“INFLATION” SHADOW

Evening Star, Issue 20655, 1 December 1930, Page 1

“INFLATION” SHADOW

AUSTRALIA’S INDUSTRIAL SPECTRE [SrseiiL to thi ‘Star.’] WELLINGTON, December 1. Fear of inflation hangs over A ustralian iudustrv like a black cloud, and for this reason it will be surprising R the new conversion loan of £28,000,000. due in December next, proves a sin?cess,” said Air 13. Soutar, a Wellington business man who has just returned from Australia to-day. . “ At the same .time, it will be highly unfortunate for Australia, lor it is the first real test of her willingness to shoulder the burdens which tiie Gonfcrenco of Prime Aliuisters accepted on behalf of the people. Bad as things arc, there still seems to bo a disposition to look to the Government to help the people out. The recent victory ct Afr Lang at t!to polls lias been taken to mean that the general run of worker has not been impressed by the talk ol hard work and sacrifice. He feels that much easy money has come from tlic Government in the past, and that tbei e is no reason why another well should not be tapped. To the average man finance is a mystery. He sees plenty of money (as ho thinks) in the banks, and there is a read dread that be may bo impressed by the loose talk or alr i'Anstev, the federal Minister of Health, who has issued a memorandum on the financial situation and who has toured tho country arguing that tho banks should be made to carry the country s finance and that nationalisation of the banking system is imperative. ‘•lnflation is such an attractive course (or so a strong faction of the Federal Labour Party thinks) that the investing classes are alarmed. Hieie is no denying that. And as the h ! st people to suffer by inflation would be the holders of Government brads, it will be surprising if the conversion loan is rapidly taken up. It mil be a h e cresturc to the world, but investors aio thinking of more than gestures. They are concerned for the future of then m °" This threat of inflation is now past the stage of a nebulous possibility. At a recent meeting Mr Anstey revealed the fact that the Commonwealth Statistician (Air C. H. Wickens) mt nrenared a secret memorandum toi tne Government in which ho favoured some form of inflation. Air Wiekcus is an economist as well as a statistician, and was one of the Comnutte of experts appointed by the Bruce Government to prepare a report on the operations ot the Australian tariff some little time o(z 0 . Air Wiekcus, speaking ot the psychological effect of falling prices, said that something heroic was needed, something more than the raising oi the exchange rates proposed by the. Economic Conference, and he advocated what he called “some measure oi what mav be. called inflation.’ Iho only wav out, as he saw it, was tcv check deflation. Air Anstey and Ins follow cis have not hesitated to seize upon; this, and a contest is looming. _ “What will happen it is impossible to foretell. To get the position m perspective it must be realised despite the statements of the new 1 edoral Government at the outset ot its career, and the warnings winch it received it failed to call Parliament together lor four, mouths to put now plans of economy into effect. Inat valuable time lost has placed it in the present apparently dangerous position where a deficit appears unavoidable m spite of its efforts from now on. What may happen under political pressure in tho circumstances which will then ause it is idle to speculate. The attraction of a policy of inflation as a- means of lightening* the load of the national debt is obvious. The fact that Australia's credit will ho ruined will have little effect with the ‘wild men ■ of the Federal Party, who have been heartened by the success of Mr Lang ot the noils, and have goiie s ? Bu* as to attack their own leader in his absence, drawa protest from Air Hogan, the Labour Premier of Victoria, at what lie described as ‘a stab in the back. ' But these things are much in the minds ot those who are able to invest. “The bright feature of the situation is tlqit Australians still believe in the future of their country as far as industrial investment is concerned. No doubt the new tariff, and the feeling that even higher tariff barriers . are likely, are what 1 have encouraged them to put their money into local industry. In any event, quotations on the share market have soared high in recent weeks. They may determine to act when the Government asks them. The hanks have already made clear the fact that they will not underwrite the, loan.' The intention is to appeal to the people of Australia to vindicate their honour. Banks, life and fire insurance companies, etc., hold just under £3,000,000 in the■ £20,000,000 loan which, matures on December 15. “Another interesting phase of the situation is the growing feeling that tho States must go. Air Stanley Bruce, on his return from abroad recently, made a statement which would have been unthinkable in tho days of his Inst Ministry, when lie said that the States must" never go their own way again. Against the movement for separation which has been launched in Western Australia there is a real move towards one Government. The burden of dual taxation has grown as high as it can he. and the last decision of the Commonwealth to intrude on the States’ field, and collect an additional income tax has not helped taxpayers to bo reconciled to paying two separate assemblies. South. Australia, lor instance, would gain very greatly from tho abolition of tho Separation Act and tho unity of Australia under one Government. Slowly hut surely that is coining.’’