1. I submit herewith my report of the discussion and proceedings
of the United Nations Monetary and Financial Conference held at
Bretton Woods, U.S.A., from 1st July to 22nd July, 1944.

Representation at Conferences
2. In addition to the attached report of the proposals formulated
at the Conference, I am preparing a fairly detailed report of the
procedures and working of the Conference for guidance in the
appointment of Australian delegates to future conferences.

3. As a result of my experience at Bretton Woods, I am convinced
no country can expect to play an effective part at a conference of
this kind unless it has a large and strong delegation. For a
country with a small delegation, such as Australia had at this
Conference, it is a matter of great difficulty to be represented
effectively at all the various discussions which are of importance
to it. In this connection, it should be noted that it is not
sufficient to be represented merely on those standing and ad hoc
committees dealing with issues of particular importance to
Australia. After an issue has been decided in principle, it must
sooner or later be dealt with by one or more drafting committees,
and these committees have considerable opportunities to modify in
small but important ways the reports and documents which finally
emerge. Membership of even a proportion of these committees,
however, entails a considerable volume of work not directly
related to the immediate work of the delegation. Accordingly, it
was impossible for us, and will be for any future delegation of
similar size, either to seek or accept membership on these
committees.

4. Moreover, it is even more important that one at least of the
delegation should be free to participate in informal negotiations
which are not part of the formal organisation of the Conference
but where some of the most important decisions are made.

Commercial Policy
5. There is another lesson which I feel should be drawn from the
experience of the Conference at Bretton Woods. The discussions on
monetary policy commenced as long ago as October, 1942, and for a
long time it appeared that discussions at the official level would
not very rapidly reach a conclusion. The Conference at Bretton
Woods, however, has shown that, once the United Kingdom and the
United States resolve their major differences, the discussions can
proceed very quickly to the stage of formulating definite
proposals which Governments must accept or reject.

6. It is probable that the attempt to draw up an international
agreement on commercial policy will meet much greater difficulties
than the proposals for a fund and a bank. Nevertheless, the United
States administration is pressing the United Kingdom to resume
discussions on commercial policy, and there is always a
possibility that an agreement on this subject might move swiftly
to a conclusion.

7. This is a matter in which Australia is vitally interested, and
she should seek to influence the final agreement at as early a
stage as possible and aim to work through smaller bodies, such as
the British Commonwealth, or to organise a group of countries with
similar interests before the discussions reach an open conference
of the United Nations. To be effective, however, Australia would
have to be able to present a well reasoned case supported by
carefully assembled data.

8. I should therefore like to repeat the recommendation made in my
report [1] on the London discussion on Article VII, that it is
urgently necessary for a detailed investigation to be made of the
effect (as far as possible in quantitative terms) of the latest
commercial policy proposals on Australian industry, employment and
overseas trade.

Employment Policy
9. In the report I have referred to the misunderstandings which I
found at the Conference about Australia's attitude to
international agreements. The delegation was constantly being
confronted by the belief that we were unwilling to co-operate with
other countries on economic matters. No opportunity was provided
at the main meetings of the Conference for general discussions
during which this belief might have been dispelled, although the
discussion in Commission III of our proposed employment agreement
[2] gave me some opportunity to state the Australian point of
view. The atmosphere became particularly unfavourable when the
attitude of the Australian delegation on the question of voting on
the resolution adopting the reports of the Commissions and signing
the Final Act [3] was revealed. There was some improvement,
however, when I attached my signature to the Final Act 'for
purposes of certification'. Further comments on these matters will
be found in the body of the report.

10. It is, I believe, urgently necessary that Australia should
state her general attitude towards international arrangements as
soon as possible, on the highest possible plane. And it appears to
me that Australia has a suitable opportunity not only to explain
her attitude but also to become a spokesman for a positive and
constructive policy of international cooperation, which would make
the various international proposals now under discussion
subsidiary to the general requirement that all nations should
commit themselves to maintain high and stable levels of
employment. A policy for international co-operation of this kind
based on a commitment to maintain high levels of employment would,
I am sure, receive a sympathetic hearing in many countries and
even from an important section of the United States public. What
has been interpreted as a negative approach by Australia to
international questions would then appear in its positive aspect,
as a constructive attempt to direct international activities
towards objectives which the people of ail countries wish to
attain.

