HIGH EXCHANGE

Evening Star, Issue 21284, 13 December 1932, Page 5

HIGH EXCHANGE

COST TO AUSTRALIA For the payment of interest charges on loans raised in Great Britain and the United States by Australian Governments and semi-governmental bodies an amount of nearly £36,000,000 has had to be remitted abroad annually since the practice' of borrowing to pay interest was necessarily discontinued owing to the unfavourable- condition of the money market, savs the Melbourne 1 Argus.’ It would have been much better for the credit of Australia had this money always been found out of revenue, but while investors were ready to lend, Australian Governments were more disposed to follow the easy path of borrowing rather than that of economy. While the payment of overseas interest out of revenue is to be commended. the change of policy has coincided with a period of depreciated Australian currency, which means that the interest burden is made heavier in proportion to the amount of exchange that has to be paid on the overseas commitments. Fluctuations in exchange last year culminated in the high rate of 30 per cent, being fixed, but this was in operation for a comparatively brief period. When the Commonwealth Bank, took control of_ exchange it reduced the rate to 25 per cent., and next month will complete a year’s operations at that rate. Had it not been for the suspension of interest on the war debt Australia would have had to pay in exchange this year £9,000,000 in addition to £36,000,000 in interest on Government and semi-governmental loans. With exchange at 25 per cent, every man, woman, and child in the Commonwealth would have been debited with £1 7s Bd. As children do not pay taxation a fairer comparison is afforded by distributing the £9,000,000 over the population over twenty-one years of age. There are 3.942,635 adults in Australia, and with exchange at £9,000,000 every adult would be responsible for £2 5s sd. The suspension of war debt payments decreased the total interest payable abroad this year to approximately, £31,000.000. On this sum the amount of exchange would be nearly £8,000,000. Thus. each adult has been drawn on unknowingly to contribute about £2 more than would have to be paid to satisfy the external interest bill had Australian currency been at par with sterling.