation and it became a part of uovernment policy to increase mports for the year following. In fact a general easing of the world supply position occurred just at this time with the result that imports came in with unexpected rapidity, and exceeded the previous year's total by about 42%. Although this increase was in fact not much larger than the increase in imports from 19Y4/50 to 1950/51 (which was 38%) it was accompanied by a fall in the value of exports of over 30% owing largely to the decline in wool prices. Thus a great strain was placed upon Australian exchange reserves. At first the Government hoped that imports would decline spontaneously but in March.1952 restriction on non- dollar imports had to be imposed. In the event, the year 1951/52 closed with a current deficit of 6585 million of which 14614 million was met by drawing on exchange reserves, -5- 14. In the following year import restrictions, a lower general level of economic activity and a good agricultural season again combined to reverse the picture and international accounts closed with a surplus of £171 million. During the current year 1953/54 with the greater overall stability of the economy it is not expected that the balance of payments will depart very far from an equilibrium position.. Foreign exchange reserves have been rising slowly since June 1953.. Import restrictions are still in force although they, have been relaxed in many ways since their first imposition. To remove them completely from sterlina goods should not be too difficult. providing speculative purchases could be prevented. As mentioned previously, agri- cultural production, which provides the bulk of Australian exnorts, should increase satisfactorily over the next few years. AIfch will therefore depend uDon the future world demand for Australia's nroducts- OnA ohvionslv imnor- tant factor is the effect of competition against wool from synthetic fibers. The exact degree of nessimism which it is appropriate to adnt. n +his sohre is still a matter for argument but it has been estimated that, in ten years time. U. S. wool consurintion will h lnar than it is at PeRent Aonste rising population and incomes per head. In the short-run, however, it is not likely that the nadismnts rmuirAd of Arnalia mill be on ad a on+ cause serious difficulty; in the longer run this shadow on the horizon may beA vj up-A j n.q+ -riin s o f " -ran-411m Ad -I. The- latter is described more fully in the Technical Report. 15. On the capital side of the balance of payments Australia has received an seas companies, which has averaged around £70 million .per year over the last J.w .tea'U". one J1 0uIu JuU± auuio±uo liV UU1 rdepaying ouuobanu- ing debt while the Commonwealth Government has been borrowing from the Bank, anu recentiq Lrom wi wur±and, and has purcaused curencie Irom Tne Fund. The effect of these movements on the balance of payments is obscured by the existence o unidentified capital movements, From July 194b to June 1952 there was an apparent total inflow of funds amounting to E340 million. Some of the representeu funs moving to Auatralia in anticipation or export pur- chases, a tendency which in the earlier years was accentuated by a common belief Una hUe Australan pound might be appreciate., in 1952/53 the flow of unidentified funds was reversed; the exchange crisis had disposed of the notion that any currency appreciation was likely and there was also the efrect of a lag in the settlement for some of the imports of the previous year. 16. Although private capital hap been moving into Australia fairly steadily over the postwar period there has frequently not been a corresponding deficit on the current balance of payments which would have indicated a using up in Australia or the resources thus made available. Until 1951 the tendency of Australian exchange reserves was predominantly upwards; the capital inflow was, in effect, invested in exchange reserves.. The explanation lies partly in the difficulty in obtaining supplies from soft currency sources and partly in the persistent upward movement of export prices. Whei. both these factors suddenly ceased to operate Australia then utilized much of the capital inflow of previous years in a somewhat chaotic manner and in a few months. -6- (c) The Commonwealth Budget 17. For the first five years after the war the Commonwealth Government was able to balance the current budget while reducing the tax burden from wartime levels. At the same time the easy money situation enabled all the State loan programs to be covered by public borrowing in the domestic capital market. These conditions prevailed until 1950 when the State works croarams increased. the loan mrrket contracted and the prospect of a budget deficit appeared. In 1951/52 there were two denartures in fiscal noliev - firstlv the Governrrent budgeted for a current surplus in an effort to stem the inflation and secondly, it undertook to supplement the amount which could b raised on the hlin capital market for State loan programs by providing additional funds from its own resources. The first of these only lasted for one vpnr sine Ev the miH_ dle of 1952 the necessity for further anti-inflationrry policy hod disapreared. RhIt the spnnnar deprtu1re hAs beer-n rOncesity, cnt+inuedq sincem +Ig +_d programs are still too large to be met entirely from public borrowings. The resources ued r the rmmnaol1h tn'tooviminm +n i a""imn the -eed o __ __ " ____ _ - ~ - - - . public borrowing come principally from accumulations of the Trust Fund, a fund are the National Debt Sinking Fund and the National Welfare Fund. The counter- n-rt of c* pA 2nIne 4a ,-4A D+eb ik MT+-A h+ --As4.- A 4-t 11- _ -_ ---_ lv W Ll" .UL J Lu .L LI V£ L. UI %- J_D .L 9LIUD4 made available for the financing of State works. 