L. G. MELVILLE

Attachment (extracts)

26 August 1944

Report on discussions at United Nations Monetary and Financial
Conference held at Bretton Woods, U.S.A. from 1st July to 22nd
July, 1944

A. GENERAL

1. The discussions at Bretton Woods, New Hampshire, arose out of
Article VII of the Mutual Aid Agreement, which provided for agreed
action directed towards the expansion of production, employment
and consumption, the reduction of trade barriers, and the
elimination of all forms of discriminatory treatment in
international commerce.

2. The discussions were at the official level only and did not
involve any commitment on Governments. In accordance with the
terms of the invitation [4] from the President of the United
States of America, the Conference was merely to formulate
proposals for a monetary fund and a reconstruction bank, for
subsequent reference to the respective Governments for their
consideration and acceptance or rejection.

3. The proceedings of the Conference are covered by this report
under the following headings:

A. General
B. Procedure
C. International Monetary Fund
D. International Bank for Reconstruction and Development
E. Employment Agreement.

The outcome of action taken by the delegation in accordance with
the Government's instructions is covered under appropriate
headings of the report and summarised in Appendix D.

4. Prior to the discussions at Bretton Woods between the
representatives of the 44 United Nations, there had been earlier
discussions between the United Kingdom and the United States of
America, between United Kingdom, Dominion and Indian officials,
and discussions between the United Kingdom and the United States
of America and most of the other countries represented.

5. As a result of these discussions, a joint statement on the
establishment of an international monetary fund was prepared by
the experts of a number of countries. These included experts of
the United Kingdom, the United States of America, Russia and
China. This joint statement was published by the United States of
America, the United Kingdom and some other countries, on 21st
April, 1944. [5] A preliminary draft outline of a proposal for a
bank for reconstruction and development of the United and
Associated Nations was also prepared by experts of the United
States of America and circulated on 24th November, 1943. [6]

6. By agreement between the United Kingdom and the United States
of America (and presumably the U.S.S.R. also), these skeleton
proposals for a fund and a bank became, in effect, the terms of
reference of the Conference. No opportunity was provided for
general discussion of the merits of the proposals before the
Conference. Neither was there any opportunity to discuss the
desirability of developing alternative forms of international
financial collaboration. The form of the proceedings confined
discussion for the most part to suggested amplifications and
modifications of each of the various articles and sections of the
skeleton proposals for a monetary fund and a reconstruction bank.

7. Important modifications in the proposed monetary fund were made
at the instance of the United States, the United Kingdom and
Russia, and the South American Republics were successful by
combined action in striking some useful bargains. Most of the
modifications which were made were settled during the course of
informal negotiations, although they had eventually to be brought
forward in open conference. Modifications which were made in
response to representations by the Australian delegation were
reasonably satisfactory. The Australian quota in the fund was
increased from A47 million to A62.5 million. The 25 per cent.

limit on annual drawing rights was not increased, but a 'waiver'
clause was inserted which permits the fund to relax the limit. A
portion of the amendments proposed by Australia to the 'purposes
and policies of the fund' was accepted. In addition, the
modifications made at the instance of the United Kingdom in the
direction of greater flexibility in exchange rates were as
favourable as we could reasonably expect in view of the United
States outlook on this matter and would seem to meet Australian
requirements.

8. In view of the modifications made to the proposals, I now
believe that, on balance, it would be to Australia's advantage to
participate in the proposed fund.

9. Important modifications were also made, largely at the instance
of the United Kingdom, to the original United States proposals for
the reconstruction and development bank. On balance, I believe
that it would be to Australia's advantage to participate in the
proposal, as now drafted, for an international bank for
reconstruction and development.

10. It is difficult to forecast the final attitude of the other
countries represented at the Conference. The Final Act, as adopted
by the Conference, gives an appearance of greater unanimity than
actually existed. The Articles were drawn up by majority
decisions, and important reservations were made by Russia, China,
France, India, Australia and a number of other countries. However,
as a result of an appeal by the United Kingdom and United States
delegations, these were recorded only in the minutes of the
technical commissions appointed by the Conference and were not
published with the Final Act. As Australia was not voting on the
motions for the adoption by the Conference of the documents drawn
up by the commissions, I did not oppose this procedure.

