The Press MONDAY, SEPTEMBER 29, 1941. The Australian Budget

Press, Volume LXXVII, Issue 23446, 29 September 1941, Page 4

The Press MONDAY, SEPTEMBER 29, 1941. The Australian Budget

It lias been known for at least a month that Mr Faddcn’s Budget would depart from orthodox financial methods and would be an attempt to steal the thunder of the Labour Opposition. But the Australian public can scarcely have been prepared for a Budget of the magnitude and the boldness which Mr Faddcn introduced in the Commonwealth House of Representatives on Thursday. Commonwealth expenditure, which in the last pre-war year was about £86,000,000, is now at £322,000,000, of which £217,000,000 is for war purposes. In order to meet this huge sum and to counter inflationary trends, a combination of income tax and compulsory saving is being levied on all incomes greater than £IOO (the previous exemption was £200), holders of tax-free stock are being required to pay 20 per cent, of their interest receipts into loans, companies are being taxed 6d in the pound and will have to pay 20 per cent, of undistributed profits into loans, and trading banks are required to deposit all surplus investment funds with the Commonwealth Bank. In the course of his statement Mr Fadden gave an estimate of the total amount of Commonwealth and State taxation and compulsory loans payable by a man with a dependent wife on various grades of income. A comparison of Australian and New Zealand taxation on this basis gives the following approximate result;— Gross Income. Australia. New Zealand. £ £ £ 200 .. ..11 20 300 .. ..33 37 400 .. .. 55 62 500 .. 80 89 600 .. .. HO H7 In New Zealand, therefore, taxation is still more severe, particularly on low incomes, than in Australia; but the suddenness of the increases in Australia is likely to make them for the moment a very heavy burden. It is also relevant to point out that a higher percentage of public revenue and national income is being devoted to war purposes in Australia than in New Zealand. So precarious is the position of Mr Fadden’s Government that his Budget is at present being discussed mainly in its political context. Mr Fadden has, it is clear, put the Labour Opposition in a difficult predicament. Presumably Labour had hoped to be able to attack the Budget either because it was inflationary or because it was too conservative, or on both these grounds. Mr Fadden can, however, claim that he has gone almost to the limits of political practicability in his effort to avoid inflationary expedients and that he has produced the most daringly original financial programme in the history of the British Commonwealth. In its search for a point of attack Labour is thus thrown back on the contention that the burdens imposed on wage earners are too heavy and those imposed on the rich too light. The expediency, let alone the morality, of arguing in this way is questionable. If the Opposition beats the Government on the Budget issue, it will have to take office and frame a new Budget; and the Labour leaders know well enough that, if the inflationary trends now perceptible in Australia are to be checked, there is no escape from taxing wage-earners heavily. It would, however, be unjust to Mr Fadden and his Government to regard their Budget simply as a brilliant political manoeuvre. It is that incidentally; but it is also the boldest attempt yet made outside the totalitarian countries to solve the financial problems created by the need to divert at short notice a large part of the nation’s labour and capital to the production of war commodities. Three doubts suggest themselves in connexion with Mr Fadden’s proposals. The first is whether the Australian public is capable of swallowing such a large and sudden dose of political realism. The second is whether a combination of compulsory loans and borrowing in the open market is likely to succeed. The New Zealand Government’s experiment in compulsion was not encouraging on this point. The third is whether the repayment of the compulsory loans after the war can be effected without serious inflationary consequences. The Keynes scheme of compulsory saving, on which Mr Fadden’s scheme is based, makes provision against this difficulty. But the Keynes scheme involves long-range financial planning, which is something normally beyond the capacity of democratic governments.