LEGS BORROWING

Evening Star, Issue 20633, 5 November 1930, Page 5

LEGS BORROWING

AUSTRALIA’S PATH

NO ROYAL ROAD TO SOLVENCY Striking reference to Australia’s financial position, and particularly the matter of Government finance, was made by Mr S. Ricketson, chairman of directors, at the annual meeting of Wero’s Investment Trust Ltd., says tho Melbourne ‘ Age.’ The pathetic feature, he said, was that so many people did not, or would not, realise that we were lacing a most critical period in tho history of Australia, and, unfortunately, this outlook was not confined to the proverbial “ man in tho street.” The force of circumstances had brought homo to most individuals the need , lor readjustment, and the lines along which such adjustment should be made, and, if anything more was required in this respect, surely the trenchant, unvarnished review of the position supplied by the members of tho Niemeyer Com mission had brought out the facts in such a way that their significance was plain to all. Apart from anything else, it was inevitable that they in Australia must got down to a proper basis. They possessed a country with wonderful resources and advantages, and the proper exploitation of such advantages should enable them to become a most prosperous people. It was the reckless disregard of proper standards which had brought them to their present position. ( “ PITIFUL FAITH.” Many people, while convinced that tho desperate situation required painful and drastic remedies, had a pitiful and unbounded faith in the ability ol politicians to wave some magic wand which would smooth out nil their difficulties without the necessity for personal sacrifice. If they remembered that nationally they were regulated by tho actions of the individual, they would see how erroneous was sucli a viewpoint. There was no royal road back to solvents’ for the individual who had not only over-spent his income but had also borrowed money to assist in creating standards of comfort compatible with personal financial prospects. The remedy was drastic reduction of current expenditure, deter mined efforts to live within one’s income, and to liquidate as promptly as possible all liabilities incurred by such personal extravagance. Such a course was difficult and unpalatable, but there was no other cure. In all sections of industry and commerce to-day the necessities of reduced trade had created a position whereby employees had to bo dismissed or at best accept part-time employment, and yet they had Arbitration Court awards prescribing a certain standard of payment totally impossible of continuance in tho present state of business generally, and incapable of being achieved in tho near future. “ THEORETICAL STANDARDS.” Unemployment was steadily grow ing, and they had the ridiculous position of many who could not be employed at loss than award rates, say, nominally £5 to £6 per week, actually drawing not more than half that amount. Surely it was much better to recognise the mockery of tenaciously clinging to theoretical standards which in practice were hopelessly out of touch with realities. What everyone was waiting for was a definite lead from the Commonwealth and State Governments. At the recent Premiers’ Conference the home truths submitted apparently had startled the political lead ers. An agreement that budgets must bo balanced was promptly signed, but they wore still waiting for an indication of the steps to be taken to achieve that most desirable result. Apparently tho consequences of drastic action, which were forgotten in tho process of thinking nationally, had now assumed alarming proportions ou the return to tho spliere of party politics. Recent developments had shown that Australia’s credit abroad definitely depended upon her capacity, year by year, to pay her way and balance her budgets. Any Government could balance her budget this year by making excessive demands upon taxpayers, but if it continued on such a course business would go under, and the sources of Government income dwindle. It followed that permanent financial equilibrium in government depended upon keeping taxation down to such a point as would enable industry to carry on and earn revenue, while at tho same time cutting expenditure (as private individuals must do) to match the income. “WILD TALK.” There had lately been some wild and irresponsible talk of directly or indirectly repudiating the overseas debt. This talk had been properly denounced by the responsible leaders of tho Commonwealth. It was, however, obvious that their overseas creditors could not bo met, nor could their credit be preserved by pious sentiment in high places. Any Government to-day which denounced repudiation, while refusing to carry out measures of drastic economy calculated to equalise revenuo and expenditure, was guilty of hypocrisy. A man could repudiate his debts just as much by refusing to curtail personal expenses as by any public or private declaration. It was amazing that taxation should be the only substantial remedy for situations that tiro majority of politicians could think of. Taxation was rapidly reaching a point where it would cripple the business life of the community. At best it was only a “ first aid ” remedy, and was no substitute for the surgeon’s knife.

The advocates of direct repudiation had modified their original suggestions in favour of insidious proposals of in- , direct repudiation by means of special taxation, which was to apply only to interest. The obvious reason for these proposals was the desire to minimise retrenchment in the matter of wages and salaries at the expense oi one section of the community plausibly explained as an equitable attempt to ad just all incomes to the new standards. Interest rates would be adjusted, and by the forces of economic circumstances in the ordinary course, and such could be effected without dishonour to Australia. The effect on overseas investors of such proposals as were now current would bo disastrous for tho country, apart from the incalculable harm as far as local investors were concerned. It was a well-known fact that since 1917 the bulk of the applicants for local loans had been drawn from the ranks of Saving Bank depositors, and the legislation now proposed would really harm the worker, whom it was designed supposedly to assist. The high rate of interest now being paid on national borrowings was due to tho Government competing with industry in abnormal times for such funds as were available. The ideal position (and one not incapable of achievement) would be the restriction of public borrowings to bare necessities when trade and industry were prosperous; then, when trade was depressed, Government works would bo available for the relief of unemployment. Loan moneys would then be obtainable at more moderate rates, and such a scheme would spread unemployment more evenly between good years and bad years. The postponement of borrowings might also eliminate many unproductive works of a •• white elephant ” nature which would bo no hardship to the country, but would indeed confer 1 a most acceptable boon. Such a scheme might eventuate in the future. He was afraid it could not be looked for at present.