APPROXIMATING PROSPERITY

Evening Post, Volume CXVI, Issue 84, 6 October 1933, Page 6

APPROXIMATING PROSPERITY

"The, Times" describes the Commonwealth Budget as the nearest approximation to a prosperity Budget yet seen anywhere since the beginning of the-depression. The praise, as briefly sent to us, is a little ambiguous. It may mean that this is the nearest approximation to, a Budget suited to prosperous times1 or that it is an effort to induce the return of prosperity by a Budget lead. The proposals of Mr. Lyons may be viewed from both these angles—as the fruits of recovery, or as the seed sown with hope of a recovery harvest. The Commonwealth Government is certainly taking bold measures to revive trade and industry. Prices of major exports expressed in Australian currency have risen , ;40 per cent, in six months. This must give a decided impetus to recovery and Mr. Lyons has planned to accelerate the speed by releasing the taxation brakes. The most important concession from the viewpoint of the effect on trade is a reduction of the sales tax by one per cent, and additional exemptions from the tax, costing together £2,570,000. In this estimate of cost we assume that the Budget makes allowance for reviving trade and the probability of making good by increase of turnover part of what is lost through reduction of the rate. ' The net result of concessions is that the Government will relieve the community of £7,350,000 in taxation, and the cost will be an estimated deficit of £1,176,490. In what measure this is a gamble it is difficult to say without more information than is given' on the Treasurer's calculations. The past year ended with a favourable balance of £3,546,608. With higher prices and industry reviving it would be reasonable to expect a much augmented revenue this year if taxes were maintained at the same rate. Mr. Lyons has banked on a doubled surplus and returned it in advance to the taxpayers. There is an element of risk; but Mr. Lyons is budgeting for people who respond quickly to an optimistic lead., A deficit and postponement of reduction of the floating debt do not have a depressing effect on Australia. "A general feeling of optimism, with new life and spirit given to industry," sums up the initial effect of the Budget, according to a message from Sydney; and this may be expected to spread as the wages and pension restoration proposals are brought into operation. There may, however, be a reaction when industrialists study the substantial tariff reductions. Australian manufacturers have enjoyed high protection. A high tariff was made higher when adversity hit the Commonwealth. The necessity of immediately correcting lopsided trade led to actual embargoes stud duties that were as good as embargoes. These were imposed to save Australia from national bankruptcy—not mainly for the benefit of local industries. Other parts of the house-in-order plan, including wage and interest reductions and currency depreciation, also had a protective effect, and, as the Minister "of Customs states, resulted in many industries being over-protected. A substantial cut is now to be made in this protection. The British Press welcomes this as "Australia's big gift to British trade" and "a dramatic gesture for Empire trade." The Country Tarty will also welcome it,

though we are not told whether the party is satisfied. The Minister of Customs says the adjustments will not expose Australian manufacturers to undue competition. They still have the indirect protection of the high exchange. The crucial test is yet to> be applied. Is Australian industry so soundly established that it can continue under these conditions? Can Australia have relief from taxation, continued activity in manufacturing, and renewal of trade with Britain? The three do not seem to fit together. If the primary producer is to buy his goods cheaper, the manufacturer must have a smaller profit margin, arid if the British manufacturer is to sell more, the Australian manufacturer must lose trade; unless, and this is where the Federal Treasurer's hope lies, the measures now taken, with better prices for Australian exports, provide greater spending power so that consumer, manufacturer, farmer, and British exporter may all have a dividend. And tljie Government expects a return, too. <