11. While participation in these proposals seems to me to be to
Australia's advantage, from a more general point of view they
contain certain defects. For this and other reasons, there is much
opposition to them, and particularly to the fund, in the United
States. It is far from certain that Congress will accept them.

There was also strong opposition to the earlier joint statement on
the fund in the United Kingdom. The modifications made to the
joint statement at Bretton Woods should meet some of the
criticisms, but by no means all.

12. If Congress accepts the proposals, I should judge from the
attitude of the representatives of various countries at Bretton
Woods that, despite some reservations, most countries would be
prepared to accept them. It is, however, difficult to know, in the
case of occupied countries, to what extent their representatives
are likely to reflect the opinions of the countries when they are
set free.

B. PROCEDURE

13. The formal work of the Conference was divided between three
commissions. Commission I reviewed the proposed monetary fund and
Commission II the proposed bank for reconstruction and
development. To Commission III was given the task of considering
other means of international financial co-operation brought
forward by various delegations, such as proposals for the purchase
of silver as well as gold by the fund, for the liquidation of the
Bank for international Settlements, for the disposition and
transfer of enemy assets, and for reducing obstacles to
international trade, and bringing about the orderly marketing of
staple commodities. It was before this Commission III that the
Australian delegation sought, unsuccessfully against United States
opposition, to have a resolution adopted by the Conference urging
member countries to accept an agreement for the maintenance of
high levels of employment.

14. The reports of the commissions were finally submitted to a
plenary session of the Conference for adoption.

15. It was at first intended that the Conference at Bretton Woods,
following the procedure of the United Nations Conference on Food
and Agriculture at Hot Springs, should adopt resolutions
recommending to Governments the acceptance of the plans drawn up
by the Conference. It was also proposed that the Final Act, a
document containing a brief record of the proceedings together
with the plans, recommendations and any reservations, should be
signed by the various delegations. As at Hot Springs, signature
was to be no more than a certification to the accuracy of the
Final Act as a record of the proceedings.

16. In accordance with my instructions [7], I urged on the United
States and the United Kingdom delegations that the Conference
should make no recommendations and there should be no signature of
the Final Act.

17. I was told by the United States delegation that the Conference
could not dispense with formal signature involving merely a
certification to the accuracy of the record.

18. However, delegates of some other countries were also unwilling
to take part in proceedings under which they might appear to be
making recommendations to their Governments. Accordingly, the
resolution which the plenary conference was to be asked to accept
was reworded to read:

'Resolved: That the Conference accepts the Report of Commission I,
adopts the Articles of Agreement of the International Monetary
Fund, and directs that they be incorporated in the Final Act of
the Conference.' This seemed to me sufficiently neutral to meet
our objections, particularly as the plans for a fund and a bank
were to be drawn up by majority decisions without committing
delegations to approval of the texts either in whole or in part.

19. Accordingly, in my cable No. 26 of 16th July, 1944 [8], I
recommended on purely technical grounds that I should be
authorised to sign the Final Act of both the fund and the bank,
and in my cable No. 35 of 19th July, 1944 [9], quoted the above
resolution and gave full details of the proposed procedure.

20. On receiving the Government's reply [10] that in their view
the re-drafted resolution was not neutral, together with
instructions not to vote on the resolution or to sign the Final
Act, I conveyed this decision to the United States and the United
Kingdom delegations with whom I had been negotiating.

21. The United States and the United Kingdom delegations felt that
the Australian Government's attitude must have been due to some
misunderstanding. Since I stated I was satisfied my cables had
fully explained the procedure, they decided to take the matter
into their own hands, and cables of explanation were sent from the
State Department [11] and the Dominions Office. [12]

22. In accordance with my instructions, I stated at the plenary
session that the Australian delegation was not voting on the
resolutions adopting the reports of Commissions I and II on the
fund and the bank, and asked that this be recorded in the minutes.

This statement would without doubt have been taken by the
Conference to mean that the Australian Government had made a
policy decision against the acceptance of the proposals. I
therefore thought it necessary to explain that, while we had no
authority to vote, this must not be taken to imply that the
Australian Government had made any decision for or against the
fund or the bank. I added that, although the Australian delegation
was not voting on the proposals, the proceedings would be
submitted to the Government for consideration and would in due
course be presented by the Government to Parliament.

