Canberra, 21 November 1967
1786. Secret
I called a special meeting of Cabinet in Canberra today to consider the situation created by the British devaluation. I had had a message from Wilson only on Saturday afternoon informing us of their decision and the circumstances which led them to it.
2. I held a meeting first with some of the officials including Coombs and Phillips of the Reserve Bank, and Randall, Westerman, Singer and McKay. 1
Doug Anthony, who had been in Northern Queensland, was not available for this meeting but Ian Sinclair was present. We had a meeting of full Cabinet at 2:15, at which Doug Anthony was present.
All the officials attended for the first part of the discussions: the final discussions were confined to members of the Cabinet.
3. After a very full consideration of all aspects of the matter we came to the conclusion that we should make no change in the currency value of the Australian dollar. In reaching this decision we were influenced by the fact that of the twelve major trading nations ten had already decided not to devalue and we were the remaining country to declare our position. There was the further fact that we would be hard put to demonstrate that we were in the situation of fundamental disequilibrium necessary to secure I.M.F. approval for a change in the exchange rate.
We had been pressed by the Americans and the British to refrain from a devaluation. Most important we judged that devaluation of the Australian dollar would give a damaging boost to costs and prices in the domestic economy. At the same time we had well in mind that a decision not to devalue would produce special problems for particular industries in both the primary and manufacturing fields. We were very conscious of the importance which your party would attach to this aspect and your two colleagues put to us fully and very ably the difficulties as they saw them.
4. For various reasons we felt it important to make and announce a decision today. With the exception of your two colleagues members of the Cabinet were strongly against devaluation. We thought it would be preferable to handle the problems of particular industries by specific measures rather than to seek to do so by devaluation which we felt would adversely affect the economy as a whole. My brief statement tonight announcing our decision not to devalue goes on to say ‘Cabinet recognised that the effects of this decision will fall unevenly on the Australian economy as some industries, particularly some primary industries, are more closely linked with the British market than others. These difficulties some of them critical are now under urgent examination to find appropriate ways and means of overcoming the problems.’
5. I have in mind to appoint a committee of the Cabinet underpinned by a committee of relevant senior officials to pursue the examination referred to. I will tomorrow night in a special nation-wide hook-up on ABC television make a statement amplifying the decision which I have announced tonight. The draft of this statement is currently being prepared and I intend to discuss this with your two colleagues tomorrow.
6. I may say that the Australian Press has been virtually unanimous against devaluation. The opposition through Cairns its Shadow Minister for Trade had also publicly taken this line.
7. It has been a difficult decision for us but I feel that on all the information before it Cabinet had no alternative that was realistic in both economic and political terms.
1 H.C. Coombs, Governor of the Reserve Bank of Australia; John G. Phillips, Deputy Chairman, Reserve Bank of Australia; D.H. McKay, Deputy Secretary, Department of Trade. The reference to ‘Singer’ is presumably to A.L. Senger, Deputy Secretary, Department of Primary Industry.
[NAA: M2684, 124]