AUSTRALIA’S FINANCE

Manawatu Standard, Volume LI, Issue 117, 18 April 1931, Page 9

AUSTRALIA’S FINANCE

GOVERNMENT AND THE BANKS. CORRESPONDENCE DISCLOSED. FEDERAL TREASURER’S STATEMENT. (United Press Association.—By Electric Telegraph.—Copyright.) CANBERRA, April 17. In the House of Representatives today, Mr E. G. Theodore, Federal Treasurer, disclosed the correspondence with the Commonwealth Bank Board in consequence of its ultimatum with regard to the limitation of Treasury bills. Ho said that the bank had advised the Government on April 2 that it would be unable to extend financial accommodation to the Commonwealth Government beyond the total of £25,000,000 represented by Treasury bills for the overdraft within Australia and the present total advanced in London upon Treasury bills and debentures, amounting to £25,000,000. The bank pointed out that, owing to the continued drift of Government finances, accentuated by the action of the New South Wales Government and the inability of the Victorian Government to obtain further assistance from the associated banks, it had been made necessary for the Commonwealth Bank to consider its capacity to continue to finance the Governments of Australia. Mr Theodore said that his reply to the Bank Board on April 15 emphasised that the Government could not be deflected by the unawarranted action of the Bank Board, whose attitude could only be regarded as an attempt by the bank to arrogate to itself supremacy over the Government in the determination of the financial policy of the Commonwealth. Persistence by the bank in this attitude would force all the Governments to dishonour their contractual and other obligations. The Government therefore seriously challenged the right of the Blink Board to cut off money supplies without consultation or prior discussion. In another part of his letter to the Commonwealth Bank Mr 'I neodore hlames the banks for the present crisis, declaring that they blindly followed the overseas banks in pursuing a policy which forced down Australian prices in consonance with slumped prices overseas. There had been a too rapid deflation, and a consequent collapse of trade profits, with thousands of bankruptcies and unemployment on an unprecedented scale; whereas, if the banks had continued to sustain industry until it had adjusted itself Australia could easily have weathered the storm. A noteworthy fact was that during the past twelve months the Australian workers through variations in their awards and reductions of wages had lost £40.000,000, but people with fixed money claims against the Government or against industry amounting to £70,000,000 continued to enjoy their full incomes.

Declaring that the banks themselves were not above reproach, Mr Theodore’s long letter concluded by saying that the banks had drained vast sums from industry since the war by high charges, by which they had doubled their profits, built up colossal inner reserves, and expended millions on palatial new premises. The Commonwealth Bank had allowed itself to be dominated by the trading banks, which had become the final arbiters on interest and exchange rates, exacting a heavy toll from the community. Mr J. G. Latham, Leader of the Opposition, said that Mr Theodore’s statement was one of the most important in the history of the Commonwealth. It went to the very root of Australia’s present-day problems. Tho Prime Minister, Mr J. H. Scullin, promised members an opportunity of debating the matter at a later stage. Authoritative assurance was given at Canberra to-day that, whatever happened in banking circles, tho Government would be able to meet its commitments until the end of the financial year.

EFFECT OVERSEAS. . DROP ON LONDON STOCK EXCHANGE. Received April 18. 9.40 all. ' LONDON, April 17. Tiro announcement that the Commonwealth Bank had declined to further finance the Commonwealth caused an all-round drop in prices on tho Stock Exchange, ranging from two to five points. A message from New York says that 'Australian Commonwealth bonds promptly reacted on Wall Street. ASSETS TRANSFERRED. AFRAID OF MR LANG. Received April 18, 11 a.m. SYDNEY, April 18. Anticipating the depreciation in Australian currency, the directors of a well-known limited company have been transferring liquid assets overseas and now have more than £61,000 in New York. “Frankly, we are afraid of what Mr Lang may do next,” said the chairman at the company’s annual meeting.

AUSTRALIA HOUSE COSTS. SYDNEY, April 17. Mr P. E. Coleman, M.P., who investigated the administration of Australia House, London, has submitted his report, in which lie estimates that the total cost of Australia House and its activities aggregates £312,000 a year. This includes migration costs and the expense of representing the various States in London. The report states that New Zealand by comparison spent £52,769 end South Africa £65,391 in complete representation last year.

LONDON PAPER’S COMMENT. LONDON, April 16. The Morning Post’s financial editor says: “Tho Government’s concession to Australia is approved of in the city. “The people of Australia must realise that Britain is confronted with a heavy Budget deficit and is bearing a greater burden of taxation than any other nation.”