23. There was considerable antagonism to this attitude of the
Australian delegation at the Conference, which, as far as I could
discover, was shared by all delegations, including New Zealand. In
private discussions, the view was freely expressed that, if the
Australian delegation was not prepared to vote on the resolution
or sign the Final
Act, it should not have taken part in the Conference.

24. This unfavourable atmosphere was slightly improved when, in
accordance with instructions, I attached my signature to the Final
Act, followed by the words 'for purposes of certification'.

Nevertheless, the other delegations remained unsympathetic and
critical of the Australian attitude.

25. New Zealand and one South American Republic also had some fear
that their signatures might be misunderstood. New Zealand met the
position by sending a private letter to the President, pointing
out that their signature was not to be taken to imply approval of
the plans. The South American Republic had a note attached to
their signature to the effect that their signature did not imply
that they would recommend to their Government approval of the
agreements. In neither case was any reference made to their
attitude in open conference, and both delegations avoided any
publicity on the point.

C. INTERNATIONAL MONETARY FUND

[matter omitted]

36. In response to our representations at the Conference that the
Australian quota was too small, it was twice raised from an
original figure of A47 million. Although relatively favourable,
it will not by itself be adequate to meet our post-war needs in
view of the large fluctuations in our balance of payments. The
waiver provision was specially inserted in an attempt to meet the
needs of Australia and countries subject to similar conditions.

However, the safeguard it provides is an uncertain one, and we
should aim at supplementing our drawing rights by building up gold
or dollar balances or by having some of our blocked sterling set
free to supplement our working balances. While by themselves
inadequate, Australia's drawing rights would be a useful addition
to our international liquidity.

[matter omitted]

Effect of the Fund on a policy of full employment
62. In deciding whether to accept the Fund, the Australian
Government will no doubt wish to consider what effect it might
have on a local policy of full employment. Were Australia
maintaining a high level of employment by the expenditure of
public money at a time when employment abroad had fallen, prices
and wages in Australia might be steady or rising at a time when
they were failing elsewhere. This together with a fall in our
export income, which we must expect to accompany any fall in
employment in our principal markets, would place a strain on our
balance of payments. We could not correct this by exchange
control, but the Fund would not prevent us from curtailing imports
by means of import restrictions. Nevertheless, import restrictions
might not be the best way of defending our balance of payments,
and some depreciation of the Australian pound might be needed.

Provided this would not reduce the value of our currency by more
than 10 per cent. below the initial par value, we could make the
adjustment without hindrance from the Fund. If a greater
depreciation were needed, we should need to secure the approval of
the Fund and could argue that a fundamental disequilibrium had
developed which needed correction. If the Fund did not agree, we
could still depreciate our currency by the amount required, though
we would then be denied use of the Fund's resources and, after a
reasonable period, could be expelled from the Fund. But this is
unlikely. Provided we built up international reserves outside the
Fund, for use in the event of the Fund denying us the use of our
drawing rights, our freedom to follow a policy of maintaining a
high level of employment in Australia should, therefore, not be
hampered by membership of the Fund.

Defects of the Fund
63. From an Australian point of view, the Fund would be better if
our quotas and drawing rights were larger. The degree of
flexibility proposed for exchange rates is as favourable as could
reasonably be expected. The fundamental disadvantage that it is
not closely associated with commitments on employment policy is
discussed in a later section.

64. Some critics have argued that there is at present much
uncertainty about the kind of monetary policy that will be needed
in a world where some countries will have national policies of
full employment and others will not. We should not, these critics
claim, be trying to lay down a new set of monetary rules until we
are clearer about the international monetary policy that will be
best adapted to these national policies. For example, the Fund
would ban exchange control, but it is not at all certain that
exchange control may not be the best and most flexible
international instrument for maintaining full employment in
individual countries.

65. This may possibly be a defect in the Fund from Australia's
point of view. It seems probable, however, that we could use
import restrictions to give us much the same results as could be
secured by exchange control, while exchange control applied by
other countries, and particularly by the United Kingdom, might do
us much harm.

66. The position of gold in the Fund might be misunderstood. The
United States, as the world's largest holder, and Russia and South
Africa, as large producers, could not be expected to agree to any
proposals which would damage the international market for gold.

