PRESS STATEMENT
Statement by the Prime Minister
The Hon. E. G. Whitlam, Q. C. M. P.
Change in the Exchange Rate
of the Australian Dollar
The Australian dollar will be devalued by
12 per cent as from 6.00 the Prime Minister
announced today. The initial rate against the US dollar
will be $ A1 $ US1.3090.
The fixed link to the US dollar will be
discontinued. In future the exchange rate for the
Australian dollar will be determined by changes in an
average of foreign currency values weighted in accordance
with trading significance to Australia. This means that
the rate for the Australian dollar will tend to vary
from day to day against all currencies including the
US dollar, in a manner which will maintain constant
the weighted average exchange value.
When the Government came into office it was
faced with a situation of high and growing international
reserves and an excessive level of domestic liquidity
giving rise to strong inflationary pressures. In these
circumstances it was appropriate to appreciate the
Australian dollar and the Government had acted to do so
by 7.05 per cent within weeks of taking office in
December 1972. In September 1973 a further appreciation of
per cent was undertaken. Since that time there had
been a further effective appreciation of' the Australian
dollar of about 51-per cent as a result of the rise in
value of the US dollar against other currencies, taken
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as a whole. The Prime Minister said that in 1973/ 74
the Australian economy had benefitted from the rising
international value of the Australian dollar. As the
Treasurer had said in his Budget Speech, nearly one-half
of the increase in demand in 1973/ 74 had been satisfied
by the increase in imports which had been induced by this
amongst other measures.
It had been appropriate to appreciate the
Australian dollar when reserves were excessive and a
boom in demand was over-straining domestic resources. It
is now appropriate, in the light of the changed outlook
for the balance of payments and the slow-down in the
domestic economy, to depreciate.
The Prime Minister emphasised that the
depreciation will give a fillip to many domestic
industries. Export industries, such as the rural and
mining industries and manufacturing exporters, will
benefit particularly, as will those sectors of industry
experiencing undue pressure from import competition.
In these ways the devaluation will have beneficial
effects on the climate in which business operates. It
will thercby assist in restoring the general level of
ousiness activity and in the maintenance of employment
) portunities. If unchecked, unemployment could destroy
the efforts which the Government is making in co-operation
with unions, employers and State Governments to reduce
inflation. While some increase in costs of a number of
import items will probably result from this move, it is
essential, if inflation is to be overcome in Australia,
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that conditions be created which are favourable to
continued economic growth and full and effective use
of Australian resources.
September 1974 1