AUSTRALIAN FINANCE

Evening Post, Volume CXI, Issue 41, 18 February 1931, Page 9

AUSTRALIAN FINANCE

THE LANG SENSATION

LABOUR AT SIXES AND SEVENS

(From "The Post's" Representative.) SYDNEY, 12th February. Australia is becoming heartily tired of plans calculated to overcome the financial mess in which the country has found itself, and demands action. But action seems to bo as far off as ever. The main essentials, it has been pointed out by people who should carry weight, arc that the Governments should balance thier Budgets, that costs of production should be decreased, and that the Commonwealth should find new markets for its goods. None of these things is being done. The deficits are mounting in each State and seem likely to mount. New South Wales is in such a serious position that there is even doubt whether there will be sufficient money in the coffers to meet salaries at the end of the present month. This week the Commonwealth had to come to the aid of the State to the extent of more than £400,000 so that interest payments on loans raised locally could bo met. The only other alternative would have been default, and, judged by the sensational speech made by the Labour Premier (Mr. Lang) at the conference of Premiers at Canberra, on Monday last, that would not have caused the Government any great concern. WHAT MR. LANG PROPOSED. Mr. Lang's remarkable- proposals created almost a panic in financial circles, for clearly he , advocated default. What else can bo read into his suggestions? Hero they are in detail: — (1) That the Governments of Australia decide to pay no further interest to British bondholders until Britain has dealt with the Australian overseas debts in the same manner as she settled her own foreign debt to United States. (2) That in Australia interest on all Government borrowing bo reduced to 3 per cent. (3) That.immedate stops be taken by tho Commonwealth Government to abandon the gold standard of currency and to set up in its place a currency based upon the wealth of Australia, to be termed tho gold standard. "If the conference agrees to these proposals," said Mr. Lang, "it means that there will be released for circulation in Australia millions of pounds that are now sent overseas. The sympathetic fall of interest right throughout the commercial and financial life of tho Commonwealth would give new life to industry. By giving new life to Governments and to industry, it will cause a rapid absorption of the unemployed. Confidence in Australia will be restored because her dependence on tho outside world will be reduced to a minimum. Tlio Government of New South Wales has decided to adopt this policy where it applies, regardless of what the decision of tliis conference will be, but I am hopeful that all States and the Commonwealth will join us, and then Australia will bo able to say truly that at last tho depression is lifting. From tho information we have it is clear that Governments must reduce their expenditure or publicly declare themselves bankrupt. CUT INTEREST BEFORE WAGES. "There are two main factors in Government expenditure—wages and interest. 1 s;.y that wage reduction is not only wrong, but that it is not by any means helpful towards the solution of our problems. Supposing we reduced the wages of the Civil servants a further 10 per cent., the saving would be only £3,000,000 a year. Docs anybody suggest that our troubles are solved u-lien we reduce our deficit from £8,000,000 1o £7,000.000. Nothing could bo more absurd. Now, jis regards interest. In. ordinary times tho Now South Wales annual commitments under

this head aro £5,000,000 overseas, which the increased exchange rate lias made ' £9,500,000 this financial year with every prospect that it will go higher. Payable in Australia our interest commitments arc £0,352,000 for the current financial year. With the increased exchange the interest burden is one which the State cannot carry. To-day it is impossible to meet these commitments —as impossible for New South Wales as it is for the Commonwealth and the other States. It is a burden that Australia has no right to carry. Most of the debt was incurred during the war and because of the war. It is money that was borrowed at inflated prices, and must now be repaid during a period of deflation. Where, say, two shiploads of wool and wheat would have paid a portion of this interest two years ago, four shiploads are required to pay the same amount now. AVo should not bo asked to continue along these lines." SCOUTED BY SCTJLLIN. Was it any wonder, after Mr. Lang had concluded his speech, that the Prime Minister should- have risen hurriedly and made tho dramatic announcement, 'We will have nothing to do with this plan?" Mr. Scullin knows better than any other politician in Australia to-day what au atmosphere such a speech will create in London. He could see in it straight-out repudiation, and plainly the temper of the Australian people' is against that. Mr. Theodore, too, was quick to say that the whole plan was impossible, and the representatives of all tho States joined in a loud chorus of disapproval. It is safe to say that they would have given almost anything if they could have silenced Mr. Lang at such a time. The effect of his utterances are already farreaching according to cable messages that have been received from London, Nevertheless, it is clear that Mr. Lang's speech was not uninspired. The fight for Mr. Lang's plan will now be carried into the Federal sphere, and Mr. Scullin will soon find that a number of tho members of his party will demand that it should be adopted by the Federal Government. Mr. Lang is believed to have secured the promises of many of tho Federal Labour Party that they will support his ideas which coincides with the famous Anstoy plan —repudiation and inflation. An at-' tempt is already being made to capture the support of the outside Labour machine, and the next move will probably be to refer tho Lang plan to tho Federal Executive of the Labour movement—the all-powerful executive which can put a man out of the Labour movement for ever if it so wills. A definite break up of tho Labour Party now seems to be closer than ever, and in the wreck it seems certain that Mr. Theodore will follow his leader, Mr. Scullin. It is just as certain that if a new Labour Government is formed, with the avowed purpose of giving effect to the Lang plan it will not be able to- achieve that object, nor will it have v life of more than six months —the time that must elapse before the Senate can force a double dissolution and the.consequent General Election. In the meantime the conference is awaiting the verdict of the Commonwealth Bank Board on the panacea put forward by Mr. Theodore. This is for tho "restoration of the currency to what it was, say, two years ago," and for the mysterious "release&of credits." Mr. Thoodore said, by way of explanation: "The banking authorities of Australia have tho power, by using the powers of the Commonwealth Bank as a central bank, to create additional credit. If we got back to the money value corresponding with the price levels of 1929 wo would not devalue the Australian pound or even alter the basis of currency. We should not inflate the currency, but we should certainly cnablo tho country to turn tha corner and go forward to a recovery." It is not thought that the bank's verdict will, be favourable. One banker has said that what Mr. Theodore really aims at is inflation though he has expressed himself in delightfully vague terms. It was evident that he had si desire not to place his house in order. The desire for increased credit came from the Government because it wanted to be saved from facing the real posij tion.