The United Kingdom is also anxious to retain a market for gold
because of its importance to the sterling area and France because
of her large holdings. In the face of this support, it was
necessary to make some provision for gold in the Fund. There is no
intention, however, to tie the value of member currencies
permanently to gold, and provision is made, if necessary, for a
general adjustment of currency values in relation to gold. The
Fund does not represent a return to the gold standard. If the
alternative to the gold standard is a managed currency, then the
Fund must be regarded at least as a half-way house towards a
managed international currency.

67. The fact that the Fund will sometimes hold large quantities of
Australian currency need not occasion any misgivings. The
operations of the Fund will be transacted through an account with
the Commonwealth Bank, and the Fund may use this Australian
currency to discharge Australian liabilities only on the
initiative of the Treasury or Commonwealth Bank, as fiscal agent
of the Australian Government.

Conclusion
68. My conclusion is that it would, on balance, be to Australia's
advantage to participate in the Fund as now drafted, and I
recommend its acceptance to the Government.

[matter omitted]

D. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT [13]

[matter omitted]

Benefits
78. Australia is not likely to be a borrower or large lender.

Since the resources and facilities of the Bank are to be used
exclusively for the benefit of members, the operations of the Bank
may result in Australia participating in the sale of capital
equipment for the reconstruction or development of overseas
countries. Borrowers, however, are not to be 'tied' to any
particular member in spending the proceeds of loans, and the
benefits of the Bank to Australia will lie mainly in the effect
such an organisation would have on the market for our exports,
since any increase in international spending will indirectly
increase the demand for Australian exports. The proposal arose in
the need for loans, first, to facilitate reconstruction in war-
damaged countries in the immediate future and, secondly, to aid
the development of underdeveloped countries in the long-term
future. Reconstruction loans could not be provided by the Monetary
Fund without straining its resources to breaking point. The
development of backward countries is urgent, not only to promote
world trade but to ensure the necessary conditions for a lasting
peace in the Pacific. From our point of view, successful
reconstruction of the devastated countries means the very
necessary restoration of our old export markets. The development
loans mean the expansion of new markets and the prospect of
exports of capital equipment to the Far East and Netherlands East
Indies.

Obligations
79. It is hoped that the commission of 1 to 1 1/2 per cent. to be
paid into a special reserve will meet any losses incurred by the
Bank. An important function of the Bank would be to subject
requests for loans to an expert examination, and all loans must be
guaranteed by the Government of the country receiving them.

Nevertheless, loans will be made to countries which are not first
class risks, and there will remain a possibility of loss.

Australia's contingent liability to meet these losses is A50
million. Any loss, however, would be discharged over a
considerable period of years and need not be embarrassing.

Australia would have to provide annually only her proportionate
share of the foreign currencies needed to amortize the loss and
pay interest and other charges.

80. Apart from any loss of this kind, however, Australia's
contribution would be the gold subscription of A1.25 million and
the currency subscription of A11.25 million. This subscription is
not a gift but an investment which may in the end give a moderate
return on capital. Moreover, no loan need be made out of
Australia's subscription if her balance of payments is not
favourable.

Conclusion
81. Australia stands to gain more from the indirect effects of the
successful operation of the Bank upon her trade than she is likely
to lose through its failure. I therefore recommend acceptance of
the Bank to the Government.

E. EMPLOYMENT AGREEMENT

82. Commission III was formed to consider other measures of
international co-operation brought forward by the various
delegations. Owing to shortage of time, it was impossible for the
Conference to give sufficient attention to the problems resulting
from wide fluctuations in the value of silver which were troubling
some South American Republics. The Conference therefore
recommended that these problems merited further study. The
Conference also passed a resolution recommending the liquidation
of the Bank for International Settlements at the earliest possible
moment and one recommending the action that should be taken by
member countries to deal with the disposition or transfer of
assets belonging to the Government or individuals or institutions
of enemy or occupied countries.

83. A number of countries argued that the International Monetary
Fund could not function successfully unless it were accompanied by
efforts to reduce tariffs and other barriers to trade, and a
resolution was carried recommending to the participating
Governments that they reach agreement as soon as possible on ways
and means whereby they may best-
(1) reduce obstacles to international trade and in other ways
promote mutually advantageous international commercial relations;

(2) bring about orderly marketing at fair prices of staple
commodities with due regard for the interests of producer and
consumer alike;

(3) deal with special problems of international concern which will
arise from cessation of production for war purposes; and
(4) create by co-operative effort the harmonising of the national
policies of member States designed to promote and maintain high
levels of employment and progressively rising standards of living.

