NOTES OF THE DAY

Dominion, Volume 22, Issue 72, 18 December 1928, Page 10

NOTES OF THE DAY

A great deal of attention is being given in financial circles abroad to the question of the uses to which loan moneys are being put by the overseas Dominions. Especially is concern being expressed at the increasing burden of uneconomic expenditure of borrowed millions. A cable message from London this morning touches on the position of Australia, and incidentally remarks that the test of soundness of Australian borrowing is whether the money is being spent productively and economically. This, of course, is,a fairly obvious truth; but unfortunately it is not one which receives sufficient consideration either by politicians or the public. * * * ♦ In a recent issue of the Wild Cat Monthly, which is recognised to be an extremely well-informed and competent critic on State and private finance, this matter was discussed in a very outspoken fashion. It is considered orthodox,” this journal remarked, “to spend a large and growing amount of loan money annually on public works, including many which could wait indefinitely, and which are recognised as assured money-losers in advance and” unlikely to develop anything of importance. . . . Even if interest rates are exorbitant and labour is costly and inefficient' the process goes on.” What too frequently is overlooked is that this costly expenditure on unproductive undertakings involves an increasing burden on the community through the tax collector.. While the loan money is being expended a spurious prosperity is created, but the load of taxation goes on piling up inexorably until it cripples business and industrial enterprise, and leads to stagnation and hard times. The Wild Cat Monthly quotes a very interesting and impressive table, showing the growth in the interest charges in New South Wales, which is well worth studying. We give it below: . Increase Average Year’s interest. iu's years. annual increase. • f■ £ £ 6,077,912 2,321.069 464,214 8,a00,G,j9 2,457,747 491,549 lJ_<-_8 , 12,206,000 3,670,341 734,068 It will be seen from this table that not only has the interest burden increased enormously, but the rate of increase has been materially accelerated in recent years. - * * * * So far as New South Wales is concerned the view is expressed that the situation all round indicates the need for a long rest from loan works “except the rare species which reliable experts will certify as. capable of paying their way, and especially a rest from, works which form an addition to the great external [interest] burden. I hough this opinion is voiced in relation to borrowing in , New South Wales, it is equally applicable to this Dominion. It is especially timely, too, in view of the obvious inclination of the new Government to embark on a fresh spurt <sf borrowing on what must clearly come within the category of doubtful economic undertakings, y e refer particularly to the proposed railway expenditure, but all classes of public works undertakings require the closest examination before the country is finally committed. Sir Joseph Ward is faced with a very serious responsibility in this respect. He has promised that his borrowing “will not cost one penny additional taxation, direct or indirect. How he can keep this pledge and at the same time press on with the works he has outlined it is difficult to see.