Economic Adjustments In Australia

Press, Volume XCIX, Issue 29367, 21 November 1960, Page 14

Economic Adjustments In Australia

The financial measures of the i Australian Government were foreshadowed by the booming consumer expenditure that has distorted the economy. The nation has tried to expand productive capacity and at the same time maintain or even increase its expenditure on consumer goods. The result has been to leave insufficient capital for government works, and too heavy demands have been placed on overseas funds. Now the Government has taken measures designed to sober economic activity and eventually to bring the economy into better balance. Demand for consumer goods (both manufactured in Australia- and imported) has been stimulated by the activities of hire-purchase and finance companies which, generally speaking, have been outside the control that the Government, through its central bank, exercises over the trading banks. These companies will be restricted by abolition of tax deductions for interesfon loans and convertible notes. The ability of the trading banks to steady business activity will be helped by adjustments of interest rates. Legislation requiring life insurance companies and provident funds to have at least 30 per cent of their investments in Government securities will operate as a sort of levy on the capital market assuring the Government of sufficient funds and curbing over-stimulation jf such activities as building. Substantial increases in sales tax

on fnotor-cars and other vehicles are designed to check a particular form of expenditure. The Government believes that curbs on internal expenditure will reduce the demand for imports; and the Treasurer (Mr Holt) insists that the Government intends to “ keep out ” of import controls, which it virtually abolished in February. Although the reaction of Australian financial and business circles demonstrates that the new measures will be distasteful to many, for some time Australian economic opinion has foreseen that something would have to be done. The Government may have been tardy in moving; but now that it has done so it has tackled the problem with a certain resoluteness. The obvious danger of some unemployment, the Government believes, will be no more than temporary—until redundant workers are placed in industries which at present have many vacancies. By refusing to turti to direct controls on imports the Government may take some risks with overseas balances It can, however, point to the strength of Australia’s reserves, which include, besides more than £4OO million in gold and foreign exchange, drawing rights on the International Monetary Fund for more than £2OO million. On the whole, the measures seem well designed. The Government has avoided the easy path of expediency, and tackled root causes. The national economy should soon be strengthened.