INFLATION IN AUSTRALIA

Press, Volume LXXXVII, Issue 26514, 31 August 1951, Page 9

INFLATION IN AUSTRALIA

Peak May Soon Be Reached (Special Correspondent N.Z.P.A.) (Rec. 9 p.m.) SIDNEY, August 30. The crest of Australia’s inflation wave may be in sight. Though prices will continue to rise, largely by their own impetus, for some months yet and at least one more sharp increase in the basic wage is forecast, there are unmistakable indications that compensating factors will be operating within a year. These could achieve a balance and even cause a decline in the Australian cost of living index. Economists predict that in November the basic wage will be increased by another 13s a week to the record level of £lO 5s in Sydney. This adjustment will be automatic as a result of increases in the retail prices of butter and more than 100 grocery items, many of which are on the official index which controls the quarterly wage variations. The effect of the adjustment in itself will be inflationary, as Australians have found after the recent adjustment of 13s, which has not yet been absoroed by the nation’s economy. Most State transportation systems are running at a heavy loss because of increased wage bills. Predictions of increased freight and fare charges have already been realised in Victoria, and New South Wales must follow to reduce an estimated deficit of £12,000,900 in the Transport Department. There is nothing reassuring on this side of the ledger, but for the first time in postwar years there is concrete evidence that soon some necessary items will be cheaper.

Effect of Fall in Wool Prices Falling wool prices have already brought small reductions in the retail prices of woollen goods, such as blankets and textiles. In a few months, when this season’s wool has been processed and woven, the reductions should be substantial. At the same time the loss to graziers of some 1200,000,000, as compared with last season’s wool cheque, will have a direct effect on the luxury market. Authorities freely forecast cheaper cotton goods by next April. This will come about because Australian spinners, forced last year by the dollar shortage to buy their cotton from Pakistan and Brazil at 50d per lb, are now purchasing in America again at 39d per lb. This should result in a reduction of 20 per cent, in most cotton lines as soon as goods made from the cheaper cotton come on the market. There are abundant signs that the Federal Government’s policy of restricting luxury industries is already cutting into the output of non-essential items. Reports from many sources indicate that the restriction Of bank credit for importing and trading, combined with shortages of raw materials brought about by defence stockpiling, are affecting industries connected with furs, jewellery, and electrical appliances. Mr Samuel Biber, managing director of a large fur company, says that the Government's restrictive policy, together with increasing price resistance, is forcing hinj to cut imports by a third. . Curb on Credit Buying The demand for jewellery is heavy, but production is limited by shortages of nickel, brass, and copper. Similar shortages are crippling electrical manufacturers. It is regarded as significant that these Industries are feeling the pinch, even before the heavy increases in sales tax, forecast in the coming Budget, have come into force. Anticipating a drastic curtailment of credit buying, Queensland’s biggest used car finance firm has cut off finance from 40 Brisbane dealers. These dealers are left with cars worth £200,000 which they must sell for New South Wales moves have not been so drastic, but the major used car companies now require a deposit of 50 per cent, instead of 33.3 per cent, of the selling price, and stipulate that the remainder must be paid within 12, instead of 18 months. According to co-operative societies and master builders, the Government's credit restrictions are having an unfortunate effect dn home building. Describing the Government’s action as “a back-door method of imposing manpower controls.” Mr W. G. Poo ley, general secretary of the Co-operative Building Societies, claims that societies have had to turn down more than 3000 applications for membership in the last two months. He believes that many housing projects will be stopped and workmen diverted into other avenues.

These are only some of the many indications that the era of cheap loans and rapid expansion on borrowed capital is passing.