FINANCE OF 1939.

Auckland Star, Volume LXX, Issue 21, 26 January 1939, Page 8

FINANCE OF 1939.

AUSTRALIAN PROBLEMS. LOW EXPORT PRICES. ENLARGED DEFENCE SCHEME. I In a recent issue of the "Sydney Mornirvg Herald." Profeaeor D. B. Copland deala with the financial .prospecte of the Commioinvealth. Three forces, suites Professor Copklml. will opeiate in 1931) to raise special econoink inoWenm in Australia. Firat, there is the <-<>ntinuance of low export prices ami a had season in some areas, notablyi :n Victoria. Se-ondly. t'lie enlarged defence proinline, ii-niiiig at a time when (Jovern- , mi nt budgets ale experiencing increases in I normal < xpenditme, and less buov;int revenue creates new tinanc-ial burdens. ri«[ieetally for the (.'oininonwealth Goveninicn;. I iiiidly. there is the task of reorganising the economic hie of Australia to sii engtihen our <let'ences and maintain industl y in the event of a blcK-kade, in w in.le or jiart. j I his is alor in idia ble array of I Wilt oil examination they will lie found to I be well within tii<- <apacit.\- of Australian | (Jovermiieiits and induntrieM il" handled I resolutely . (he first is one with w hwfc A ust rali.i is familiar. 'Phe [ranking s\ stem and (;<>\ erniiient finalK-es are in better shape to meet it than for some yeni s. Jhe C orminon wealth Biink has nlteiidy made its <|nisititin clear in mibsci ibmg L'OXXX).OOO to t'he conversion loan in December. Jt« policy is designed to strengthen the liquidity of the trading banks, so that no credit contraction need take place bt-cau.-'e the ailverse balance of payments is K-iluting the cash reserves . and deposits of the l»inks. There are indiI ciit ions in the fall in imports that the iialance of pay will now be less adverse than was at first si(pj>ose«l. For the three mouths. Septeiuiber t<, November, of 1 !Ki3, inipiiit.s iiuiounted to £'24.9 m stilling. <*omI>.ue<l with tMiln sterling for the same nioiitlis oi ll»37. It the rate of reduction were maintained for the rest of the year, I'.KB-:x iinporta would lie about I'9."im sterling. compaifsl with £ 112 m sterh ng in 19.17-.IS. Hecauee export pi ices are still very low the adverse balance of piivments may well be £ lOm sterling this year, imt this is drain that we can afford. Our London tumls on .Inly 1 were about I'6'J.iiu sterling, and there is a sufficient reserve to two years as difficult aa the present one. Government Finance. The action of the Commonwealth jn expanding the credit base should enable sufficient credit to Ih* available for normal industrial development for sustaining j.rodiicers tiiroujfh ii bad year. Jt will also be an important influence in keeping money c-heap, and in a«sisting Governments to finance defence and public works, i here is still the normal works programme of £ 14,000.(KX> for the Statea to lie financed 1 jet ore .Tune 3, a n<l perhaps £'2.000.000 for Suite deficits. Ihe works programme is not likely to Ik- reduced next financial year, so that up to the end of Decem-ber tlhe total t uiida by State Governments may Ik? £20.000.000, including half the works programme for 1939-40. In ii<ldition. the Commonwealth will face a nnich more difficult budgetary position, because Customs' reveuue will tall, and there will be heavy iidditional oberges for defence, pensions and insurance.. "In. these circ-imistances, the Comm on weaitti will doubtless transfer some of its works from revenue to loan, thus adding to the funds required for the money market.- Additional taxation will also be necessary to meet tlie rising annua 1 cost of defence and pensions and the tall in revenue. Industrial Organisation. It is not ii pleasant . proapeet, but no democracy that faces its .tasks xeaoluteijin 1939 can escape new obligations. Eren with the new defence ipiograllime, Australia's annual expenditure on defence will be only about £3 per bead, compared wi£i £7. per head in Great Britain, 111 ere ait many who think it ia nOt The problem, however, is not priniariTy one of finance, but of organising the country's economic life and training its citizens i'or national defence. The totalitarian Statea have gone a long way in economic organisation with the object of increasing their military strength. We need' not copy their methods, but it is well to remember that they have showp how great a proportion of men. and resources can l>e devoted txk. defence, and how closely- industrial organ* iaation is linked w'th defence. Australia is only beginning to learn this lesson. We are wpending about £35,000,000 -per anmmt' at ..present on public works of the., Commonwealth and State Governments and semi-Governmental bodies. With careful co-ordination, it would be possible to divert our energies from some of these works for the time being, to use not only the funds Ijnit also the men and resources for urgent defence works. This is a task that the Loan Council must take up afresh this year. Industrial Development.

Again, is tihc matter of private industrial development those industries required for defence, such as aircraft, munitions, supply of necessary goods like machine tools, chemicals, and fuels should be given preference to the development of industries catering for less urgent needs. This, again,- is a matter of organisation, of directing resources into the appropriate channels. Take also the question of transport. In the event of a partial blockade internal transport would be more important than in ordinary times. Are fhe present facilities adequate? What is required to make them serve the purpose in an emergency? We should be thinking lees of finance and more of the appropriate degree of reorganisation of industry, lx>th public and private, required for making our national defences impregnable. Except for some necessary material* that we must purchase abroad, the problem is one for Australians working in Australia with Australian materials. But to get this woric done well and quickly, a plan of vigorous development for defence is required. Will we dedicate 1939 to this task? Upon the answer to this question, and not upon considerations of cost in terms of money, will depend the rapidity with w'hich we are able to build up efficient defences.