A SURPLUS

Evening Post, Volume CXVII, Issue 146, 22 June 1934, Page 16

A SURPLUS

FEDERAL FINANCES

GOVERNMENT'S PROBLEM

DEMAND BY STATES

(From "'The Post's" representative.) SYDNEY, June 14.

It is certain now that the Federal Government, which in its last Budget indicated a deficit of more than £3,000,000 will end the current financial year with a surplus of at least £1,500,000. The deficit was expected because of the cuts'that had been made ;in taxation, but such has been the nature of Australia's recovery from -the depression that these losses were more than off-set by the gains in other directions. On Juno 30 the accumulated surplus will be £6,000,000, and that is why the State Governments will have a bone to pick with the Federal Government when the Premiers meet again next week. Many of the States arc iv financial difliculties, and they will expect the Federal Government to come to their aid, either by increasing their grants or by vacating one or more of the fields of taxation in favour of the States.

'It is not likely that the Federal Government will be over-anxious to make further concessions to the States, for .it has other ideas that are all-important in "view of tho fact that a General must be held soon. Tho Federal iGovernment i? anxious, for instance, to take at least another per cent, off the sales tax and to increase the exemptions. It is believed, too, that it would be willing fo restore the salaries of public servants at least 10 per cent. A reduction in the annual fee for radio listeners from 23s to 20s is almost certain. Postal concessions are under consideration, and a return to penny postage has been spoken, of. It is unlikely that this will be agreed to for ; if the letter.rate.,were, reduced to Id the Commonwealth would lose £1,000,000. . It is almost certain that •the Federal: Ministry will 'insist, on cutting the land tax by half ;also the super tax on ■ incomes. It is ..also recalled that under the Ottawa Agreement the Commonwealth is bound to remove primage from British goods as soon as the financial positirn permits. The Commonwealth Bank Board arranged for the financing of the 1933-34 deficits to. the extent of £ 8,500,000, and although; Victoria, Western Australia, and South Australia are in difficulties the aggregate State deficits will be well within that limit. Even if the position in these States, is . mitigated by grants from the Federal Government it will be impossible for all the Governments to balance ■ their Budgets next year, but it is believed that the total deficits will be kept within a limit of £,6,000,000.' , When the Premiers' Plan was , formulated, there was an understanding that the Governments should aim at'balanced: Budgets within three years.' This was- not actually incorporated in the plan, and though the ideal has not been lost sight, of it was recognised, a. year ago that it would bo impossible of achievement.

The State that .has shown the most consistent financial - improvement;, is New South Wales. When the Stevens Government took office in 1932 there was a leeway of £6,000,000 on the allowable deficit for, the first year of the Premiers' Plan, the total being, over £11,000,000. Mr. Stevens cut his deficit for 1932-33 to £ 3,758,000. For this year the New South Wales deficit will certainly ba less than £3,400,000; This improvement is principally accounted for by reductions in the cost of Government relief,'and unexpectedly large receipts from the special income (wages) tax. The ordinary income tax returns, however, are .expected to be less than the .£3,170,000 estimated for. The estimate for the special tax was .£4,815,000 and at the . end of May £4,579,777 was already in hand. The June receipts will be.at least £600,000.