MONEY STRINGENCY IN AUSTRALIA

Evening Post, Volume CIX, Issue 51, 1 March 1930, Page 8

MONEY STRINGENCY IN AUSTRALIA

(To the Editor.)

Sir, —The Australian special correspondent of- the "Daily Telegraph" (London) has forwarded to his paper an alarming but rather inaccurate account of Aus^ tralian economic conditions, which forces one to the conclusion that the aim of the correspondent was to provide, a sensational story rather than a correct one. The economic position of Australia, which includes its ifinancial and banking conditions, is practically dependent upon the primary industries as it js in New Zealand, and 'primary industries depend upon the weather, which cannot be regulated or controlled. Last season Australia suffered from drought over a wide area, and drought conditions continue in some parts. The vagaries of the weather have caused a shrinkage in many primary products, so that Australia has less, to flxport, and unfortunately that smaller quantity is selling at a lower level of values than, say, a year ago. ,' :

There is another very important factor, for, as the "Sydney Morning Herald" says, "We have never before ia x the history of the present generation, outside of the war period, seen the- great moneylending centres of the world denuded of funds, and in a position in which they find it difficult, even though willing, to provide loans for us." The Australian position, to-day is that she ha*, less t<j export, ,'and what she is exporting is not realising" as good prices as in the : past season. It is estimated that the national income, not the public revenue, has fallen, by £37,000,000 to £38,000,000 owing to a fall in the world price's of wool and wheat, and Australia is unable to make good that deficiency by borrowing. Naturally there is financial stringency in the country, but to say that there is a financial crisis is unwarranted.

The problem before Australia to-day is the redistribution of the reduced income. Readjustments are invariably attended with difficulties and hardships, and that is the case just now. Australia has IeBS to sell, and therefore must buy' less—that is, imports must be reduced and imports that can be classed as luxuries should bo banned. The only authority that can impose a check on imports is the bank, for bank efforts in that direction have immediate effect. 'Imports can be reduced by increasing the tariff, but a new tariff takes time to come into effect. The bauks in Australia and New Zealand have taken steps to reduce imports, and they have with their exchange rates made it difficult for the importer, while at the same time they have made the rates favourable to- the exporter or the man on ( the land. A year ago a wool exporter sold his draft to a bank at 32s Cd discount (60 days' rate); to-day he can sell his draft at 2s 6d premium—so that he is 1% per cent, better than a year ago. The banks; on the other side, are scrutinising all demands for credit on London, and are refusing credit to those importing luxuries. This obviously is not the time for Australia to import luxury articles.

It can be freely admitted that there is financial stringency in Australia, which, we are feeling to some extent because of the close financial connection between the two countries, but there is no crisis. And the monetary stringency cannot continue for very long, for a spell of favourable weather would see Australia< fully recovered. The drought has broken in' Australia, for copious rains have fallen over wide areas of the drought-stricken parts of the country.—l am, etc.,

PENLOO.