35 Notes by Department of Commerce and Agriculture

Extract CANBERRA, July 1949

THE DOLLAR PROBLEM SECTION 2

Measures taken by Australia to assist the United Kingdom, or to sustain sterling, which have involved some sacrifice by Australia Throughout and since the war, Australia has had long-term contracts with the United Kingdom covering a number of major commodities. Chief among these are the contracts on meat, butter and cheese, eggs and sugar.

In each case Australia has admittedly enjoyed the advantages of market security but this has been in a period of high prices for foodstuffs and raw materials. On the other hand, the prices at which Australia has supplied have been reasonable and, at times, considerably less than those paid by the United Kingdom to other countries. In some cases the alternatives facing the United Kingdom have been payment of higher prices (sometimes dollars) or doing without.

For example, the price for best quality beef in the present meat contract with Australia is 7 and 1/8d. E.C. [1] per lb. compared with an average price for all carcase meat of 10/ 1/2d. E.C. per lb. under the new agreement between the United Kingdom and Argentina. There is a similar disparity in canned meat prices. The current price paid by the United Kingdom for Danish butter is 271/6 sterling per cwt. compared with 251/- sterling for Australian. The price of Australian eggs in 1948-49 was 2/4 Australian currency per dozen compared with 3/3 A.C. per dozen being paid by the United Kingdom to Canada. (Note all prices are f.o.b. More details are available in Attachment A).

Additionally, some of these commodities could have been sold in dollar markets (thus increasing Australia's direct dollar earnings and the United Kingdom would have been obliged to purchase in dollar or hard currency markets to fill at least part of the gap.

The U.S.A. and Philippine markets for beef and lamb have been and remain attractive at better than U.K. contract prices. The same applies to butter, whilst the sugar market in Canada would absorb quantities of Australian sugar in excess of those at present being shipped to that country. Nevertheless in each case Australia would have been obliged to market part of her surplus in the U.K. This latter did not apply to copra in 1948 and early 1949 when we sold 12,000 tons of Territories copra to U.K. which quantity was saleable at better prices in U.S.A. (U.S.A. prices are however at present lower than the U.K. contract price).

To help Malaya's food supply, practically all Australian rice production is being shipped to that country but only by prohibiting its sale in Australia. The availability of Australian rice in Malaya in so far as it assists food supplies and hence Malayan production generally is a factor in the dollar drive as well as a saving in Egyptian or Brazilian currency.

Butter rationing and the ban on domestic consumption of fresh cream in Australia are successful measures which account for the availability of over 25% of our total butter exports and, last season, helped us earn 11/2 million dollars from sales of butter to Canada.

Sales of scrap metal to Canada, steel to Hong Kong and pig iron to U.S.A. are examples of dollar sales of secondary products which could have well been retained in Australia. On the other hand, the United Kingdom has been saved hard currency expenditure by the Australian sale to her of over 100,000 tons of steel at prices which have remained unaltered since the contract was made in 1945.

(For details see Attachment A).

The comparatively low prices at which Australia has supplied foodstuffs to the U.K. have been an important factor in the cost structure of United Kingdom industry, particularly export industries, and in the cost of her domestic price subsidies.

1 English Currency.

[AA: A10817, 4]