18. Expenditure under the State Programs reached a peak in 1952 (fiscal year ending June4 30)1 ofL £227r W.LL-ULL CID~ UU1J1W to £67 mIIILll n1 197497 ,;1 2MiL-LIOn in 1950 and £161 million in 1951. In 1952/53 expenditure was a little lower at £v mi.LLin. uf Us oal some 5f million was obtained from public loans and the Commonealth Government provided £131 million. The principal sources of the Commonweaths contriution were a surplus transferred irom tne Uonsoi- dated Revenue Fund (£13.4 million), the counterpart of I.B.R.D. loans (118.5 I 1 and issue of Treasury 111s 01 W,7 million (see Statistical Appendix 19. The issue of Treasury Bills represented a reversal of the anti-infletion" ary policy of previous years; it was intended to increase the liquidity of the banks and to help ease the economy out of Tne temporary recession in 19)z. 20e. The most recent Budget, that for 95/5>4, was similar in nature to that for 1952/5 . The Treasury estimated that with revenue at existing tax rates there would be a current surplus amounting to about £80 million. The Govern- ment decided to grant tax concessions which would reduce this surplus to a nominal figure. It also agreed to support a State Loan Program of £200 mil- lion by providing, if necessary, up to £95 million in the form of "special assistance", for at the time of the Loan Council meeting it was estimated that the capital market might provide £100 - 105 million. Furthermore, apart from the I.B.R.D. counterpart, it was not expected that there would be any significant increase in Trust Fund balances so that the major portion of the Commonwealth's £95 million would have to be provided by Treasury Bill issues. However, the strength of the Government bond market was underestimated and in -7. Amue a publi isse ou"r;5V ir"iu.on brougnu suoscriptions o boo. mlion. A simultaneous conversion operation of L32.9 million was almost completely successIul. Mreover, there are indications that the current budget may pro- duce a substantial surplus and the Treasury now hopes that it will be possible to avoid any increase in the Treasury Bill issue this year. Government financial operations for the current year may therefore be described as mioy iruationary and much less so than they would have been but for a recovery of domestic savings. (d) Monetary Policy 21. Until 1951 the central problem facing the Commonwealth Bank was to control excessive spending made possible by the high liquidity caused initially by war-time conditions but aggravated and maintained by the upward trend of export prices and the inflow of capital from overseas. In administer- ing its control the Bank made strong use of its "Special Account" power, that is, its power to immobilize a certain proportion of the commercial banks' assets in special accounts in the Commonwealth Bank. During these years the proportion of the assets ofthe major private banks which was held "frozen" in Special Accounts was generally around 40% rising to h% in 1951. the year of greatest difficulty immediately after the rise in the wool price. 22. In 1951/52 the effect of the large balance of payments deficit was to reduce the liquidity of the banking system owing to the loss of overqpn reserves which amounted to almost L480 million. This movement was partially offset by the Commonwealth'Bank's purchases of Government securities in nrer to mitigate the deterioration in the bond market and by financing part of the State loai rroLrams by borrowina from the Cnmmnwnlth Rank_ 23. The heavy demand for funds on thp nort of nrivate tr'ad in tny. to finance imports was met by a release of bank funds from Special Accounts which declined from &570 million in J.une 19Q1 t.n Lini million n Jtune 15 whereas Bank advances rose by L293 million. Over these twelve months the liquidity of thA nrivnte banks a meanun 1-red by the +4- _P +of ---s with the Commonwealth Bank and their Treasury Bill holdings to their total denosits. declined from 56q to 38%1 2h'. Aftpr the end of QC;1/4P +he c+. Jcg%nt. moneta-r 4+i4- ease. The fall in exchange reserves came to an end, the bond market became mon ada are at of thUreiu7iceaei ----.--a repaid. However, the conditions of abnormally high liquidity which had characterize theLL earIeryeas hd dspeared caid the Coimionwealth Bank was enabled to dispense with most of its qualitative controls over the war by the issue of periodic instructions. In October 1952 this type of -A-W "CL V= uACy CZVenuyuA w.02i tue sle exception a Dank lending was not to be inconsistent with the control exercised by the Capital Issues Committee. nV1 e reVen, at tne end of >53, the control of capital issues was itself abandoned. 25. As a no'rt of its Pnt-i_infl~I_.innry nolicyv thp rlmmnnwP.n1th BankX ceased to support the Government bond market in the fall of 1951 and at the end of July 1952 bank intArpst rntns were raisea to I-in them ino line ith th1 higher yields on securities and the higher rates in force in the United King- dom Tn Alo- - thp- T-rApAy Pi11 rn+c wnqn-ioer rr%m A/ZO +%N 1-I/Z nn 4" November a Government issue was floated at 4-1/2% compared with the 3-3/4% mhinlh hnA nrcbi4mial-i h%mnn +hn "inl whih hd pevioaslj been the rule, 26. The -rz -In t"n- -411-' resrv- Ingn/9 contributed to a rise in the commercial banks' liquidity ratio from 38fo to powers so as to leave in the hands of the commercial banks liquid assets te-Uu;0UIIu5 Y-LUSe U-1-vii-tul SmuveneuCur-LueS equal DO about 4;b of their deposits. During the current financial year there i.lay be additions Uo liquidity from small additions to overseas reserves and from Governmentr, operations. The Commonwealth Bank, however, has offset these influences in some degree by sales of Government securities. The commercial banks nave estimated that their advances may increase over the current financial year by Z75 million. The Commonwealth Bank regards this figure as rather high and it has requested them to exercise more restraint in lending. 