Evening Post. THURSDAY,' FEBRUARY 12, 1931. THE AUSTRALIAN CRISIS

Evening Post, Volume CXI, Issue 36, 12 February 1931, Page 12

Evening Post. THURSDAY,' FEBRUARY 12, 1931. THE AUSTRALIAN CRISIS

Six months ago the Premiers and Treasurers of all the Australian States decided at their conference in Melbourne to carry out the recommendations of Sir Otto Niemeyer in order to save the country from bankruptcy, and the decision, was approved by Mr. Scullin on behalf of the Federal Government. The balancing of all the Budgets and the effecting of this object by reducing expenditure instead of by • increasing taxation were the two principal points covered by this decision. Yet the Queensland Government alone has carried out the policy which every other Government in Australia had approved. Elsewhere the drift towards insolvency has continued, and in some cases at an accelerated pace. The figures for the first seven months of the financial year (Ist July to 31st January) for the Commonwealth and the most important of the States were reported by cable yesterday. The Commonwealth expenditure during that period was £45,179,000, which was £11,487,000 more than the revenue. In New South Wales the State expenditure, of £29,484,000 was £6,074,000 in excess of the revenue. Thus in the Commonwealth the deficit for more than half the current financial year is more than 33 per cent., and in the wealthiest of the States it is more than 25 per cent^of the revenue. These figures suggest that Mr. Scullin was well within the mark when in his explanation to the Financial Conference at Canberra of the "very serious budgetary position" which has to be faced he estimated the Commonwealth deficit for the whole year at £10,000,000, and that of the States at £5,000,000. But the explanation doubtless is that in Australia, as in New Zealand, the payment of income tax and land tax makes the last part of the year particularly profitable for the Treasury. Even on Mr. Scullin's showing, however, the position is grave enough, and it" is, of course, possible he has again been too sanguine. The possibility had indeed become a probability before forty-eight hours had passed. It is certain that the shattering effect upon Australian credit of Mr. Theodore's financial policy cannot have been included in Mr. Scullin's calculations, or it would Aever have been propounded. Unless that effect is promptly checked by a reversal as drastic and dramatic as the policy itself,' the probability that Mr. Scullin has seriously under-esti-mated the gravity of the position will, to say the least, be very strong. And the-probability that without a similar reversal the only Australian State which is under the control of a more dangerous plunger than Mr. Theodore will have made default long before die end of the financial year was made very clear by a message from Sydney yesterday. The desperate straits of New South Wales and the escape which it has been able to make from default at the eleventh hour might, like so many other incidents in Australia's strange story, have been regarded in a work of fiction as involving a rather too violent stretch of probability, which might nevertheless he pardoned for its moral and dramatic values. For New South Wales the villain of the piece is Mr. J. T. Lang. It was largely by the express promise of a loan of £50,000,000 and by unassessed promises which were estimated to cost £150,000,000 more that he was able to win the State General Election in October. On the hustings he had denounced the Loan Council, by which the borrowings of the Commonwealth and the States are regulated, as incompatible with the financial independence of New South Wales, and one' of his first official acts was to withdraw from the Loan Council in order that he might fulfil his election promises without interference. x Under the best of Governments and with the Loan Council behind it the State would have had very great difficulty in raising 10 per cent, of Mr. Lang's commitments, but under his unchecked control it could do nothing. Not only must those election millions be written off, but it is now reduced to such straits that there was not enough money in the Treasury to pay the £831,000 falling due for interest on Tuesday, and the fairy godmother who intervened at the last minute to avert the crash was the Loan Council which Mr. Lang had denounced and defied! < Instead of the millions with which Mr. Lang was to have found employment for everybody and brought prosperity to the Stale, he had not so much as half a million available towards these interest payments. The amount due was £831,000, and of this the Loan Council had to guarantee £469,000, which means that with-

out this help the State could not have paid its bondholders more than 9s in the £. Thus, says our report, this State will be able to meet its commitments in a way which emphasises the desperato condition of its financos. London, which had previously been badly scared by Mr. Theodore's inflation scheme and the still wilder project of this "mad Mullah of finance," is likely to derive more anxiety than comfort from this narrow escape. On the 2nd March the Commonwealth has to meet bills to the amount of £5,000,000, and its total liability for loans falling due during the year is £27,000,000, while that of the States is nearly £17,000,----000. How are these liabilities to be met, with the credit of Australia grievously shaken by the proposals of Mr. Theodore and Mr. Lang, and* apparently with little hope of economy anywhere except in Queensland? -The best hope of the Commonwealth seems still to lie in a moderate Labour Government, but there is no longer any hope, of Mr. Scullin being able to form such a Gov* ernment. His captivity to Mr. Theodore and to inflation appears to be complete. It is strongly urged by the "Bulletin" of the 4th inst. that the moral of the Parkes election, in which, as it points out, there was a swing-over of one vote in every three from Labour to the Nationalists, is a Reconstruction Cabinet with party lines obliterated to meet a great national emergency. Failing that, the "Bulletin" argues that if the Labour Party feels justified in carrying on alone it must at least show some respect for the manifest wishes of the people. It is true that it is not clear what those ■wishes are in, detail; the "Bulletin" will not even say that the vote clearly declared that Mr. Theodore should resign from the Ministry. But, there can be no question at all that\ these representative, electors of Parkes are utterly opposed to any form of inflation whatever; and a Government which would proceed with any scheme even tending in that direction would bo so obviously flying in the face of the people that it would be guilty of an outrage on the very fundamentals of democratic government. But the distinction drawn between Mr. Theodore and inflation was obliterated a few days later by the . policy which he was allowed to proclaim, and Mr. Scullin thus became his accomplice in this "outrage on the very fundamentals of democratic government." \ _^ ,