CONFIDENCE IN THE FUTURE

Dominion, Volume 32, Issue 104, 26 January 1939, Page 11

CONFIDENCE IN THE FUTURE

Australia’s Economic Situation

LONDON FUNDS AT HIGH LEVEL i Benefited By Influx Of N.Z. Capital By Telegraph.—Press Aseq.—Copyright SYDNEY, January 25. The Australian Federal Minister of Finance, Mr. Casey, in a speech reviewing Australia’s economic situation, said that the internal position was remarkably good compared with that of practically any other country in the world, in spite of adverse circumstances.

“The Budget,” he said, “was framed in the expectation of an appreciable drop in Federal revenue —particularly Customs revenue—and, with half the financial year behind us, it is working out approximately, according to plan.

“The chief factor that Australia has had to contend with has been the great and sustained fall in export prices, which began more than 18 months ago.

“Relief is not yet in sight, though its appearance will be greatly hastened if my hopes for the future in Britain and the United States of America are realized. This long period of low prices for our exports might well have been expected to be reflected iu a decided slump in Australia generally—but this has not been the case.

Pulled Through Well. “In fact, the admitted distress of many of our primary producers has not yet been reflected at all seriously in other avenues of Australian economic activity. There has been a slight falling away here and there, specially in Victoria, where low prices for primary products have been aggravated by a bad season —and now by disastrous bush fires, but Australia, as a whole, has pulled through so far with considerable success. “The explanation of this apparent anomaly lies in the fact that a number of internal factors have operated, and are still operating, to offset the fall in export prices.

“Among these are the continuance at a high level of investment in manufacturing, the continued strength of the building industry, the replacement of imports by locally manufactured products as our new factories come into production, our increased defence expenditure, and the continued high level of public investment.

Drop in Imports. “Under the combined influence of increased production of manufactured goods in Australia and the drop in export prices, there has been an understandable drop in imports into Australia in the last six months. “For the time being our imports still remain relatively high, because much of the machinery required for establishing additional local industries has still to be imported, but as these factories come into production they reduce the quantity of imports required for our current needs. “It is difficult 0 be precise, but estimates have been made which indicate the rate of this replacement of imports (i.e., increased Australian manufacture of goods) at as high as from £5,000,000' to £10,000,000 a year—probably nearer £10,000,000 than £5,000,000. This migration of industry from overseas has the incidental effect of relieving our overseas balance of payments very considerably. Overseas Capital. “The importation of overseas capital into Australia, which: now commonly / takes the form of the direct establishment of new factories, or extensions of existing factories, is still proceeding at a satisfactory rate. Again, it is difficult to give precise figures, but it has been roughly estimated that imports of capital into Australia from all overseas sources are still averaging something like £10,000,000 a year. “In the last few years we have benefited by the influx of New Zealand capital into Australia, to the extent of possibly £5,000,000 in all. I need hardly say that we have done nothing to encourage such a' capital movement —as we had no desire to add to the anxieties of our sister Dominion. With the adoption of exchange control by New Zealand, presumably this movement of capital will cease. “Our London funds remain at a fairly satisfactory level, despite some drain on them in the last IS months. The balance of payments is not running as strongly as usual in our favour, but fundamentally the position is still sound. The present relatively high level of London funds enables us to face the future with confidence.”