27. In 1953, the Commonwealth Bank Act was passed with two main purposes in view. The first was to amend the regulations governing the proportion of commercial bank assets which the Commonwealth Bank may call up to Special Account. Previously this authority had been very broad for it applied to any increase in a bank's assets since July 1945. Because this authority had not been fully utilized, by mid-1952 the Commonwealth Bank had the legal power to call up additional amounts equal in total to about 40% of commercial bank deposits at that date. Under the new Act the maximum amount of a bank's assets callable to Special Account will be adjusted every year. This change represents a considerable reduction of the legal powers of the Comonwealth Bank. However, taking into consideration the growth in the stature and reputationof the Cbmmonwealth Bank since the Special Account powers were first introduced, the degree of its control over the banking system is not likely to be significantly impaired. 28. The second purpose of the 1953 Act was to establish a new Commonwealth Trading Bank which will take over the functions previously exercised by the General Banking Division of the Commonwealth Bank. This Division had carried on a general banking business in competition with the ordinary commercial banks which regarded it as a privileged competitor. As the Commonwealth Trading Bank. its policy will still be determined by the Commonwealth Bank Board although it will be subject to all central bank controls equally with the private-commercial banks. -9- II. Tariff Protection and the Cost Structure 29. One conseauence of the inflation in Australia is that the level of costs has now caught up with that of her tradine partners, particularly that of the United Kingdom, after a long period going back to 1939 during which Australia had a substantial cost advantage. This has focused attention on the problem of maintaining a satisfactory cost structure, particularly in secondary indus- try. so that industrial develonment may nroceed without excessively high tariffs, (a) The Determination of lvbney Wages 30. The rate of money wages is one of the important determinants affecting the level of costs,cnth Ausalni." syatem wherebym then bkac waen wca adjusted quarterly in accordance with changes in the cost of living has been a - . UV . 1W 4much cr-"ized T4 h I s bencstmr in Autai 4 o man years for - nd u- trial disputes to be settled by a system of Arbitration Courts and this has led +o - - a a am m P +U- ------4d -f +I,- Itba-4- me f ora usld41 sle h - J- 14 U'. ULI1, %.~V~JA~~ . / J. Uti ,U1,V 1 U .~L ULI±, GOJ wC4a .1A '.J. - & ' The Commonwealth Arbitration Court has the power to make an order determining L,e -bsi wage" E11MII ULJ L-Lguris usal adote I- Q++ A ~.~ Courts so that it applies to almost all Australian labor, Until last year, -L W ~ U I-~ A.~ UUU . 11 ~ ± -4L Ue.~JIL~LA~±1 ~ of living index. During the period of inflation wage rates therefore never lagged far behind prices nd it is comnnonly aUegeud UtI had it not been for this system the cost structure would not have been pushed up as far as it has ueen. It is, of cour5e, impossible tio 41now wLIaU wou±u nvu uprmu UU wurz been no automatic adjustments but it is worthy of note that the largest single increase in the basic wage, Tne one increase that coula, with fewest reser- vations, be said to be a cause of further inflation rather than a mere result of past price increases, was in fact, not a cost of living adjustment at all but was a decision by the Court upon a case before it. 31. Whatever the evils of the automatic adjustment system may be held to be, it has now been abandoned. On September 12, 1953 the Commonwealth Court delivered judgment on a lcrge number of matters under its jurisdiction in the course of which it gave a re-statement of the principles on which it believes the basic wage should be determined. Since the level of money wages is of central importance in economic policy, this is a subject of considerable interest. A more detailed account of the principles underlying the Court's decisions is given in the Annex on "Wage Determinction by the Arbitration Court". Briefly the Court decides whether or not a case for an increase in the basic wage is justified by reference to the capacity of industry as a whole to pay a higher wage in the light of the economic situation existing at the time, The capacity of industry to pay is judged by a general survey of the state of the economy; if it seems prosperous an increase in the basic wage is generally granted. In 1953 an association of employers put forward a claim for a reduction in the basic wage and a tredes union claimed an increa-se. Both were rejected. The rejection of the employers'claim was influenced by the improvement in the general economic situation between the time the case began and the time the judgment was delivered. - 10 - 32. An important result of the whole arbitration system in Australia is that the Government is precluded from pursuing any wages policy since, at least officially, its views are not considered by the Court. The Australian Council of Trade Unions has recently demanded new legislation to deal with industrial matters because of its dissatisfaction with the Court's decision on cost of living adjustments and the Prime Minister, Mr. Menzies, has stated in reply that in no circumstances will his Government interfere with the decisions of the Court. (b) Competition from Imports 33. The present wage level in Australia which has resulted from the policy or absence of policy, of the Arbitration Court is one of the important factors affecting the cometitive nosition of Australian industry. Effective nmpa- tition from imported goods has not been an important consideration for local entrepreneurs since 1939. During the war internal nrine contr.ol meanues held local price increases down to about 50% compared to an import price increase of around 100.