UNDER ACID TEST

Evening Post, Volume CIX, Issue 144, 21 June 1930, Page 10

UNDER ACID TEST

[THE BIG EXPERIMENT

NO LOAN AND MORE TARIFF

THEOEIES AND PACTS

"Tariff-drunkenness," diagnosed one of the doctors called in to feel the pulse of tho sick Commonwealth. ."Loan-drunkenness," diagnosed another doctor. The patient decided to give up loans frill to take more tariff than ever. His decision may have been influenced by the fact that London (and at times New York) regulates tho loan supply, while Australia can help itself to tariff.

An economic question nowv arises: How will the policy of aceeleratory tariffisni, and of braking external borlowing, react on Australia's general position? POLITICAL OPPOETUNITY? On the heels of this question pomes a political one: Will the ecenomio exporience of the new policy cause the electorate to.react towards Free Trade? Already the Federal Country Party is trimming its sails to catch the anticipated Free Trade breeze. This party, led by Dr. Page, has "decided to make tariff reform its issue" at tho next election. "It is hoped to conduct a campaign throughout Australia for an adjustment of the tariff, and to exploit to the full the unemployment and rising costs expected to follow the Customs prohibitions and restrictions imposed by the Scullin Ministry. The Country Party claims that there are definite signs of a sweeping reaction in public sentiment, and that excessively high duties and indiscriminate protection have resulted .in increased unemployment, a higher cost of living, and ■foreign retaliation." Boverting from the political to the (economic, it may be noted that the London "Economist" has no faith in either super-tariff or rigid exclusion as a. euro for Australia's malady: . Tho adverse exchange movements have driven the Australian Government into the superficially attractive "policy.of attempting to restore trade equilibrium by sterner import restriction. This may prove a temporary palliative, but it is merely equivalent to taking a still, stronger dose of ■ the drug which originally produced the • symptoms. And so the vicious circle goes on/. 'According to the critics Australia's latest tariff-and-exclusion pol- ■ icy will not be a revenue-get-ter; will reduce exports by reducing the imports that pay for exports; will impel-Australian manufacturers to snpply what they are not fitted to supply except at higher cost to the Australian consumer. Also, the stopping of external borrowing will compel Australia to export much more goods to pay for the goods she. continues to import and to pay for "invisible" services the cost of which was masked by the former borrowing policy. SEGMENTS OF THE VICIOUS CIRCLE. According to the Tariff Committee of Five appointed by the Bruce Government, under a borrowing-and-tariff policy "it is possible to have an adverse trade balance and a- the same time a favourable cash balance. In the year 1925-26 Australia imported more than •was exported, but borrowed so much more than the interest obligation that the year ended with an increase in the funds available abroad." That contingency ends with the cessation of borrowing. ""''■■ -■■'■In view of Australia's great experiment now in progress, it is interesting to recall the following principles laid down by the same committee: "If and when we borrow less annually than our annual interest bill, we shall require to send out more than we receive. If we ceased borrowing altogether, we should have to send out a large excess of exports." Moreover, "it is impossible both to exclude imports and to maintain borowing at the same time. It is also impossible to produce in Australia the goods which come in through borrowing, for without the borrowing there would not be the income to pay for them." Again, "the purchase_of home-produced goods to the exclusion of imports does indeed keep the money •in the country, but it helps to keep the exports in the country as well. So much for principles. Now for the recorded facts to date, as seen by the "Argus" of 3rd June: "That the exchange position is, to say the least, not improving is shown by the overseas trade figures for Australia published in another column. Imports of merchandise for ten months ended 30th April amounted to £115,815,155, while exports for the same term reached only &bO,----769,422, a difference of more than £35,----000 000. This deficiency was made up to the extent of nearly £27,000,000 by the shipment of gold, but further relief of a substantial nature cannot be looked for in that direction. The balance against Australia is larger than the figures indicate, as they do not include payments for interest, dividends, and services, which usually take large sums annually out of the country. HOW TO PROVIDE LONDON INTEREST. * "These overseas transmissions arc probably on a much smaller scale thau usual at present, owing to the exchange position, those to whom the money is due finding it more profitable tp allow their funds to be invested for the time being in Australia. Interest payments on Commonwealth loans in London cannot be dealt with in that way, and special measures may have to be taken to provide the money in London if there is not a substantial increase in exports or decrease in imports in the near future." ' According +o the same authority "trade' iiv softgoods in Victoria has suffered severely in the last three months, and the turnover in many cases has declined by at least 15 to per cent. The difficulty which attends the maintenance of trading figures at anything approaching normal proportions is indicated by the early date at which retail stores have commenced winter sales. The winter trade has been almost completed by wholcsalo houses, and it has been much below normal. Orders placed for spring and summer goods are very limited, as there is a general move to reduce stocks. In spite of tho reetot drastic increase .in the tariff, which almost prohibited the import of woollen goods, tho Australian mills have been unable to increase their trado, and orders are so »mall that production is actually being reduced in many cases. Some buyers have refused to take delivery of woollen piece goods, and these have been retold by the mills at low prices. Prices quoted by tho mills have generally been reduced, but this has not stimulated trade. . . The depressed conditions are also affecting tho cotton piece goods trade, and importers find that in many 'Cases they are being undersold by email firms which have been forced by financial difficulties to realise upon their stocks. . . Some of tho difficulties now being experienced must be Icniporary, and when the supplies of .imported goods now on hand hiiyo been exhausted business may bo expected to voturn to normal channels. The actual Consumption of softgoods is not as limited: as conditions in, the wholesale

trade would indicate, and when stocks 'v all sections of the trade have been /educed to a minimum an improvement should take place." MOTOR TBADE BAROMETER. For tho three months ended March, 1930, compared with tho same period of 1029, tho imports.of assembled and unassembled chassis into tho Commonwealth showed the following reductions:—72l from United Kingdom, 6843 from Canada, 6807 from tho United St,ates. Imports from Europe increased by 45 units. . .In value this means a reduction of imports by just over £1,500,000, and as there'are now fewer orders with oversea manufacturers than there were at thd end of last year, imports' in- the next three months will show a still greater reduction. The secretary of the Chamber of Automotivo Industries (Mr. 11. ,W. Harrison) considers that the imparts this year will be reduced in value by nearly £7,000,----000. Orders foiv £1,400,000 worth of Australian bodies he said, had been lost in tho first- three months of tho year, and about £30,0,000 of local distributers' profits, sales of 70,000 tires and tubes, about ■ 14,000 Australian-made batteries, and 50,000 Australian spark plugs had also been lost. Taking into account all the items making "omplcte ears manufactured in Australia, ho estimated that reduced business in the motor industry would lose a market for Australian goods valued at about £12,----000,000 this year.