THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY, SEPTEMBER 3, 1931. AUSTRALIA'S RECOVERY.

New Zealand Herald, Volume LXVIII, Issue 20968, 3 September 1931, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY, SEPTEMBER 3, 1931. AUSTRALIA'S RECOVERY.

Accokoixc to figures cabled as coming from the Commonwealth Statistician, Australia has made huge strides toward recovering a favourable overseas trade position. They indicate the transformation of an unfavourable balance of £5,900,000 in 1929-30 to a favourable balance of £-10,500,000 for 1930-31. These statistics, which were tentatively announced some time ago, were accompanied by an explanation showing the recovery to be less dramatic than the round figures indicate. The cabled statement implies one reservation by admitting the export figures include £13,000,000, the value of bullion shipped during the year. It is in a sense legitimately classed as an export item, but it is essentially an abnormal one, impossible to duplicate in subsequent years, since it is far above the "annual output of precious metal. - This, however, is only part of the adjustment that must be made before the measure of Australian recovery can be assessed. The figure given in the cable message, £40,500,000, is very interesting. To meet the interest bill on overseas loans out of national income, an excess of exports over imports amounting to £36,000,000 at par of exchange is needed. On the return published the task has been completed in 1930-31. Toward the end of 1929-30 the British Trade Commissioner in the Commonwealth estimated that- a favourable trade balance of £40,000,000 —about the value of an entire wool clip—would be needed in 1930-31 to stabilise the position. Apparently his estimated requirement has been met. If that were so entirely, the adventitious character of the bullion export could bo regarded more lightly, because the achievement in a single year would be so impressive. As it happens, there are other very necessary reservations to be allowed before the actual value of the year's statistics can be determined.

To take first the £13,000,000 representing the value of bullion shipped abroad, some £4,000,000 was sent to meet Treasury bills that had to be repaid in London. This amount must be deducted from the favourable balance, since it was a capital transfer. Then, it happens, as the complete returns by the Statistician show, the value of imports is given in British currency, and of exports in Australian. No comparison of any value is possible until the two sums have been adjusted to the same standard. Reduced to terms of British currency the exports for the year ended June 30, 1931, valued at £88,800,000. The imports, also measured in sterling, amounted to £60,b00,000. The favourable balance appearing first as £40,500,000 immediately shiinks to £28,300,000. Deducting the £4,000,000 utilised to meet Treasury bills that matured on June 30, the amount reduces to £24,300,000, a sum £11,700,000 short of what was required to meet the interest bill of £36,000,000. The, deficiency, it has been explained, was made good by utilising reserve holdings in the v banks in London. Thus, by the export of bullion and by drawing on reserve funds, Australia met an actual deficiency in overseas requirements with resources that will not be available a second time. The achievement of the year, substantial though it was, fell considerably short of what the British Trade Commissioner declared to be necessary for stabilisation. Neither did it measure up to what Professor Copland said a little later would be essential. Professor Copland allowed for imports valued at £70,000,000. Actually they amounted to £60,500,000 in round figures, a greater reduction than he estimated as necessary. But he expected exports to reach £110,000,000, whereas their value was only £88,800,000 in British currency. So the £40,000,000 balance he demanded became an apparent £28,300,000 and an actual £24,300,000. With all that must necessarily be said to correct what appears on the face of the cable message, Australia has made marked progress toward recovering a favourable balance in overseas trade. Much of the readjustment has been compulsory because adverse exchange rates restricted the flow of imports, and the enforced cessation of public borrowing, by requiring an actual creation 1 of credit through exports to meet interest payments, increased the restraint. Nevertheless, whether under duress or not, a long stride toward restoration of economic equilibrium was made during ]93031. It was made by the Australian people. The Governments cannot j show equal progress in their part of j the task, the balancing of Budgets. Indeed, in at least two instances, especially New South Wales, and to an almost equal extent the Commonwealth, nothing appreciable had been done when the year closed on June 30. As one feature of what the Statistician disclosed proves, urgency was required from the Commonwealth because what was being achieved outside the realm of public finance accentuated the task of the Federal Treasurer. The shrinkage of imports cut heavily into one of his most important sources of income, customs revenue. This reveals a weakness in the financial system of Australia, duplicated by that of New Zealand. Both countries have leaned heavily on customs taxation for revenue, and both have swelled the yield by borrowing freely abroad and thus facilitating the flow of imports. When the overseas loan markets curtailed their offerings, the volume and value of imports, already checked by the fall in export prices, diminished further. In both instances, therefore, a source of public revenue it had become customary to regard as unfailing shrank severely. The cue was to meet the situation by a drastic reduction in public expenditure. On both sides of the Tasman there was a recoil from this salutary, if painful, prescription. In Australia, as the figures already discussed show, the community travelled far ahead of the Governments in meeting the finan* cial crisis.