The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo. MONDAY, AUGUST 18,1930. AUSTRALIA'S DILEMMA.

Auckland Star, Volume LXI, Issue 194, 18 August 1930, Page 6

The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo.

MONDAY, AUGUST 18,1930. AUSTRALIA'S DILEMMA.

For the cause that lacks assistance, For the teraig that needs resi&tanM, For the future in the distance, And the good that we can do.

The visit of Sir Otto Niemeyer to Australia is causing an amount of interest and excitement that can only be explained by the extremely critical and precarious position of Commonwealth finance at the present time. When Mr. Scullin took office he told the people of Australia, with commendable frankness and courage, that vigorous steps must be taken to reduce expenditure, to balance the State and Federal budgets, and to cut down borrowing. But matters had drifted so far beyond control that it seemed necessary to draft a definite programme in co-operation with representatives of British finance, to meet the situation, and Sir 0. Niemeyer has been deputed by the Bank of England to assist the Australian Loan Council in this difficult and delicate task.

When Sir O. Niemeyer met the Loan Council for the first time, a fortnight ago, he appears to have impressed upon the delegates the urgent necessity for putting the State accounts on a sound business footing, as a preliminary step toward complete financial readjustment. Strenuous efforts are now being made in that direction, and it is assumed that at the conference which is to be held at Melbourne this week, Sir 0. Niemeyer will follow up his admonitions and warnings with practical proposals. These may quite conceivably take the line of that "mobilisation of credit" by which the Australian banks have already offered to facilitate the raising of loans on the London market and to guarantee Australian issues. For though borrowing must be rigidly restricted in future, loans will need to be raised from time to time, and this is impossible while, as the "Sydney Morning Herald" admits, Australia is in grave danger of default.

What are the causes that have combined to produce this crisis ? A few days ago Sir Mark Sheldon told the shareholders of the Australian Bank of Commerce that the people of Australia have built up an expensive political and social system which they have been able to maintain only through the high prices secured for their primary products and by lavish expenditure of borrowed money. As the "Bulletin" puts it, more bluntly and forcibly, Australia was living beyond its means to 1 the extent of about £40,000,000 a year. The surplus of imported goods over exports was sold, and though the goods were not yet paid for the money was circulated and "created an artificial prosperity." Salaries, wages and rents were high, and the whole community was able to indulge in extravagances which otherwise would have been quite beyond its reach. Now that a halt must be called, in face of rising interest and falling prices, Australia must cut down expenditure; reduce imports, refrain from borrowing, and take the advice that Sir O. Niemeyer offers, the penalty of failure being far worse depression and far graver financial and industrial distress than all the proposed remedies, however drastic, will entail.