- Australian nrnrnners -n+.t tli enA ar ened a cost advantage of some 33% and this increased even further in the immediate notwar var.q until in 19l7/AR it. mrnphoA nhmi+ An Tki --- 64+4-- an end in 1951/52 when Australian prices largely caught up with import large imports of 1951/52 created immediate difficulties for Australian industry 31d led to Some slowing up inproduction and to some uneaploym-ient. Some of these difficulties are transitional and are already disappearing and it may stl be too ea- to as'es acc-utelY thE derz1Ee% of vulnierability of Australian industry and to indicate the particular industries which are weak. -ea the P-owar periOu has been favorable for the establishment of new industries and it is only to be expected that there has been some industrial growth baeu o insecure foundations. in total, however, it is not likely to be large. According to one estimate, only 10% of factory employment in 195/5 was devoted to the domestic production of the kinds of goods which before the war were imported and only a part of this new domestic production is likely bu prove uneconomic. Over the whole field the Department of National Development has concluded that import competition may represent a ra t osomrLetng io ne ne ignornood or QjuVQ employees with a value of production of some LS0 million, or .about 5% of manufacturing employment and 1-1/2o of tota emplpyment and gross national product. The situation cannot therefore be said to be very serious at the moment but it does indicate the importance to Australia of preventing costs from rising any further in relation to import prices. (c) The Role of the Tariff 34. The industries threatened by import competition are likely to appear before tne Tariff Board to demand increased protection. The Tariff Board has already paid some attention to its policy in the present circumstances and, in its latest report, it states that it does not regard tariffs as the first line of defense against import competition nor is it prepared to increase them to any level which may be determined as the difference between local costs and the cost of imports. Thebals of aU.tarff pcaicyin Audmia is to omnr-e -11- nrotection to those industries which nnn HPmonstrate that the have a reasonable chance of success in the long run. Once it is admitted that some prot.ec~t.io-n is l~' rpngny~ in orAw +.n h 4"Aiia+-riaaf ;' tion with imports from more advanced economies, Australia's tariff policy fro11ovv. Ini-nlt -~1r-vnrn haer desireaoidstilz Auslia's1t appoac t tariff making has been noticeably more scientific and less subject to inter- ~ ~..S ~ UI ~ ~ 1..1 U.A.L aL a. J. PkJ_i..Lt~ LLuv 4, .4Li 1929, for example, the Government sponsored an inquiry by a group of well- The resulting document- , though critical of some aspects of tariff policy, .L y ", the ia4in, el"VUUJ ULM; J_;.L.,L L -L~ UD t A-L j±.L I. J WUJ'11 1JU .LUJ 1JDQU.Frd, which has sole responsibility for the imposition or removal of tariffs, con- cuuos hearings a' wioh representatives of ausura'za's principal competitor, the United Kingdom, may present their case. It is not averse to using boun- ties, wLi their conSequent cos to tne Treasury, in circumstances where it believes their use is justified. The fact that an industry is granted pro- tetuion can generally be taken Uo mean that a careful examine-ion of iT 1nows that its development does not involve a waste of resources. A criticism of the Tarif Broard Is thnt tere is no adequEte proce-ure for lowering existing tariffs. As the economy matures it becomes more important to avoid giving unnecessary protection to "infants" who no longer require it. 35. unch of the criticism of Australian protection is, however, directed at a somewhat different point; not against the wisdom of using a tariff as a means to industrialization but against the desirability of industrializing at all. This is a matter which cannot be considered except in conjunction with the question of the size of the population. In the 1929 inquiry into the tariff it was admitted that, based on purely economic considerations, the maximum income per head for Australia could probably be achieved by reducing it to one large sheep run with the necessary subsidiary occupations, a few rich mines and a population of 2 million. Even if the truth of this view is not self- evident, it is nevertheless difficult to make any clear justification for an increasing population in Australia on economic grounds alone. In fact, of course, the case for increasing the populetion is based on other considerations and if these are granted, the necessity for developing resources other than agriculture and mining, and hence for a tariff, follow as a matter of course. In any case, from the point of view of the Bank, there need be no ground for any uneasiness if part of the development effort in Australia, that part devoted to supplying the basic capital needs of immigrants, is of doubtful value to the existing Australian population. The immigrants come generally from areas with lower incomes per head and their absorption into Australia represents a growth of productivity in the world as a whole. 1/ "The Australian Tariff". J. B. nrloyih and others. 