Australian Economy Continues To Drift

Press, Volume C, Issue 29537, 12 June 1961, Page 17

Australian Economy Continues To Drift

Th* condition of th* Australian ecoromy ha* continued to drift downward*, says th* Bank ot New South Wales in it* quarterly economic review. “Busin*** confidence at th* moment is dull, and yet at least part of the financial market appear* to be finely tuned to any breath of hope and to expectation* of a resumption of growth. “It is a fortunate augury that in spite of the immediate cloudy outlook, confidence in the long term ha* not waned, nor has the interest of overseas investors." the bank adds Referring to the Federal Government's emergency measures, the bank warns that the point has been reached at which heavy handed restriction could spread the weakness of some sectors throughout the whole structure of the economy. "The central feature on which all eyes, economic and political, are concentrated is the growth of unemployment” A transfer of labour had occurred, a movement which had been part of the Government’s Intentions, but it had happened within a trend which had raised the numbers registered for employment to more than 89.000 at the end of April

In addition, th* bank point* out, th* amount of overtime work has fallen off. and short-time working ha* increased. Both movements had affected the volume of mending power, and contributed to the decline of hire-purahaae business and a bigger fall than usual tn retail aalaa during the March quarter The bank describes th* position a* disquieting, and say* no quick reversal seems likely. The picture was complicated by report* of increasing stocks, which would have to be worked off before production picked up, while the spread of unemployment to the steel industry suggested that the damping down of the boom had gone beyond original intention* Government policy had misfired, too. in another direction. "Home building was on* sector it did not want to curtail, but a decline of about 30 per cent compared with a year ago ha* occurred in the number of new housing unite approved.” the bank states The bank warn* that the liquidity of the banking system is anything but easy. "The ratio of liquid assets and Government securities to deposits was 18.9 per cent, in April, compared with 21.9 per cent, a year before, and the statutory reserve deposit ratio has been lowered to cater for purely seasonal credit needs.' 1 says the article. The run-down, however, was not expected to be as ■ever* a* seemed likely a tew months ago. "The extent to which public finance may fall abort of the budget surplus may relieve th* position, just aa th* slower drain of reserve* has done,” the bank adds. Referring to international reserves, the bank says export receipts have recently been stimulated by the firming of wool price* and additional wheat sale*. Imports showed sign* of having passed their peak, and th* drain on reserve* had been at leait (lowed down by apparent capital movements. Th* bank says no step* have yet been taken to soften the severe policy of credit restriction, which was basic to the Government's antiboom policy of last year. Th* initiative, when it came, must be derived from the Government, for little margin existed in present banking resources while current standards were imposed. "The loan of £7Bm from the International Monetary Fund, while boosting th* size of the reserves to obviate the need for emergency action, will not affect the local state ot liquidity.” the bank adds.