CLUTCHING AT STRAWS.

New Zealand Herald, Volume LXVII, Issue 20716, 8 November 1930, Page 10

CLUTCHING AT STRAWS.

A fresh crisis has arisen in Australia through the attempt by a section of the Labour Party's caucus to impose upon the Government a choice of fantastic alternatives for the solution of an imminent domestic problem, the renewal of internal debt to the extent of £27,000,000, which falls due for repayment next month. The Government was forced to abandon its declared intention of balancing the Budget, its surrender having been so complete that the acting-Treasurer apparently tlid not venture to predict the magnitude of the deficit. That will, of course, have to be covered by borrowing in some form, presumably by drawing further on the Commonwealth Bank, which in the past 12 months has furnished £22,000,000 to enable the Governments to meet their commitments. Not content with this measure of inflation, the rank and file of the party is now pressing for further experiments in credit manipulation. The Government recently announced that a 6 per cent, loan would shortly be issued to. cover the maturing liabilities, onethird of which represents State loans. The caucus overruled this proposal, the only rational course possible, and carried a recommendation that the bondholders should be forced by legislation to postpone their legal claims for a year. In other words, they ask for a forced loan or a moratorium applicable only to a section of the community. Tho qualification that bonds held by necessitous persons should be cashed by the Commonwealth Bank is no palliation of the proposed oppression, since it is impossible for the bank to determine necessity, and, in any event, it could carry out the scheme only by further inflation of the currency, tho only means by which it could comply with tho alternative demand that it should underwrite a conversion loan. The caucus plan is perilously near repudiation, for if the £27,000,000 now falling due were postponed for a year, tho debt would coincide with the maturity of Federal loans alone exceeding £29,000,000 in December, 1931. During next calendar year, some £44,000,000 of internal debt fall due for repayment, followed by £72,500,000 in 1933 and £51,000,000 in 1934. Moreover, the Australian Governments aro pledged to finance public works expenditure by domestic borrowing. The result of the caucus deliberations has been to shako the faith of overseas interests in the sincerity of previous professions, and now to administer a staggering blow to the national credit among the people of Australia themselves. Had the Government been allowed to proceed with a sound programme of reorganisation, patriotic motives would have impelled Aus, tralian bondholders to renew maturing loans and to subscribe to new issues, but the wrecking tactics of the Labour caucus will inevitably destroy public confidence and alienate all inclination to respond to appeals for national co-operation. ■ It will be a serious matter for Australia if Mr. Lyontf is forced to resign and the revolutionary clement gains full control of tho Government.