Canberra, 15 March 1951
I refer to your letter of 17th January to the United Kingdom Chancellor of the Exchequer concerning a suggestion you received from him that Australia’s contribution to the Colombo Plan should be increased.1
As you will recall, Cabinet decided on 13th December, 1950, that Australia should contribute a total amount of at least £stg. 25m. over the six years from July, 1951 to June, 1957, of which £stg. 7m. was to be made available in 1951/52, the first year of the Colombo Plan.2 The United. Kingdom suggestion to you was that Australia might consider raising the total contribution to £stg. 50—60m.
The United Kingdom proposal has been fully examined and as a result I put forward for your consideration the view that as far as we can see ahead at present we should not be justified in raising the level of Australia’s contribution.
The budgetary outlook for 1951/52 is still problematical, but one thing which seems clear at this stage is that on both budgetary and general economic grounds it will be necessary to keep expenditure to a minimum. Although the form of Australia’s contribution to the Colombo Plan has not yet been determined, any credit or grant given by Australia would need to be financed by the Commonwealth Government and would add to total expenditure. Further, Australia’s physical resources are already stretched to the limit and any additional demands on these resources inevitably would add to the already excessive inflationary pressures. Our overseas commitments have been increased substantially by Cabinet’s decision of 13th November to contribute 2% of the total Korean Relief Programme. This programme Is NOW expected to total about $220m. so that Australia’s contribution has been set at a maximum of £A1,971,000, a largeypart of which is likely to be required in 1951/52.
We shall probably need over £A1. to meet our contributions in 1951/52 to the Technical Assistance programmes of the United Nations and the South and South East Asian Aid Programme. In addition, it may prove necessary to respond to the appeal you recently received from the U.K. Secretary of State for Foreign Affairs for a contribution to Palestine Refugees. These obligations, together with the sum of £A8,750,000 approved for the first year of the Colombo Plan, make a total of about £A11m. for 1951/52, compared with less than £1m. estimated to be spent on international relief in the current financial year.
It might appear that Australia’s international reserves, which amounted to £A676m. on 31st December, last, are so large that an additional contribution over the next six years could be afforded easily. I suggest that this approach ignores the impact of the contribution on Australia’s budgetary and internal economic position to which I have referred.
Moreover, when allowance is made for the inflows of “hot money’ in recent years, the balance can not be regarded as excessive to meet our requirements, for it covers only about 60-70% of a year’s imports at current rates of importation and at current price levels.
This situation may change somewhat during the next twelve months, if export receipts continue to rise and if imports should be affected by reduced availability of goods. Such a change has not yet occurred, however, and it would seem speculative to anticipate it.
Moreover, our developmental and migration plans (and probably our defence plans) require large importations and it is sound policy to conserve our overseas funds for these purposes.
When we consider our own contribution in relation to the proposed contributions of Canada and New Zealand, Australia compares very well. Canada did not announce its contribution until the recent conference in Colombo, when the Consultative Committee was informed that an amount of $ Can. 25m. (£stg. 7.3m.) would be provided in the first year of the Plan. New Zealand’s contribution has now been announced as £stg. 1m. a year for each of the next three years.
Having in mind therefore the budgetary and general economic outlook, the substantial] overseas commitments we have already incurred and the points I have made about the level of our international reserves, I suggest that we should not at this stage undertake to increase our Colombo Plan contribution.
I notice that you have already pointed out to the Chancellor of the Exchequer that Australia’s contributions since the war to international relief programmes have been very substantial. I feel strongly that our past record and our present undertakings enable us to face any criticism that we are not taking part in the Colombo Plan to the best of our capacity.
[NAA: A9879, 2202/E1 part 3]