191 Full Cabinet Submission by Chifley and Evatt

Agendum 669 CANBERRA, 10 June 1944

INTERNATIONAL CONFERENCE PROPOSED INTERNATIONAL MONETARY FUND

Statement of Principles for an International Monetary Fund (already circulated) [1] is to be the basis of discussion at a Conference in United States of America on 1st or 7th July. The conclusions of the Conference will not be binding on Governments, but will be referred to Governments for final consideration and decision. It is necessary now for Cabinet to consider the matter so that suitable instructions may be given to the Australian Delegation.

2. The Cabinet Sub-Committee has examined the proposals [2] and discussed details at some length with the Australian representatives at the recent London talks (Messrs. Melville and Wheeler) and with other officials.

3. The Sub-Committee recognised that the provision of additional international reserves, which the Fund would offer Australia in the form of the 'quota', would strengthen our ability to meet fluctuations in the external balance of payments. The Fund could also provide indirect benefits through its potentially expansive effects on international trade.

4. On the other hand, the plan involves obligations on Australia which should be carefully considered, the most important being surrender of some freedom to vary the Australian exchange rate.

The examination on the technical side has been directed to points where there might be disadvantages for Australia and in particular to the following aspects:

(a) Purposes and policies of the Fund.

(b) The Australian quota and annual drawing rights.

(c) Control of movements in exchange rates.

(d) Right of withdrawal.

(e) The form of management and the discretionary power in its hands.

5. Apart from the technical aspects of the scheme, there are other angles which should be taken into consideration, and these will be discussed further with Full Cabinet.

6. When the decisions of the Conference are later referred to Governments the Australian Government will have the opportunity of giving final consideration and decision before submitting the plan to Parliament, which must be consulted before any definite commitment is entered into.

7. The Sub-Committee recommends that the Australian Delegation should include Messrs. Melville, Wheeler and Tange, who should reach United States of America in time for the preliminary Drafting Committee composed of officials which will commence about the 24th June.

It is also recommended that Sir Owen Dixon should be asked to assist in any important drafting which may be necessary.

8. The attached memorandum entitled 'Australia and Monetary Fund' [3] discusses the main technical points and sets out the instructions which the Cabinet Sub-Committee recommends be given to the Australian representatives on these points. It is recommended that the Australian representatives should be asked to collaborate fully with the New Zealand delegation in an endeavour to reach an agreed approach.

J. B. CHIFLEY

H. V. EVATT

Attachment

CANBERRA, 10 June 1944

SUPPLEMENT TO AGENDUM ON INTERNATIONAL MONETARY CONFERENCE PROPOSAL FOR A UNITED NATIONS BANK FOR RECONSTRUCTION AND DEVELOPMENT

The invitation from the United States indicates that the Conference opening on July 1st may also be asked to formulate a proposal for an international bank for reconstruction and development. Although there has already been some discussion among officials of the United States, United Kingdom and Dominions on this subject, no concrete proposal for discussion at the Conference has been put forward. At this stage, therefore, it is not possible to give detailed instructions to our Delegation.

It is considered that it would be in Australia's interests if a successful attempt were made to organise international investment on an expanded and more stable basis after the war. An organization set up for this purpose should be able to assist rehabilitation and reconstruction in war-damaged countries, in the immediate post-war period and aid the development of underdeveloped countries over the longer-term future. Moreover, such an authority could, by encouraging overseas investment by creditor countries, assist other countries to bring about equilibrium in their balance of payments, and thus facilitate the successful operation of any International Monetary Fund which may be established, and of other post-war economic proposals.

It is therefore recommended that the Australian delegation inform the Conference that the Commonwealth Government is interested in further action being taken to achieve the general objectives outlined above.

J. B. CHIFLEY

H. V. EVATT

1 A copy was attached to this submission. See also Document 120, note 3.

2 See Document 187, note 3.

3 Not published.

[AA:A2700, VOL. II]