Bay of Plenty Times. FRIDAY, AUGUST 25th, 1933. AUSTRALIA’S RECOVERY.

Bay of Plenty Times, Volume LX, Issue 11201, 25 August 1933, Page 2

Bay of Plenty Times. FRIDAY, AUGUST 25th, 1933. AUSTRALIA’S RECOVERY.

According to Professor Ernest Scott of Melbourne University, Australia will probably be the first nation to emerge from the slump. This must be taken with the proverbial grain of salt. The Commonwealth Government has been feeding the people on doles, and particularly the farming community. ■ The Patterson Plan is a subsidy, or a dole, to the dairy farmers, and the reaction has been adverse. Owing to the high price of butter locally to ‘provide the subsidy the consumption has contracted and with a good season, Australia has been dumping its unwieldy surplus on the London market. The subsidy had also the effect of encouraging exports. Thus the growth of Australia’s trade in dairy produce is to some extent artificial. Australia also indulged in a pegged high excljange on London. The Australian rate was at one time 30 per pent., and is now 25 per cent., the same as New Zealand. The effects of the high exchange are well known. Its first effect has been to check imports, for it is equivalent to a duty on all goods, whether they were previously free or not, and at the same time the exporters have received more for their produce locally, but in inflated currency. We fancy that both Australia and New Zealand will before very long simultaneously reduce the exchange rate. The high exchange added to a high protection, tariff, naturally made for a big volume of exports, and a small value of imports, and thus the trade balance, Or the

excess of exports over imports, is large. The sariie result from the same causes are discernible in New Zealand. Australia’s trade returns to the end of June showed a favourable balance of £31,21(5,000, practically all of which was required for debt service of the Commonwealth and the municipalities. In addition to ordinary exports, Australia has exported to London, £11,260,000 in gold, representing the reserve against the note issue. This has been con-

verted into sterling securities, and does not come into the trade account. At a recent' date the Com-, monwealth Rank had accumulated in London about £12,000,000.

Australia has paid her foreign commitments just as New Zealand has, but in working up to the point of probably being the first nation to emerge from the depression, Australia has accumulated a floating debt of £93,260,000. She has been borrowing from the banks and from the public, to keep men at work, but that huge sum has to be repaid some day. In Australia and New Zealand repayment of debt is not practical politics. Of course in both countries there are sinking funds, but the neiv loans are much larger than the aggregate of ; the sinking funds so that debt is always expanding. By applying artificial methods Australia, and New Zealand also, show 1 some improvement. In New Zealand there is more money about owing to, the inflated exchange, some industries are busy supplying local requirements because inporters cannot supply the same goods owing to the high exchange, and the position is much the same in Australia, and it is absurd to claim that Australia Is emerging from the slump. Both Australia and New Zealand are for the time being wedded to planned economy as suggested by some economists. Planned, economy may appear satisfactory for a time, but the end will be chaos. The only country that is showing any real improvement is Britain. A great many countries are in the sterling zone, and the inter-trade of those countries is large enough to enable them to carry on despite the fact that they are off the gold standard. Britain is not relying upon any planned economy, but is leaving, recovery to the business men of the country. Each one is studying his own market; each one has endeavoured to reduce costs, and Britain is now recovering her export trade. The United States is experimenting with the impossible, and in a measure is following the examples of Australia and New Zealand, but on a much greater scale. Britain is emerging from the slump very slowly, and will probably experience a set back when American experiments fail. There will be no real recovery in any country until war debts are revised, tariffs are lowered and the gold standard restored.