“QUITE SOUND”

Evening Star, Issue 19994, 11 October 1928, Page 2

“QUITE SOUND”

FINANCIAL CONDITION OF AUSTRALIA

A .-New Zealand financier, wlio has just'returned from a visit to Australia, has'communicated to tl Christchurch Press the result of his inquiries regarding the position " Australian finances. The subject is one of considerable able interest to the ’ i the dominion who have invested i Australian banks, or in high-class commercial and industrial undertakings in tho Commonwealth: The inquiries, the result of which follow, were made through various channels, and th result embraces the opinion of men of high commercial standing in Australia:— When' tin. Commonwealth was farmed in 1901, it, was arranged that out of the revenue from the Customs and Postal Departments (which were transferred from the States to tho Commonwealth) “ per capita ” grant should be made to the States to compensate them for tho los.. of income. In 1993 the Commonwoalt' Government realised that tho people of the States wore living in a state of false security as regards taxation, because the effect of the “ per capita ” grant was to cloak, in a measure, the cost of Government by the States. A conference was held aiming at tho termination of the pr "t arrangement and it was hoped also to simplify the entire taxation systems of Australia. Another conference was held in May, 1926, but a alisfacton conclusion was net then reached. Tho Commonwealth Government however, persisted in its intention to legislate for the withdraw of the present capitation grant and for the discontinuance of Commonwealth taxes on land, entertainments, estate duties, and per. n of the income tax, thus enabling the State Governments to recoup themselves for the loss of the capitation payments by raising extra taxation n the fields surrendered by tho Commonwealth. Part of the scheme also was that ho Commonwealth Government should handle all the loans required by the- States so as to prevent competition in tho English and American markets, and the procedure at the present time is that there is a Commonwealth Loan Council which meets each year, and the various States and tho Commonwealth make known their requirements for the ensuing year in tho shape of loan money, and it is then decided, having regard t. the genera! position, how much shall be borrowed. Further, it is the intention of tho Commonwealth Government to guarantee the loans of all the States and provide a sinking fund therefor, so tha in future' there will be no State securities issued, but the Commonwealth will borrow on the market and distribute the money to tho State as required. All the States have agreed to this procedure, but it will be necessary to alter the Commonwealth Constitution, and for this purpose a referendum is to be taken at the next general election, giving the Commonwealth Government power to undertake the control of all borrowing. There is a somewhat mixed feeli. on the part of some. States as to the propriety of passing on to the Commonwealth the right J o control loan money, because in a State like Victoria, which has been conservatively managed in the past, they have been successful in keeping fairly well off the loan market in comparison with a State like New South Wales. Now the whole amount will have to be pooled and the individual factor, i.e., the State, will pass out of the transactions, In 1925 there was a Commonwealth loan which was the last of the tax-free loans converted into a 5i per cent. loan. This, however, did not appeal to tho public, and iLtfas uhderetodd that the -bankftffas uSScrwriters, wore left with about £10,000,000 of this loan.

Further, there have been loud complaints about the adverse trade balance against Australia as tho imports were considerably more than the exports. Therefore, the balance could Only bo paid by borrowing in London. As the result of this curtailment/, the conservatism of the banks, and tho decreased purchasing power of the community .due to the bad season, the excess of imports over exports has uoc.i brought down from £19,800,000 for the year ending June 30, 1927, to £6,520,000 for the year ending Juno 80, 1928.

Their principal revenue, apart from income. tax, is from Customs duties; therefore, if Customs 'uties diminish, the income of the Commonwealth Government also diminishes, and that is the cause of the deficit in the Federal B”dget, which has just been published. If this curtailment of imports from overseas continues then it is difficult to see how the Commonwealth Government is going to keep up its revenue without imposing fresh taxa tion.

Last year the conditions throughout Australia, with the exception of West Australia, were droughty, and although the wool clip realised practical'^, as much as the previous year, there was a considerable falling < in tho exports of the other primary products, which represented so much less cash coming into Australia.

Conditions this year look better, but this is the critical period, and the absence of rain is being severely felt in various parts of the wheat-growing areas in New South Wales. Victoria, and South Australia. The banks, therefore, have observed_ a very restrictive .tfcitudo which is all to the good, as it stops speculation. Very little land is being disposed of now in sub-divisioa.:, such as took place three or four years ago, because the banks will not advance money on this subdivisional land. In fact, the banks have, over since their past experience, curtailed their advances ' when there were any signs of movement for overspeculation amongst tho public. On the whole, the position in Australia financially is quite sound, as there is evidence that after Socialistic legislation, such as was prompted by tho last Lang Government in New South Wales, there is a reversal of public feeling, making for solidity.