1929. -12- 36. A further consideration of areat importance. from the Australian viewpoint, is the future prosperity of the wool industry. If the growth in the use of synthetic fibers were to make substantial inroads into the market for wool, a purely or largely pastoral economy in Australia would be much more vulnerable than one with substantial industry 37. The nurnose of the trriff iq. in shnrt. to nplpnf. inbnq+.riA which- with the help of moderate initial protection, will in the long run be able to stand on their own fpptl Tt. i. not in any wiy an anpronriat.e eannn tn ue +o deal with the problem of an inflated cost structure. If costs are excessive (and it. i-M- rr%. IMc+. +.)i~1 4n+ +1,Ai ic + % e- a ia%m -P^-"' n - .r mn ,',,4 - - 11 -i -----------t& undertakings) the remedy lies in greater productivity and efficiency. 3ap a a-e o~ ~ rf the " 'essir"n 1AN;^ --is in-cst- upon it. In its latest annual report it says, "In its function as an intru- caught up in a spiral of its own creation -- the spiral of higher duties, 1I.L91J-je . prices', highe cost a4IU . L LL1~ n 'I l-er.VLP L1.L WUL-LU UV 11 L .L L= ±I L disaster." The Board goes on to point out that the effect of the arbitration enabled to argue that in incurring increased labor costs they are merely complying with a legEl ouliatenu anU, consequenty, iU raise the quest.U whether there is not a need for greater economic co-ordination in Australia. Dut as Long as an arbitUrabtion system is continued tne Governmentts powers of co-ordination in this field will be very small. !I!. Creditworthiness and Conclusion 39. Australia's public external debt is now slightly smaller than it was before the war and the relative debt burden, taking into account the large rise in the money value of the national income, has been reduced substan- tially. The overseas debt of the Commonwealth and State Governments declined from £644 million in 1939 to ;534 million in 1951. Since then it has been increasing again owing to Commonwealth borrowing from I.B.R.D. and from Switzerland. The annual liability for interest payments on overseas debt has fallen from the:equivalent of 3.3% of the national income in 1939 to only 0.6% at present. Thus the relative external debt burden is now less than a fifth of what it was prewar. Interest charges on the external debt amount to little more than 2% of the value of exports whereas during the depression. they amounted to 41$. 40. There is no-doubt therefore that the overall external debt burden is low, and lower than it has been for the past two decades. If Australian currency were freely convertible, little more would need to be said on the matter of creditworthiness. Even given the present situation of the sterling area, the -13- desirability of aintaining Australia's credit would qive her d dllar debt payments a sufficiently high priority in both Canerra .nd Londow to ensure that they were not interrupted on account of any temportry dolLr strirgrcy. Ii cases of emergency, either of Australia or of the sterling area as al r.course way be .,ade to the sterling area reserves. Only if there were to be a serious and long-term worsening of the sterling area doll&r nositicn wcUd the ability of Australia to bal;nce her imredite dollar eccouits becomii a decisive factor in her dollar creditworGhiness. 41. Australia,s dollar balance of payments is a relatively small p,,rt of her totnl paymen position. DnUbar Pxrrts arc usunll rQ,d n% o, tote] exports although when the U. S. purchrsed large quantities of iool at hi;h prirrz.c thev rrse to 7. Dollar imoröts ave araged 13.5 of t.otal imrorts over the last tiree years. The salient features of Australia's dollar accounts are -Drer, hi«ow. -14- Table3 Dollar Balance of Payments (Nillions U.S. $ 1948/49 1949/50 1950/51 1951/52 1952/53 Exports to U.S.A. and Canada +132 +138 +372 +193 +150 Im=orts from U.S.B. and Canada -181 -171 -176-, -59 Q Trade BalAnce with Other Amp.riein Countries +2 - Trade Balance with Dollar Area - 45 30 +205 -103 - 85 Invisible BalEnce with Dollar Area k 8 89 -3 Balance on Current Account -119 -114 +110 -192 -118 BalFnce on Investment Account + 16 + 66 -12 + 26 + 54 Dollar Surplus or Deficit -103 - 48 + 71 -166 - Dollar Financing Purchases from I.H.F. - + 20 - - + 30 Loans from I.B.R.D. - - + 9 + 56 + 38 Gold Sales to U.K. + 32 + 30 + 21 - - Drawings on (+) or Contributions to (-) Sterling Area Doll,r Pool + 73 + 2 - 97 +133 + 12 1ovement in Australian Dollar Balances (increase-) - 2 4 - _4 - 2 - 16 +103 + 48 - 71 +166 + 64 - 15 - 42. Normally Australia has both a visible and an invisible deficit on dollar account. Only in the wool boom year was there a trade surplus sufficient to enable Australia to contribute 597 million to the sterling area pool. Ordinarily Australia makes a drawing upon the pool.although the amount fluctuates as it is the end-result of numerous factors, Australia's ability to service new dollar debt must be considered against this background. 43. In the immediate future Australia faces a period of unusually heavy debt payments. Between 1955 and 1957 dollar bonds amounting to $86.5 million mature. Together with payments due on other existing dollar debt, Australia's total debt payments between now and the end of 1957 will amount to almost '1150 million. In addition, Australia has to repay $38 million to the Fund. thus bringing the total required for debt service to nearly $190 million. At an annual rate, this would be over a third of the amount of dollars she miaht exoect to earn from exoorts to North America. but some of this debt may be refinanced in the New York market, and anyway repayment of the Bank's loans does not begin until this difficult neriod is largely over. h. By the end of 1957, taking account of new hard currency borrowings (including the nrnnonspseln) n nrl inAmnt of all the nllnar hnds fallen due, Australia's hard currency debt will have increased by about $94 million. HPr annual nirment. howP.ver, wui hp lnwir than in the vears iTnmediativ. ahead because repayment of this higher debt would be spread over a longer nPri cir. T+. -unii1fi nmnni an + ntaino n hrni+. ,90 millinn vn until 1962 and thereafter 126 million a year until 1967. By 1967 all out- sannding nnihl -nly held dllar honds unudi1 have been retired and Anrelia's dollar debt would consist solely of Bank loans (with the exception of a verr small amount due to +he EPorv+oTmv n a-^ on which the sevice charge would be 317.5 million per year. Hence, the burden of the pro- "^o-A new. 1 - 4 at- +A c - M-1 l , -1 1 ----* -t.,, ,44 . 