PREMIERS' PLAN

New Zealand Herald, Volume LXXIV, Issue 22627, 15 January 1937, Page 13

PREMIERS' PLAN

ECONOMIST'S BE VIEW THE AUSTRALIAN CRISIS VOLUNTARY LOAN CONVERSION The measures adopted by the Governments of Australia in carrying out the; Premiers' Plan, which was formulated to cope with the sudden reduction ol the national income in I'J'JD-.'lO as a result of the fall in export prices and the withdrawal of London loan money, were described by Professor T. Hytten. of Sydney, economic adviser to tlu; Hank of New South Wales, when addressing members of the Auckland Chamber of Commerce at their luncheon meeting yesteiday. "It was a sort of large-sized brick which no one exactly expected," said Professor Hytten, speaking of the crisis in Australia. "We had been going along merrily, raising our standard of living and living at a pretty high rate, without suspecting that it would come to any sort of end at all." Professor Hytten said that Australia had a regular income of £.'50,000,000 a year, which was lent by London investors. It was spent oil all sorts of public works, and Australians did not .worry whether they were, going to pay their way at all. That £'30,000,000 upon which 200.000 people depended was suddenly stopped, and wool prices, which had been very high, suddenly came tumbling down, and wheat prices also dr.opped. Income Reduced "That suddenly halved our income from exports, while at the same time our extra income vanished altogether," said Professor Hytten. "We had to iind some v ay in which to tide those people over their difficulty, and spread ihe sacrifice more evenly over the population, so the Premiers' Plan came inU> being with its slogan of 'equality of sacrifice.' "

Professor Hytteu said that the Governments of Australia had to start getting costs down in order to cope with lower prices. The gap between costs and prices was so great that it was quite impossible to close it by any one means. There was one means which did amount to propping up prices—allowing the exchange rate to slide from par with sterling to £l3O and then come back to £l2o. On the deflationary side it was a case of cutting costs wherever tliev could be found to cut.

Detailing the various expedients adopted to cut costs, Prolessor Hytten described how the Arbitration Court had cut real wages by 20 per cent, and how mortgage interest rates were cut by 22} per cent. He also mentioned the reductions made in Government costs by the cutting of civil servants' wages, and the curtailment of departmental expenditure. Loan Conversion The biggest measure of the Premiers' Plan was the reduction of the interest on the public debt, according to Professor Hytten, who said that just on £59,000.000 was offered for conversion and everything but £17,000.000 was converted. The Premiers decided that they could now allow the £17,000,000 to escape, and the conversion of this was made compulsory. Professor Hytten said that budgets could not be balanced straight away, and the suggestion of the Premiers plan was that they should be balanced over a period of years, which was not definitely stated. Deficits started to come down then, and last year the deficit for the whole of Australia had been wiped out. This year there was a deficit of £1.000,000, which might easily turn into a surplus. "1 think we will have, to say that it was partly luck and partly good management which brought us through,'' said Professor Hytten. "The Premiers' Plan was done extremely well and deserved success. Alongside it came the gradual recovery in world affairs."