LOAN NEEDS.

Auckland Star, Volume LXX, Issue 139, 15 June 1939, Page 16

LOAN NEEDS.

AUSTRALIAN STATIC

OLD STRUGGLE REVIVED.

MR. STEVENS' "FIRST SHOT."

(From Our Own Correspondent.) SYDNEY, May 8. The struggle between the States and the Commonwealth for more liberal loan accommodation for the former, which was mutually dropped during the Eurojiean crisis and again postponed on the death of Mr. Lyons and the formation of the Menzies Government, will be fought out at the forthcoming meeting of the Loan Council next week. The leader of the States will be the Xew South Wales Premier, Mr. Stevens. He was the first of the Premiers to come out openly in support of a policy based on the belief that because secondary industries have be i so extensively developed in Australia, it is possible with adequate financial accommodation to maintain the iivternal level of industry and business despite the fallen export prices. Mr. Stevens is almost certain to be supported, at least on broad principles, at the Loan Council, by Queensland, Victoria and Tasmania, if no others. The smaller States, however, do not seem able to understand that X.S.W., | because of the huge resources in course of development and awaiting development. requires more financial accommodation than them. The Commonwealth Government is fullv aware of this weak point in the States' front. It also knows well that in the last resort the States, at least as long as they have IT.A.P.l T .A.P. Governments, would not dare to break away from the Loan Council because of the possible effect on their credit jn London. At the Loan Council, therefore, the States will not be able to do much more than try to persuade the Commonwealth, and through it the Commonwealth Bank Board, to their way of thinking, but it is certain that on this occasion some plain words will be used. " Time To March Forward." On Sunday Mr. Stevens took the unusual course of opening the battle with a special article over his own name as Premier in the Sun," which that paper headed up with a big black banner, "Xow is the time to march forward." In this article Mr. Stevens mentioned the fall of export prices which has meant a loss of income this year of I about £28,000,000 compared with 1036 to 1937; the long drought broken only at the end of February, the disastrous bush fires, and the necessity to spend huge sums on the unproductive purposes of defence. Inevitably, he said, there I had been reactions. Employment, retail I sale, bank clearings, real estate transactions, motor registrations, and various other indexes of business prosperity had fallen slightly, and the railways had I been hard hit by the shrinkage in the | income of country people, the revenue being £1,200,000 lower than the' estimate. "How are we to act in such a situation?" Mr. Stevens asked. "According to the old ideas of sound economy we ought to start cutting and compacting all round, reducing wages, putting off employees, curtailing purchases, increasing rather than drawing upon reserves. But why should we do this? It seems I perfectly clear that if you put employees off or reduce their wages there will be fewer passengers on the railways and trams and less paid for all kinds of services. In other words, if you start to contract, you must go on contracting. I would be the last to deny the necessity for wise economy—meaning the elimination of waste, inefficiency and extravagance. But that necessity is always with us; it is just as imperative i at other times as now."

Note of Confidence. Mr. Stevens ended hi* article on a note of hope and confidence. It seemed certain, he said, that there would be very nearly a record wool clip, with wool prices quite likely to rise, a heavy lambing, a big supply of fat stock, a big yield of butter and cheese, and quite possibly a bumper wheat harvest. It was estimated that there would be £350,000,000 of new savings in Britain this year, and when this went into investment it could not fail to react to Australia's advantage. In Australia the heavy engineering trades were working at high pressure and already four new major industries were on the point of starting with an aggregate capital of about £6,000.000.

Instancing the case of the rice growers who were saved by the breaking of the drought at the end of February and will get £50,000 more for their crop this year than last, Mr. Stevens said: "There is more force in that story than in a world of argument; it reveals once again the amazing resiliency of this country of ours. It drives home the fact that for us pessimism is never warranted. It shows how, in a situation like the present one, we have the firmest ground for faith and a bold forward policy."

Bombshell To Mr. Stevens. The reply to this speech was a statement by the Federal Assistant Treasurer (Mr. Spender), that borrowing by semi-Governmental bodies -would be dealt with at the Loan Council. It did not seem rational, he said, that such bodies should be allowed to raise loans in competition with the Governments.

This statement came as a bombshell to Mr. Stevens and his supporters, ior the States, particularly New South Wales have fallen into a habit of offsetting what they consider the parsimony of the Loan Council by allowing these semi-public undertakings to raise large loans, and as far as New South Wales is concerned, it wants the right to borrow at least as much this year for such purposes as last year (£5,927,000) and is going to endeavour to obtain an extra £1,000,000 chiefly for a water and sewerage scheme at Broken Hill, the development of the important industrial district of which Port Kembla is the centre, and urgent railway works. Among these last is a new bridge over the Hawkesbury River. This work is likely to cost about £1,250,000, but is an urgent necessity. Cracks in the piers of the present bridge have weakened it so much that trains have to crawl across, and the Railway Department is finding great difficulty in handling the huge North Coast and inter-iState traffic which the Hawkesbury Bridge carries. "Fight To Last Ditch." Mr. Stevens contented himself in Parliament with the statement that he thought Mr. Spender was probably expressing merely his own views and not those of the Commonwealth Government, but privately he evidently feared that it was not so, for the same night he issued a long statement on the subject in which he said: "New South Wales will fight such a proposal to the last ditch. I do not think that the Financial Agreement (constituting the Loan Council) would have been adopted if there had been an

attempt at the time to bring the eemiautonomous bodies within its purview. In conferences before the formation of the Loan Council it was decided to exclude them because it was recognised that it would be unwise to force them into a rigid and centralised system of financial control. Since then a number of such bodies have been formed and borrowing powers extended to some of them. It is indisputable that this had to be done because of the failure of the Loan Council at timee to take account of the legitimate developmental needs of the States when considering their loan requests."

The activities of these bodies, Mr. Stevens pointed out, had an important bearing on the level of employment and upon business conditions. They were among the largest employers of labour and purchasers of materials in Australia. In Xew South Wales the Metropolitan Water and Sewerage Board, with assets valued at £50,000,000, Sydney County Council £20,000,000, City Council £30,000.000, and Hunter Water Board had an aggregate revenue of £7,500,000.

National Financial Plan. Mr. Stevens concluded: "The Xew South Wales Government will readily support a national financial plan coverinn; all forms of borrowing, but it must take into account the genuine requirements of all authorities concerned with development, as well as with defence. In no circumstances will the Government acquiesce in a policy which would lead to contraction of business and employment. Our stand is especially determined at a time like the present when full employment and a maximum of economic activity are essential to our national purpose."

Since then it has been announced that X.S.W. considers it requires £7,500,000 apart from borrowings by the semi-Gov-ernmental bodies, to finance an urgent programme of public and defence works. This is a great deal more than the amount which the State was allocated last year (£4.200.000). It is estimated that the Commonwealth will require £10.000,000 of loan money for defence purposes in the coming year (1030-40). Loans approved for the current year ending June 30 amounted to £17.500,000 for works and deficits, and £10.000,000 for borrowings by semi-Governmental bodies.' So £37,500,000 will be needed even if borrowings by the States and the semi-Governmental bodies are restricted to last year's figure.

It is obvious that this sum could not be obtained by internal loans, for the last £10,000,000 loan for works and defence was only about half subscribed. The Commonwealth Government is also anxious to keep down the rate of interest and has another grievance against the semi-Governmental bodies because some of them offer better terms than the Commonwealth offers for its own loans. Such is the position which the Loan Council will have to face on June 13.