The Press MONDAY, OCTOBER 16, 1950. Australian Budget

Press, Volume LXXXVI, Issue 26244, 16 October 1950, Page 6

The Press MONDAY, OCTOBER 16, 1950. Australian Budget

The Australian Treasurer had a most unenviable task when framing his Budget. He would be conscious of election pledges to “ put value “ into the Australian pound ”, to bring down the cost of living, and to ease taxation. He would see ' that in recent months inflation had j eaten further into the value of the pound, that the cost of living had risen, and that new commitments added to old made it necessary to raise more instead of less revenue. As leader of the Country Party, nobody would know better than Mr Fadden about political complications inhibiting his movements as Federal Treasurer. Problems associated A’ith the huge and sudden increase in the wool cheque would cause him considerable anxiety. Mr Fadden’s Budget is eloquent of his difficulties. His Estimated expenditure (including payments to States) is £783,300,000, compared with an actual expenditure of £592,000,000 in 1949-50. Extraordinary conditions account for a big part of the increase. Defence expenditure is £29,000,000 more than last year; £50.000,000 is allocated to strategic stores and equipment; extra payments to war pensioners will cost nearly £4,000,000; and £20,000,000 is set aside to subsidise woollen goods produced in Australia for home consumption. Mr Fadden proposes to cover all his expenditure by revenue, leaving existing taxation of individuals and companies virtually unchanged. There will be small income tax concessions for the lower income groups. He will get £7,000,000 more from sales tax on luxury articles—a fiscal measure having the main object of discouraging demand for non-essen-tial goods which cause “inordin“ate competition for materials in “ short supply and skilled man- “ power ”, Increased charges for post office services will produce £4,500,000. But it is the biggest lump of extra revenue that Mr Fadden budgets for which is the most interesting. The Government proposes to deal with the calculated inflationary effects of the vastly increased wool cheque by taking a proportion of the proceeds of wool sales “in anticipation of the income “tax that will ultimately become “payable by the producer”. This device, which appears to mean taking this year a big sum of money which would be paid as income tax next year, will, it is expected, add to Mr Fadden’s revenue £ 103,000,000. The actual sum will depend, of course, upon the level of wool prices throughout the current season. But it will be noted that it is the contribution from the wool levy upon which' Mr Fadden relies to balance his Budget. Without it he would be nearly £ 103,000,000 short. It is obvious that a level of Government expenditure that is supported by a contribution so fortuitous is most precariously sustained. It is true that the wool position has added £20,000,000 to the expenditure side of the Budget for subsidies for woollen goods for home Consumption. The fact remains, however, that anticipated revenue would be far below anticipated expenditure without the help of the wool levy. It is obvious that a more soundlybased economy must be sought in the direction of reducing Government expenditure to the level of the revenue that may be prudently calculated to be available. No line of attack on the inflation that presses so heavily in Australia can be more profitable than a determined effort to curb non-productive Government spending. Mr Fadden’s Budget is an anti-inflationary instrument in that it draws off a huge amount of money in taxation and, importantly, that a big proportion of Government revenue will be spent overseas and not in Australia. But it is difficult to see that the Budget tackles inflation as resolutely as circumstances demand. Of course, no single measure will put value . back into the Australian pound; it is a complex and manysided task. However, the .majority of Australian economists believe that one measure—revaluation of the pound—would substantially alleviate the position. With this consideration in mind, it is not unreasonable to suggest that despite its contribution to a balanced Budget, the wool levy—which may be expected to harden woolgrowers’ objections to revaluation—may prove to be the weakest spot in Mr Fadden’s Budget.