4--Iea-ate the v, per" of. Inew-. repayments is over and when the total dollar debt payments are declining. 45. As a member of the sterling area, Australia can be expected to con- '...440 V4% L.4.1&CJ"A&ILLC LL po cies LVIL O.AA4 VY K7 UVJ VJ1 .LA ..."V . ... permitted by access to the sterling area's reserves. As mentioned above, fill.L~ ita .LVWC%.A 11W1IU lull CU L Ut:.LcA~iU LU." A. UU1L G U ULuuwl 1J.L-utlkJ world conditions it can be expected that she will continue to do so. But this usual deficit is not so large as to be unmanageable should Australla cease to be able to rely on the sterling area's central reserves. If need be, she could stand on her own, though to do so would undoubtedly necessi- tate making substantial adjustments in her economy, particularly in her pattern of trade. IS woula Decome necessary to sell more goods to the dollar area and to reduce the amount spent on dollar imports. In a stable world.economy these adjustments might be distasteful, but they would not be inordinately demanding; in a time of world recession with a dwindling dollar market, the necessary adjustments would be difficult and harsh, but they could be made, and in the light of the readiness which Australia has shown in the past to meet her obligations there seems little doubt that they would be made. Annex Wage Determination by the Arbitration Court 1. In its beginnings early in the present century the basic wage was clearly related to the "needs" of wage earners; it was intended to be appro- priate to "the normal needs of the average emplovee. regarded as a human being living in a civilized community". Even at that time, however, it seems clear that other factors also entered in. Later on the cost of living adinst, ment system was adopted in order to maintain the valu of the wage awards i the face of risino nrit-es- Blt at thp qnAm +.imc fln Pm+qi. Tmed w flro the concept of the wage earners "needs" until in the 1953 case the Court based itself firmlv n ihAt. it 11le . t.q nor l +14lkhA 4an-&l +E+ + basic wage should be the highest that the capacity of the community as a whole ca sutant. Thi mna. +.h Ulinio rJ -mars" P^V, + adjustment. As the Court remarked, "There is no ground for assuming that the capacltyr to~ pay will be --intained at the same level or that it will r4se or fall co-incidentally niith the purchasing power of money". This was particu- exports and imports. 2. In their elaboration of the notion of the "community's capacity to pay", however, the MemersoSf hUu COuUrt are SOmewhat Cappoirting. Tney aumit tnat there is no clear means of easuring the general wage paying capacity of the total industry of a country. They recall that one judge's suggestion, in a previous case, that the real determinant of wage rates was the productivity Of labor was not accepted Uy the other judges, and they aa tnat there is still no satisfactory measure of productivity, or even of production as a whole, available for AuAtralia. They are also unimpressed by the usefulness for wage-fixing purposes of calculations of total "available supplies" for 1 Ucr1omy as a whole. They tnen state tnt in their opinion the best method of approach is to pay attention to certain "indicators" of the state of the national economy. These indicators are: 1) employment, 2) investment, 3) production and productivity, 4) overseas trade, 5) overseas balences, 0) competitive position of secondary industry and 7) retail trade. If, states the Court, claimants will direct their attention to these indicators much argument, "in particular about conflicting social and economic theories will be avoided. The Court is not ....-a social or an economic legislature and we are of the opinion that tbeories and policies should play no part in its determinations". 3. The case before the Court was a claim by an employers association for a reduction in the basic wage, an increase in the standard hours of work and an abandonment of the cost of living adjustment, and a second claim by a Trades Union for an increase in the basic wage. The employers claimed that a lowering of costs was essential if the country was to maintain its level of economic activity. The Trades Union maintained that the economic outlook was favorable, primary production flourishing, exports expanding, profits increasing and that the basic wage ought to be increased. The Court proceeded, untrammeled by theoretical or policy considerations, to examine both of these contentions by -2- means of a aeneral survey of the state of the economy as a whole,. and concluded that neither could be sustained. The basic wage therefore remained unchanged The cost of living adiustment was abandoned ostensibly fr ren rnrP1v mf internal consistency in the thinking of the Court. However, although the Court did not think the situation warranted a reduction in the hpsin wae- it did regard the level of costs as one of the features of the economy that "can- not be regarded as less than disturbing" and it ncnded its orva+.tin *it.h some salutory exhortations on the virtues of efficiency on the part both of management and labor. I. ThA fnrt +.hnt tho Arhi+.