PUBLIC FINANCE

Evening Post, Volume CXXVII, Issue 63, 16 March 1939, Page 12

PUBLIC FINANCE

AUSTRALIAN POLICY

COMMONWEALTH BANK REVIEW

"Evening Post," March 16. The directors of the Commonwealth Bank, in their half-yearly report, received yesterday, make special reference to the deterioration in economic conditions abroad, causing a fall in export prices, and arresting the inflow of capital to Australia. While activity was well sustained there was a danger that declining export income might adversely affect internal conditions. The board consequently directed the policy of the bank towards aiding Governments in their defence and works programmes, of keepjing trading banks' at a level which would permit them to satisfy legitimate requirements of credit-worthy customers, and of preventing any undue rise in in-j terest rates. As part of this policy the bank had recently subscribed £6,000.000 •to Commonwealth £72,----000,000 conversion and defence loan, j In' ' making the subscription of £6,000.000 to the conversion and defence loan above referred to the Commonwealth Bank stated that although it had made substantial subscriptions to Commonwealth loans, it considers that "in view of existing general economic conditions, and having regard to future defence requirements, this subscription to the loan is in the public interest and is in accord with its policy as a central bank in present circumstances." ' ECONOMIC CONDITIONS. : Reviewing present conditions the bank; observes, that the financial, position of Governments has shown some weakening in the first half of this financial year. The buoyancy of revenue noticeable in recent years has not been sustained, while expenditure has continued to expand. Government loan programmes for works expenditure have shown a slight fall, but the decline is more than offset by the increase in Commonwealth Government loan programme for defence works. In addition, there has been a further increase in the programmes of semi-Gov-ernment authorities. The board considers that the steps now being taken to strengthen the de-! fences of Australia are likely to place some strain upon the savings of the community and the available resources of man-power and equipment. It is essential, the board declares, that the ordinary loan expenditure of all Gov-i ernments and semi-Government authorities should be co-ordinated with defence requirements. It is noted that deposits of the nine cheque paying banks increased from £315,100,000 to £319,100,000, from June to December, 1938. Advances increased from / £284,900,000 to £286,900,000, while holdings of Government securities, other than Treasury bills, declined from £21,700,000 to £19,000,000. Liquid assets in Australia improved considerably during the halfyear, but show little change compared with those at. the end of 1937. "CONFUSED SITUATION." "During the last half-year the development of the economic situation abroad has been confused." It is also remarked that "the trend of activity in the United Kingdom appears unfavourable in building and m certain major branches of industry, but the engineering industry, both civil and military, and the motor-car industry are experiencing improvement." Profits of the Commonwealth Bank for the half-year ended December 31, 1938, were £763,600, distributed as fol- -■> lows: —National debt sinking fund, £163,145; reserve funds, £170,234; rural credits development, £7090; Commonwealth Treasury, £423,131.