THE LIMIT

Evening Post, Volume CXI, Issue 103, 4 May 1931, Page 9

THE LIMIT

WARNING BY BANK

AUSTRALIAN GOVERNMENT . FINANCE .

(From "The Post's" Representative.) SYDNEY, 23 r a April. By issuing its,ultimatum to the Governments of Australia, and particularly to the Federal Government, limiting the amounts to which the bank's funds shall be drawn upon to meet Government deficits, the Commonwealth Bank Board has taken a final stand in demanding the immediate adoption of a sound national financial policy. The action of the Federal Treasurer (Mr. Theodore) in interpreting this action as a challenge to responsible government is described by the chairman of the Associated Banks (Mr. C. H. Tranter) as so much■ "clap-trap" and a clever piece of political propaganda, Such are the outstanding developments in the latest phase of Australia's monetary crisis. In his communication to the Federal Loan Council, Sir Bobert Gibson, chairman of the Commonwealth Bank Board, said that the increasing demands which were falling on the bank arising from the continuous drift of Government finances, had made it necessary for the board to consider the ultimate capacity of the bank to continue to finance the various Governments. The position had become accentuated through .the action of the New South Wales Government, and the inability of the Victorian Government to obtain further assistance from the Associated Banks. •There seemed to be 110 prospect of the Government reducing their obligations, but every evidence that the continuiohs drift must 'lead to increasing calls for help. It became the unpleasant dirty of the board therefore to advise that a point was being reached beyond TChieh it was impossible to provide furthW financial assistance. The position had been fully examined, and in the ■ lig^t-of air existing circumstances and futWEe forecasts the bank would not be able to exceed a total of £25,000,000 represented by Treasury bills or overdraft^ within Australia, and the present fVstal advanced in London upon Treasury bills and debentures amounting to :£ 25,125,000. In th'tv course of a bitter reply to the bank Mis;. Theodore said that Sir Robert Gibson s\uA his colleagues on the board, wero andeavouring to control the pub-; lie pursey a position that could not bei tolerate^. The board was attempting' to dictate^ the national financial policy, and woiitttt have to be shown that it could nofc so challenge responsible government. After the former Leader of the Opposition (Mr. Latham) had described the bank's statement and the Treasurer's; reply as .one of the most profoundly important events in the history of the he extracted from the' .Prime Minister a promise that full opportunity would be given to the House .(yf Eopresentatives to discuss the posriV.on. In the meantime groat interest centres in a. meeting of the Loan Council in Melbourne this week. It is coinsidered that the council can have- no honest alternative to supporting the s\tanrl taken, by the Bank Board, and (entering into guarantees to secure balanced Budgets without delay. Big aidiiitional economies in Government costs.must be faced, and it may be found tttivit the price of failuie is national bankruptcy.