IMPORT CONTROL

Press, Volume XC, Issue 27490, 26 October 1954, Page 17

IMPORT CONTROL

AUSTRALIA’S “SIGNIFICANT STEP”

It is a pity that Australia has had to go back upon her earlier intention to allow quota-free imports of the more essential types of imports in the 12 months to the end of June next, says the “Financial Times.” But the significance of the step in Australia and for the Commonwealth as a whole must not be overrated.

Earlier this year the country’s payments were looking in such good shape —reserves had risen from £, A 412,000,000 to £A540,000,000 in the space of a year—that the Australian authorities, anxious to obtain the maximum possible help from Uie import flow in contending with inflationary pressure at home, very considerably relaxed the restrictions imposed with the 1951-52 payments crisis. Unfortunately the additional pressure that this policy change was bound to impose on the country’s external finance was accentuated by two developments which Mr Menzies’s Government had evidently not fully foreseen.

One was a downturn in export earnings caused by a tendency for those countries that normally buy Australian wheat and other commodities to postpone their purchases in anticipation of a fall in price levels.

The other was a rush by Australian importers to take advantage of the complete removal of quota limits on “A” category goods to build un stocks—a process that was accentuated when it was realised that the deterioration in the reserve position between the end of April and the beginning of September this year could not wholly be explained by seasonal factors. With the opening recently of the wool export season, the decline in reserves has been greatly slowed down—losses in September totalled no more than a few millions. But the Australian authorities have decided that the import concessions they made earlier in the year were, in the light of recent experience, wider than was justified by the improvement in the country’s basic payments circumstances. The limitations they have now imposed on imports do not, it is important to understand, wholly reverse the steps in the direction of trade freedom they took earlier in the year. They merely mean that imports will be held down to about the level at which they were expected to come out when the previous concessions were made. It is quite possible that when the adverse temporary factors that have been pressing on the country’s payments in recent months have lost their force—as they should do before long—it will be found that progress toward freedom for Australian trade can be resumed. This outcome will be all the more likely to be realised if the Australian authorities have grasped the deeper lessons that seem to emerge from the events of the last few months. These are the need of a larger reserve than Australia now possesses and a more ready use in the Government of monetary controls for influencing internal economic trends.