84. On this last recommendation, we stated that we could not
support a resolution which did not advocate a specific agreement
between countries to maintain high levels of employment, and we
urged the Conference to accept the following resolution-

'Whereas the raising of standards of living throughout the world
must be the primary aim of economic policy and the most essential
conditions for this and for the achievement of the objectives set
out in Article I of the International Monetary Fund are the
promotion and maintenance of high levels of employment; and
Whereas the operations of the International Monetary Fund and
other forms of international economic co-operation will have the
best prospects of success if member countries by domestic measures
maintain high levels of employment and consumption and by so doing
enable the accumulation of persistent credit (and debit) balances
on international account to be avoided;

This Conference resolves that Governments which are to be invited
to accept an International Monetary Agreement should be invited to
accept concurrently an international agreement in which the
signatories will pledge themselves to their. own people and, to
one another to maintain high levels of employment in their
respective countries, and to exchange information on measures
necessary to prevent the growth of unemployment and its spread to
other countries.'

85. Our statement to the Commission urging acceptance of this
resolution is given in Appendix C. [14]

86. The United States opposed the resolution on the grounds that-
(a) the extent to which domestic policy can properly be made the
subject of international concern and agreement requires further
more careful study than can be given in a few days available at
this Conference;

(b) the subject could better be treated as part of any subsequent
Article VII conversations.

87. No reference was made at the Conference to the United States
political difficulties, but I believe these to be dominant in
their opposition to our resolution at the Conference.

88. In the discussions and debates preceding the taking of the
final vote in the Commission, we had the full support of the
United Kingdom and New Zealand. France, Poland and a few smaller
countries also voted for our resolution in the Commission. Several
South American Republics supported us in the early stages but were
more interested in the special bargains they were making with the
United States and in gaining some acknowledgement of the need to
reduce tariffs.

89. In the discussions, there was fairly general opposition to the
specific proposal that the countries represented at the Conference
should be invited to sign an agreement concurrently with the
monetary agreement. The United States and Canadian delegations in
particular objected that, while they recognised the relationship
between employment and monetary policy, any resolution implying
that acceptance of the Monetary Fund should be contingent on an
employment agreement went beyond the terms of reference of the
Conference.

90. Against this opposition, we were unable to gain sufficient
support for our resolution to have it carried, particularly since
Russia, China and India are interested in increasing production
rather than in maintaining employment. Nevertheless, I believe
that after the educational work Australian representatives have
done at the Hot Springs Conference, in the London discussions, at
Philadelphia and at Bretton Woods, there are now good prospects of
securing widespread support for an employment agreement as part of
a programme of international economic co-operation.

91. Because of domestic political difficulties, the United States
may continue to oppose it, but the agreement would obtain
influential support from sections of the administration and from
an important part of the United States public. Whether the
agreement is eventually accepted or not, it is, I believe,
important for us to state our general attitude towards
international arrangements. Our general policy on international
arrangements is not yet fully appreciated abroad, and, in the
absence of a general framework by reference to which our stand on
specific proposals can be judged, the attitude of Australian
delegates at international conferences is apt to be misunderstood
and to create an unfavourable, impression.

Conclusion
92. I believe it is urgently necessary for Australia to set out a
positive and constructive policy for international arrangements
based upon the prior acceptance by countries of an obligation to
maintain a high level of employment. I therefore recommend that
the Government state its attitude and endeavour to organise a
conference at which countries will be asked to accept an
employment agreement.

APPENDIX D

GOVERNMENT INSTRUCTIONS TO AUSTRALIAN DELEGATION AND SUMMARY OF
ACTION TAKEN BY DELEGATION AT BRETTON WOODS

Instruction A
'To press strongly for substantially increased accommodation both
in respect of the quota and the annual drawing rights.'

The Australian delegation was successful in obtaining an increase
in the Australian quota from an original figure of A47 million to
A62.5 million. The 25 per cent. limit on drawing rights has not
been changed, but a waiver provision has been inserted to meet the
needs of countries subject like Australia to conditions of a
periodic and exceptional nature.

Instruction B(a)
'To seek the inclusion in Clause IV of a provision that the Fund
shall not reject a requested change in the exchange rate which is
designed to meet a serious and persistent deficit in the balance
of payments on current account accompanied by a substantially
adverse change in the terms of trade.'

