AUSTRALIA'S GOLD.

New Zealand Herald, Volume LXVIII, Issue 20862, 2 May 1931, Page 10

AUSTRALIA'S GOLD.

Before proceeding with its consideration of the Commonwealth Bank Bill, the Australian' Senate proposes to take the unusual course of summoning the chairman of the bank to the bar of the House to give evidence regarding the Government's proposed appropriation of the bank's gold reserve to meet current obligations in London. The gravity of the issue is sufficient justification for this extraordinary proceeding. Shortly after the Scull in Government assumed office, toward the end of 1929, Mr. Theodore, then acting on the advice of the Commonwealth Bank, obtained legislation enabling it to acquire all gold held in Australia by banks or otherwise, its intention being to centralise the control of exchange operations and prevent the depletion of the gold reserve of the note issue by indiscriminate exportations. At that time, the Commonwealth Bank held about £20,000,000 of gold and it subsequently acquired £26,000,000 under the powers of the 1929 legislation. As the result of successive shipments, its holding is now less than £16,000,000. The greater part of the gold accumulated in Australia when the crisis developed has been sent abroad, mainly to pay interest on Government debts. Consequently, this depletion of the reserves has not achieved any real progress toward recovery. The gold has been used to meet Government liabilities, and the Governments have to a corresponding extent increased their indebtedness to the Commonwealth Bank, which has relinquished the gold in exchange for Treasury bills and debentures. Accretions to the floating dfbt in London have merely been transferred into floating debt in Australia. A month ago, Sir Robert Gibson wrote to the Treasurers of the Commonwealth and of the five State Governments directly dependent on the Commonwealth Bank warning them that no further assistance could be given in London, and that less than £7,000,000 additional could be advanced in Australia. Appended to his letter was a statement of the accommodation afforded by the bank to the Governments in London and in Australia. In June, 1929, their unfunded obligations were £1,500,000; by last December, the total was £30,300,000, and by April 2, it had increased to £51,495,000. Tn the face of this appalling record, Mr. Theodore bitterly attacked tlfe bank for its failure to adopt "a more liberal policy." Knowing perfectly well that the bank cannot indefinitely "create" credit and certainly cannot do so in London, Mr. Theodore now proposes to seize the remnant of its gold reserves —incidentally removing all obstacles to unlimited inflation and repudiating his pledge in December, 1929, that the Government would not interfere with the convertibility of Australian notes. He talks of so many tons of gold lying idle in bank vaults and heroically proclaims his determination to ship every sovereign to London rather than allow Australia to default. But since his Government neither owns the gold nor has the means to buy it, his professions of courage are cheap mockery to conceal the failure of his Government to apply the real remedies necessary in such a predicament and a vain attempt to hide the fact that Australia's credit has been destroyed by political folly and ineptitudo.