The Dominion MONDAY, DECEMBER 8, 1930. MORTGAGING THE FUTURE

Dominion, Volume 24, Issue 63, 8 December 1930, Page 10

The Dominion MONDAY, DECEMBER 8, 1930. MORTGAGING THE FUTURE

In, commenting recently on the desirability of fusion, Mr. Downie Stewart, Minister of Finance m the last Reform Cabinet, indicated that the proposal demanded consideration mainly on the ground that a halt might thus be called to the present extravagant borrowing programme. Mr. Coates also, in setting out the conditions on which he would be willing to discuss the question of fusion, made it clear that a tapering-off of the present rate of public borrowing was an indispensable pre-condition. The gross public debt of the Dominion at March 31 last was over 267 millions sterling, and that of local bodies is somewhere over 70 millions. When allowance is made for duplication it is plain that public debt, both national and local, is not only too heavy, but is growing at an alarming rate. Parliament showed its indifference to the situation by giving the Government & blank cheque for nine millions before rising. There was little criticism of this in the Press generally at the time, and no evidence that it disturbed public P This complacent acquiescence in the piling up of public debt is the most disquieting feature of the. present position. It should be plain to the most careless, especially with Australian experience before our eyes, that a halt must be called to this reckless accumulation of public debt. We cannot go on for ever mortgaging the .future without reaching a condition of insolvency. Of the public debt about 180 millions is owing abroad, mainly in the United Kingdom. The interest bill on this external debt is about eight millions per annum. . To pay this interest we have to find gold values in London, not paper values in the Dominion itself. This we do by the sale of primary products, transferring sufficient of our export values to meet interest claims. In actual fact there is not on the average a sufficient surplus of export over import values to meet our interest bill, so that in effect we are paying part of our interest out of fresh borrowings. The fact that some of our imports are imports of capital, the result of loans, does not invalidate this contention over a period of years. No serious attempt has been made to reduce this huge load of debt the only practical question, apparently, being how far and how. fast we can increase it. Yet it is plain from common sense and the experience of Australia ‘ that we cannot go on much longer piling up debt, and paying interest out of . further borrowings.. At. the present time we are increasing the capital of the debt, paying higher rates of interest, and meeting the bill with commodities that represent much lower gold values than they have done for many years. On the other hand, few would contend that the objects of public expenditure at the present time are of an urgent character. Some of them, new railway construction for example, must necessarily involve an operative loss from the start. This extravagant loan policy is bound up with the system of democratic politics, fundamentally wasteful and inefficient, that has fastened itself on the Dominion and Australia. While borrowed funds are being spent, we are able to live beyond our means on the savings of our overseas creditors, and maintain an artificially inflated standard of living. Thrown on our own resources, we should have to work harder and spend less. This is where the shoe pinches. There is ample evidence that the borrowing boom is about spent, and that investors in Britain will no longer be as willing as of yore to provide the funds to finance political extravagance at the Antipodes. Then, and not till then, in the present debauched state of public opinion, will we be willing to face a situation that we should never have permitted to arise.