Under the original statement of principles, an alteration of a
member's exchange rate (beyond the permissible 10 per cent.) could
not be made without the consent of the Fund. Under the Monetary
Fund as now drafted [15], a member's exchange rate can be altered
without the consent of the Fund, but a member's drawing rights
from the Fund would cease. The Fund would still have the right to
expel a member in the case of continued disagreement, though
expulsion is unlikely. As modified, the Fund meets Australia's
needs reasonably well and would afford us an opportunity to
justify any unilateral action which might be taken.

Notwithstanding this modification, the delegation continued to
urge, but without success, that the articles should contain a
provision of the kind given in the Government instructions. In
view of the changes in the text, it was hardly to be expected that
our proposal would be accepted.

Instruction B(b)
'To seek the alteration of the "purposes and policies of the Fund"

to give more emphasis to employment and less emphasis to exchange
stability and to strengthen the safeguards against the Fund
interfering with the domestic policies of a country.'

The delegation pressed strongly for modifications of the purposes
and policies of the Fund. Some modifications were secured, and
while one of the purposes is still to promote exchange stability,
the significance of this is greatly modified by the subsequent
provisions of the Fund providing for changes in par values of
members' currencies. The emphasis on exchange stability has, as a
result, been greatly weakened. Nevertheless, the purposes of the
Fund still place too much emphasis on exchange stability and too
little on the maintenance of high levels of employment to be
altogether satisfactory to Australia. (See paragraphs 42 to 47 of
report.) As suggested in paragraph 44, however, by building up
substantial reserves outside the Fund, we could protect our
freedom of action.

The Conference also accepted the insertion of 'in accordance with
the above' before the words 'to shorten the duration and lessen
the degree of disequilibrium in the international balance of
payments of members'. This provides an additional safeguard
against the Fund interfering with the domestic policy of a country
in the interests of stability in the balance of payments.

Instruction C
'To ask that it should be made clear that the right of withdrawal
from the Fund should not be prejudiced by making membership of the
Fund a condition of membership of any other international body.'

The delegation pressed for modifications to the withdrawal clause
but without success, and it now seems clear that the right of
withdrawal from the Fund may be prejudiced by membership of the
Fund being made a condition of membership of other international
bodies. However, the Fund has been made so much more satisfactory
from the Australian point of view that it now seems very unlikely
that we should ever need to withdraw.

Instruction D
'To urge that an employment agreement should be concluded before a
final decision is sought on whether countries will become members
of the Fund.'

The delegation submitted to Commission III a resolution under
which Governments were to be invited to accept concurrently with
the International Monetary Agreement an international agreement in
which the signatories would pledge themselves to their own people
and to one another to maintain high levels of employment in their
respective countries and to exchange information on measures
necessary to prevent the growth of unemployment and its spread to
other countries. Appendix C gives the statement to the Commission
which urged the acceptance of this resolution. This resolution was
opposed, particularly by the United States delegation, because it
went beyond the terms of reference of the Conference, and could
better be treated as part of any subsequent Article VII
conference. It was also objected that the matter required more
careful study than could be given in the few days available at the
Conference. The resolution, in consequence, was not adopted.

Instruction E
'To report any proposals made concerning the time of commencement
of benefits and obligations before a decision regarding the
Australian attitude is made.'

The articles provide that the Agreement shall come into force when
Governments having 65 per cent. of the total quotas have accepted
it. The delegation pressed for an increase in this percentage to
70 but received no support. The quotas of the United States, the
United Kingdom, Russia and China, aggregate about 66 per cent. of
the total, so that the Fund could come into force on acceptance by
those countries.

The draft articles of agreement leave to the discretion of the
Fund the determination of the date when the Fund's resources will
be available to members. The implication is that after
establishment, the Fund will commence exchange operations as soon
as the necessary mechanical arrangements have been made but not
before major hostilities in Europe have ceased. We understand it
is hoped that quotas will be available from January, 1946.

Instruction
'That Australia is not to be committed to adherence to any
resolutions of the Conference even on an official level.'

After receipt of subsequent instructions from the Government, the
Final Act was signed 'for purposes of certification'. The matter
is referred to in paragraphs 15 to 25 of the report.