-r+Ann Crtr does inot%+ susrb -oVayprI a theory of wage determination may very well be an advantage since it is thus regarded as important in deciding the "capacity of industry to pay". It is ,Y %O W L4.PJ t.W" U1I , VUL.U-Q % juaL au.I L ±~ J. Wi _L .4±~ "policies" and its view that its decisions should be made "in the light of the such matters as these, to remain entirely free of all theoretical considera- u.uus tne princip'le that le UU u wugu noun u Je U ie nignet1 Uua 'Une cummu- nity can afford to pay is itself a theory of a sort and in applying it the Court may be said to be pursuing a policy. The danger is that in pursuing it purely with reference to the economic situation at the time, too little atten- tion may be paid to those longer term considerations which a more profounm theory might reveal as important.. For example, the increase of £1 a week in the basic wage granted in the middle of the inflation in 1950 was in no way a "cost of living" increase. It was expressly based on the view that industry could afford -to pay such an increase. At the time of the judgment this was undoubtedly true but it is hard not to condemn the result as short-sighted. Had the Court been able to pay more attention to the role of profits in an inflation and to the more distant consequences of its actions, the present situation of Australian industry would be somewhat better than it actually is. 5. But a criticism of this neture should perhaps be directed not to the actions of this particular Court but to the arbitration system as a whole. No Court, particularly one which expressly refuses to consider policy matters, is an ideal instrument to adjust principles and objectives in the light of changing circumstances. A Court can only proceed by applying some principle which appears to be simple enough to be workable as a legal criteriol. This is one of the difficulties; the "capacity of industry as a whole" to pay any given wage is not a simple notion. Indeed, if it can be said to have any meaning at all, it is a most complex and elusive one. Table 1 Summary of External Public Debt (U.S. ! million) As at December 31, 1953 millions National and Government Guaranteed Debt 14248 Sterling bonds 919 U. S. Dollars 296 a) Bonds-W 158 b) I.B.R.D. 132 c) U.S. Government 6 Canadian Dollars (IBRD) 15 Swiss Francs 17 a) Bonds 14 b) I.B.R.D. 3 Debt of Political Subdivisions and SihhnHinntp Aiithnrities St.rl n bond 39 TT A nnnn lh-mi Total External Public Debt 1,301k/ l/ Total excludes $10 million of dollar bonds retired on 2/ Excluding: Lend Lease Silver Loan (payable in silver) $8.4m. property and local currency) $5.3m. T%L 11k- OMU TM -4-LA -C1 A.~L1I by December 31, 1953 $38 m. TT--1.2 T.T .- T .L 4.L TT N (D...amb A WULU WL a UuY LU Volt* \.C LIJUM I oIU OUOPVlAUWU Source: .u Satis-tica1 Sction Table 2 Public Authority Expenditure on New Works and Maintenance 1948L2 1949/50 1950/51 1951/52 1952/53 (a) (z Million) Post Office 12 15 22 28 28 Railways 13 19 31 45 40 Roads 31 37 46 56 60 Other Transport 11 15 17 23 24 Electricity & Gas 17 31 53 77 88 Coal & Briouettes 4 10 16 18 11 Water Supply & Sewerage 10 12 18 22 22 Irrieation. Forestry, Land Development, etc.. 12 17 21 30 22 Dwelling Construction 15 19 24 36 34 Schools, Hospitals and Other Pnhlin Ruildinon 14 95 1 43 3 Al I ntheir 18 2511 Percentages of Annual Total Expenditure Post Office 7.8% 6.9% 7.2% 6.8% 7.1% Railways 8.5 8.7 10.1 11.0 10.1 Roads 20.1 17.0 15.0 13.6 15.1 Other Transport 7.2 6.9 5.6 5.6 6.0 Electricity & Gasr 11.0 14.2 17.3 18.9 22.2 Coal and Briquettes 2.6 4.6 5.2 4.4 2.8 Water Supply & Sewerage 6.5 5.5 5.9 5.3 5.5 irrigation, Forestry, Land Development,. etc. .7.8 7.8 6.9 7.3 5.5 Dwelling Construction 9.7 8.7 7.8 8.8 8.6 Schools, Hospitals and Other Public Buildings 9.1 11,5 10.8 10.5 9.6 All Other 9.7 8.2 8.2 7.8 7.5 100.0% 100.0% 100.0% 100.0% 100.0% (a) Preliminary Estimate Source: National Income and Expenditure, 1952/53 Table 3 New Capital Expenditure on Buildings and Equipment in Industry Groups (By private businesses subject to payroll tax - excluding rural industries) 1948 1949 1950 1951 192 15 ist H-iaIf Manufacturing Engineering and Vehicles 21.6 24.1 26.9 40.7 49.2 49.4 Textile 3.5 3.6 4.1 4.5 3.7 3.8 Clothing 2.7 3.6 2.6 4.2 2.6 2.2 Food, Drink, Tobacco 8.2 10.9 15.0 17.8 23.8 32.6 Paper and Printing 6.8 9.1 11.4 14.1 13.3 8.0 Gas and Electricity 5.4 5.2 6.4 8.6 9.9 16.4 Other Manufacturing 11.0 13_5 19. 27.6 29L 1-4 Total Manufacturing 592 70.0 86.1 111. 132.0 143.8 Mining 3.3 4.5 6.8 10.8 13.7 13.8 Transport 6.5 7.2 6.8 10.1 10.8 11.0 Wholesale and Retail Trade 17.7 16.1 20.9 30.7 42.0 42.4 All Other 6.3 8.0 11.1 14.9 16.4 13.2 Total Non-Manufacturing 33.8 35.8 45.6 66.5 82.9 80.4 TOTAL 93.0 105.8 131.7 184.0 214.9 224.2 Table 4 Balance of Payments (U million) 1 cAL8/A c 1c)L/A0 1950/r1 1Q91/-,2 1923 (Prelininar_) Cuirrpnt Aoun mt (rd.it am + nah4W+ 4+.omn -) Ex-ot f.o.b 44'D 1 '7 -40!) 0 4437~ r, I -AJ.-3 -k7 r7 Tmm+ f.50.1 10 The composition of this group in 1952/53 differs from that used in earlier years. On the new basis the equivalent figure for 1951/52 would be 1 80.2 million. Source: Commonwealth Statistician Table 7 Dollar Imports and Exports (US $ Million) 1949/50 1950/51 1951/52 1952/51 Exports Wool 104 319 139 77 Skins 9 10 5 4 Minerals 7 15 23 42 Foodstuffs 11 19 15 15 Other 6 10 12 12 Total 137 373 194 150 Imports Equipment and Machinery 38 33 64 60 Tractors and Parts 18 18 25 15 Other Vehicles 21 26 31 24 Aircraft and Scientific Instruments 5 3 4 22 Tinplate 7 12 13 9 Textile Yarns 5 8 8 1 P.O.L. 13 11 36 22 Drugs and Chemicals 3 3 6 3 Tobacco 12 13 15 19 Lumber 9 11 24 8 Paper 7 3 10 10 Other 33 33 61 1 Total _171 7 297- _ Source: Data supplied to the Mission. Table 8 Production 1936/37 to 1946/47 1950/51 1951/52 1952/s 1938/39 (averaRe) Wool (million lbs.) 997 936 1,142 1,080 1,2 0 Meats (000 tons) 982 881,011 949 1,152 Butter (000 tons) 190.8 143.3 163.9 135.3 167.6 Black Coal (millin tons) 12.1 14.1 16.4 19.2 18.6 Pig Iron (00tn 1,143 1,313 1,430 1,69 nnili (ffi n f-i 1 , 926 91 9 , Lead (000 tons) 223 176 188 188 193 Zine (000 ton ) 70 70 78 84 86 E'lw;ec-ric Power Generated .LDJ~U. . 