AUSTRALIAN FINANCE.

New Zealand Herald, Volume LXVII, Issue 20593, 18 June 1930, Page 11

AUSTRALIAN FINANCE.

GENERAL RETRENCHMENT.

NO OVERSEAS BORROWING.

EFFORT TO BALANCE BUDGETS.

The basis upon which the public finances of the Commonwealth and the Australian States will be conducted in the financial year beginning on July 1 was indicated by statements issued after the two days' sitting of the Loan Council at Canberra last week. A cablegram published on Friday included the announcement of a £10,000,000 loan at 6 per cent., and the statement that the accounts of the Commonwealth and the State Governments for the current financial year, closing on June 30, will disclose an aggregate deficit of approximately £9,000,000. It was also reported that all loan expenditure, which amounted to £44,000,000 in 1928-29, will be reduced to about £24,000,000 in 1930-31/

Dependence on Local Funds.

As chairman of the Loan Council, the Commonwealth Treasurer, Mr. E. G. Theodore, issued a statement in which he said the Loan Council reaffirmed the decision reached in February that loan expenditure should be reduced to such an extent as will enable Australia to raise its future loan requirements almost entirely in the Australian market. This heavy reduction in loan expenditure has necessitated a very close review of all loan proposals, and, as a result, nonreproductive works have been eliminated from the programmes. A more drastic reduction of loan expenditure would not be justified at the present time, and would be likely to do more harm than good. As regards the oversea market, the Loan Council considers that when conditions become favourable, further issues should be made to assist in meeting some of the arrears of borrowings of the last two years, but the oversea market should not be looked to for any substantial proportion of current requirements. The difficulties of securing exchange to cover oversea payments of the Australian Governments were closely considered. The chairman of the Loan Council explained the action taken by the Commonwealth Government and by the banks with a view to adjusting the adverse trade balance, and indicated that the object was to secure, in the near future, an excess of exports sufficient to meet the interest and sinking fund payments of Australia overseas.

Greater Difficulties Ahead.

The following joint statement by the Commonwealth and State Treasurers was also issued:—

" The Loan Council decided, in view of the difficult position of Australian credit abroad, to finance its loan requirements for the forthcoming financial year almost entirely from Australian funds, and in view of the very definite decline in the national income by reason of the drop in tho export value of staple products, the Loan Council recognised the need of reducing these loan requirements to the absolute minimum. The Loan Council has, accordingly, decided to reduce loan expenditure for the next financial year to an amount which is 45 per cent, less than that of last year. " A consideration of the loan requirements of tho various Governments has necessarily involved a careful survey of the position of Australian finance, and in this regard tho various Treasurers have been met with the fact that for the current financial year the accounts of the various Governments, Commonwealth and State, will disclose a probable aggregate deficit of approximately £9.000,000. " The outlook for the forthcoming financial year, having regard to the expected declino in revenue from practically all sources, presents greater difficulties than thoso now being experienced.

" The members of the Loan Council appreciate that the consideration of the financial position of the Commonwealth and each State involves a review of the financial policy of each Government, and that it is not the function of the Loan Council to determine, or even suggest, the form which that policy should assume. The Treasurers feel, however, in view of the difficult, outlook generally, that it is proper and advisable for them to urge upon all Governments the need for the utmost economy in regard to expenditures, and also that it is essential that the budgets of the Commonwealth and the States should be balanced for the forthcoming financial year. This is necessary not only becauso of the Australian position. but also because of the seriouc effect which the continued deficit* in the ao counts of tlu Comnionvealth and State* have undoubtedly had upon the credit of Australia abroad."