AUSTRALIA'S DILEMMA.

New Zealand Herald, Volume LXVIII, Issue 20866, 7 May 1931, Page 9

AUSTRALIA'S DILEMMA.

[LONDON LIABILITIES. USE OF GOLD RESERVE. SIR ROBERT GIBSON'S VIEWS > STATEMENT TO SENATE. RISK TO PUBLIC CONFIDENCE By Telecraph—Press Association—Copyright. (Received May f-. 10.15 p.m.) CANBERRA. May 0. .An event, unique in tho annals of the Federal Parliament occurred to-day when gir Robert C.ibson, chairman of the Commonwealth Brink Board, appeared at. the Bar of the Senate to give his board's view of the Commonwealth Bank Bill, rinder which the Ministry seeks to ship large quantities of gold overseas. Members of the Ministry and of the House of Representatives crowded the galleries of the Senate to hear Sir Robert's statement. Sir Robert said the board was in convinous communication with tho Bank of ■England, which had no direct financial relations with the Governments of Australia. Ho confidently believed that the Bank of England won lei do anything in sts power to help Australia, either by influencing the market in London in her / favour, or by helping bis board. Sir Robert added that. .C 5.000.000 worth of Treasury bills would fall due in T/inf]nn on June 30. and there was a danger of default. Tie read a letter sent to the Treasurer, Mr. E. G. Theodore, in which he stated that, the Commonwealth Bank had already shipped £5.000.000 in gold io meet the needs of the Government prior to March 30. ./ jf the country must default it would be preferable to default in Australia, and not. to people overseas. Mr. Barnes: Would you regard tho better alternative to be a further shipment of gold ? Sir Robert: Undoubtedly. Sir Robert, continuing his remarks, said the amount of gold held in Australia as a reserve against the note issue was £15.150,000. The total of the unfunded debts owed by the Australian Governments in London was £38,075,000, of which £5,000,000 was due to the Westminster Bank, £5,000,000 due to the bill market, £2.950.000 to the Australian trading banks, and £25,125,000 to the Commonwealth , Bank. From inquiries made in London he found 5t would bo very difficult to discount Australian bills to meet those falling due at an early date, or if it could be dono it would be at a comparatively high rate of interest. Sir Robert emphasised that the Commonwealth could make no further shipments of gold to London without reducing the Statutory reserve. The fact that the note issue would be inadequately supported would create uneasiness and loss of faith. The value of the Australian bank note would depend entirely upon tho confidence of the people, and the ability of the people to redeem notes in some form or another./ The country had an instance of what loss of faith meant quite recently, n! hough in that case the Government Savings Bank was backed by ample reserves. There was the same lack of faith in fiduciary issues. On tho other hand, the gold reserve had a psychological value. It created confidence in the mind of the people, and in those who handled the notes.