1 LOWCDI UCEUMLGetu (million kwh) 4,338 7,527 10,503 11,297 12,289 Source: Commonwealth Statistician Table 9 Wholesale Prices: Australia and.Other Countries (Base 1936/37 to 1938/39 = 100) Australia New Zealand United KinLdom U.S.A. 1946/47 143 156 178 170 1947/48 159 173 203 191 1948/49 181 180 218 194 1949/50 205 184 237 186 1950/51 246 210 288 211 1951/52 300 243 321 213 1952/53 319 320 209 Source: Commonwealth Statistician Table 10 Eäxport Pa Tmport Pri^cs Term of TrAe (Base 1936/37 to 1938/39 ä100) Wool Exports Trotal Tmot T--4~ ferms of0 (excluding Exports Trade I CM.. /L7 1946/47 173 305 203 234 8 1948/9 3654132 332285IC 1950/51 999 432 654 375 174 777, 4..)4 U94 -1t.-1 9/4 436 473 416 114 1952/53 616 441 482 384 126 Source: Commonwealth Statistician Table 11 Receip)ts and Outlay of Public Authorities r Million Receiptg 1938/39 1946/47 1942/48 1948/49 1949Z50 1950/51 1951/52 1952/ Taxation Indirect taxes 93 209 225 249 283 336 449 426 Less subsidies 3 37 51 29 24 41 35 26 Net indirect taxes 90 172 174 220 259 295 414 400 Income taxes on companies 16 54 71 74 85 101 152 167 Income taxes on persons 26 154 162 199 195 351 399 387 Estate and gift duties -.2 _14 1 _.20 .25.2 ILL~ -a.J JLJ77 4)jr f-L 77WJ 72L Ourplus 01 ruU..u ftULjjnir1V.y Business Undertakings Railways 10 3 3 -5 -7 -12 -10 Other 17 16 14 16 16 17f 16 -4 Rent and interest received 6 12 14 15 117 22 27 Net increase in - indebtedness 2.A28 .. O. ...1_) Total Receipts 201 459 451 544 667 901 1,096 1,166 Outlay Net purchase of goods and ser- vices 118 231 260 332 441 599 819 855 Oversea gifts, re- lief, etc. 39 2 14 12 1 4 4 Cash social ser- vice benefits 30 79 87 102 116 144 172 204 Deferred pay of mem- bers of forces 16 7 1 1 Capital transfers 6 6 5 4 62 1 Interest Daid 53 88 89 90 A3 95 100 103 Total Outlay 201 459 451 544 667 901 1,096 1,166 Source: National Income and Expenditure. 1952/53 Table 12 Financing of Yaior Items in Australia's Public Investment Program I ao~ Ir --I Programs E Illion State Government Borrowing Programs 160.2 Advances to States under Commonwealth-State Avances Wu tnree Sates unaer war Service land Settlement Agreement Total 195.9 Financing oPrograms Net Cash Public Loan Raisings 54.6 Commonwealth Domestic Raisings 14.9 State Domestic Raisings 6.6 Treasury Bills Issued 71.7 Other (including Consolidated Revenue Fund surplus and counterpart of I.B.R.D. loans) 49 Total 195.9 Note "State domestic raisings" are the proceeds from savings deposits in the Commonwealth Savings Bank in certain States which. for historical reasons, are used by these States for their Loan Programs. "Commonwealth domestic raisings" are the proceeds from the sales of Government securi- ties of varying maturities to the Commonwealth Bank. Source: Data supplied to the ission Table 13 All Check Paying Banks - Cash, Treasury Bills and Special Accounts as Percentage of Deposits Cash T.B. Cash Special Accounts Cash, T.B. 1 M. % of EM. % of and T.B. £ M. % of Spec. A/cs- Deps, Deps, % of Deps, Dep. % of DeLs. Annual Averages 1946/47 47.0 6.6 28.5 4.0 10.6 267.0 37.6 48.2 1947/48 54.2 7.2 19.2 2.6 9.8 263.7 35.2 45.0 1948/49 58.3 6.7 24.0 2.8 9.5 323.9 37.4 46.9 1949/50 62.2 6.1 29.5 2.9 9.0 379.6 37.2 46.2 1950/51 71.4 5.5 64.0 4.9 10.4 503.6 38.8 49.2 1951/52 72.3 5.3 61.7 4.5 9.8 468.6 34.4 44.2 1952/53 109.9 8.2 144.2 10.8 19.0 212.9 16.0 35.10 Source: Commonwealth Statistician roreign Exuhange Reserveb Date (End of Year) Q21d Foreipn Exchange Total and Foreign Investmentsil 1938 6 245 251 1945 53 543 596 1946 82 677 759 1947 88 515 603 1948 88 1,126 1,214 1949 88 1,052 1,140 1950 88 1,432 1,520 1951 112 1,107 1,219 1952 113 866 979 May, 1953 112 1,076 1,188 October, 1953 n.a. n.a. 1,094 Almost all sterling. Foreign Investments (which in May 1953 amou-Lt.ed to only 62o million) are British Government Securities held by the Commonwealth Bank. Source: International Financial Statistics Table 15 Availability and Use of Resources (t. Yillion) 1. Private Consumption 656 1,404 1,683 2,058 2,41 2,5r 2. Government Consumption 56 172 20- 280 38 455 3. Gross Public Fixed Capital Formation!/ 62 154 218 306 410 397 4. Gross Private Fixed Capital Formation-/ 122 321 443 595 770 697 5. Increase (+) or decrease (-) in stocks +9 +86 +169 +246 +401 -104 6. Available Market Supplies 905 2,217 2,721 3,485 4,385 3,982 7. Net Foreign Investment +17 +74 +3 +148 -532 +237 8. Gross National Product 922 2,291 2,724 3,633 3,853 4,219 9. Public Fixed Canital Forma- tion as Percentage of Available Market SuDnlies 6.9Z 7.0% 8.0% 8.8% 9.3% 10.0% 10. Privnt. FiywSi Cnital Fnrma- tion as Percentage of Available Market Sunlies 13.5% 1.5% 16.2% 17.1% 17.6% 17.5% 11. Total of 9 and 10 20.4% 21.5% 24.2% 25.9% 26.9% 27.5% l/ Includes maintenance of roads and buildings, Includes motor vehicles for private use, Source: National income and Expenditure, 1952/53. g 100 30 5oo DARW . u............ ....... .~ 9 30 Q5° rD~W 1V OR ) 9lIJ . -- -- r [1 S..N.. E ST ERN N ROCKHAMPTON S T R A L 1 A -- - ........... 2-:U*50... . S OU TH A S(T R A L A -.-++...LEIGH CK. .... (Cc2AL) (LiEAD, ZiNGO, SILV. E? .4é ._ ).~ORLIE  ~ < BROKEN N0 NEW 9 (-. 20 v..:!* N EWC AST LE (IRON 8 ST EEL) ... .SYDNEY 9 RT KE MBL A (IRON & SEEL) $5°~ )MIC MAP OF AUSTRALIA - ~BRE AK |N GAUGE ANNU/AL MEAN RAINFALL 0 L~J8O$ OL g ) IN /NCHIES AN RAINFALL SEA SONl &UDR 10 20 5 =5 MONTHS [CESTON1 20 - 0 -OP