MORE PLANS.

Otago Daily Times, Issue 21265, 20 February 1931, Page 16

MORE PLANS.

AUSTRALIAN FINANCE. THE LANG SENSATION. (From Our Own Correspondent.) SYDNEY, February 12, Australia is becoming heartily tired of plans calculated to overcome the financial mess in which the country has found itself, and demands action. But action seems to be as far off as ever. The main essentials, it has been pointed out by people who should carry weight, are that the Governments should balance their budgets, that costs of production should be decreased, and that the Commonwealth should find new markets for their goods. None of these things is being done. The deficits are mounting in each State, and seem likely to mount. New South Wales is in such a serious position that there is even doubt whether there will be sufficient money in the coffers to meet salaries at the end of the present month. This week the Commonwealth had to come to the aid of the State to the extent of more than £400,000 so that interest payments on loans raised locally could be met. The only other alternative would have been default, and judging by the sensational speech made by the Labour Premier (Mr Lang) at the conference of Premiers at Canberra on Monday last that would not have caused the Government any great concern. Mr Lang’s remarkable proposals created almost a panic in financial circles, for clearly he advocated default. What else can be read into his suggestions? • Here they are in detail: — 1. That tjie Governments of Australia decide to pay no further interest to British bondholders until Britain has dealt with the Australian overseas debts in the same manner as ,she settled her own foreign debt to the United States.

2. That in Australia interest on all Government borrowing be reduced to 3 per cent. 3. That immediate steps be. taken by the Commonwealth Government to abandon the gold standard of currency, and to set up in its place a currency based on the wealth of Australia, to be termed the gold standard. “ If the conference agrees to these proposals,” said Mr Lang, “ it means that there will be released for circulation in Australia millions of pounds that are now sent overseas. The sympathetic fall of interest right throughout the commercial and financial life of the Commonwealth would give new life to industry. By giving new life to Governments and to industry it will cause a rapid absorption of the unemployed. Confidence in Australia will be restored because her dependence on the outside world will be reduced to a minimum. The Government of New South Wales has decided to adopt this policy where it applies, regardless of what the, decision of this conference will be, but I am hopeful that all States and the Commonwealth will join us, and then Australia will be able to say truly that, at last the depression is lifting. From the information we have it is clear that Governments must i reduce their expenditure or publicly declare themselves bankrupt. “ There are two main factors in Government expenditure —wages and interest. I say that wage reduction is not only a wrong, but that it is not by any means helpful towards the solution of our problems. Supposing we reduced the wages of civil servants a further 10 per cent., the saving would be only £1,000,000 a year. Does anybody suggest that pur troubles arc solved when we reduce our deficits from £8,000,000 to £7,000,000 ? Nothing could be more absurd. Now, as regards interest. In ordinary times the New South Wales annual commitments under this head are £8,000,000 overseas, which the increased exchange rate has made £9,500,000 this financial year with every prospect that it will go higher. Payable in Australia our interest commitments are £0,352,000 for the current financial year. With the increased exchange the interest burden is one which the State cannot carry.- To-day it is impossible to meet these commitments—as impossible for New South Wales as it is for the Commonwealth and the other States. It. is a burden that Australia has no right to carry. Most of the debt was incurred during the war and because of the war. It is money that was borrowed at inflated prices, and must now be repaid during a period of deflation. Where, say, two shiploads of wool and wheat would have paid a portion of this interest two years ago, four shiploads are required to pay the same amount now. We should not be asked to continue along these lines.”

Was it any wonder, after Mr Lang had concluded his speech, that the Prime Minister should have risen hurriedly and made the dramatic announcement, “ We will have nothing to do with this plan?” 4 .Mr Scnllin knows better than any other politic # n in Australia to-day what an atmosphere such a speech will create in London. , He could see in it straight out repudiation, and plainly the temper of the Australian people is against that. Mr Theodore, too, was quick to say that the whole plan was impossible, and the representatives of all the States joined in a loud chorus of disapproval. It is safe to say that they would have given almost anything if they could have silenced Mr Lang at such a time. The effect of his utter ances are already far-reaching according to cable messages that have been received from London.

Nevertheless, it is clear that Mr Lang’s speech was not uninspired. The light for Mr Lang’s plan will now he carried into the Federal sphere, and Mr Scullin will soon find that a number of the members of his party will demand that it should he adopted by the Federal Government. Mr Lang is believed to have secured the promises of many of the Federal Labour Party that they will support his ideas which coincide with the famous Anstey plan—repudiation and inflation. An attempt is already being made to capture the support of the outside Labour machine, and the next move will probably be to refer the Lang plan to the Federal Executive of the Labour movement—the all-powerful executive which can put a man out of the Labour movement for ever if it so wills. A definite break up of the Labour Party now seems to be closer than ever, and in the wreck it seems certain that Mr Theodore will follow his leader, Mr Scullin. It is just as certain that if a new Labour Government is formed, with the avowed purpose of giving effect to the Lang plan it wilt not be able to achieve that object, nor will it have a life of more

than six months—the time that must elapse before the Senate can force a double dissolution and the consequent general election. In the meantime the conference is awaiting the verdict of the Commonwealth Bank Board on the panacea put forward by Mr Theodore. This is for the “ restoration of the currency to what it was, say, two years ago,” arid for the mysterious “ release of credits.” Mr Theodore said, by way of explanation ; “ The banking authorities of Australia have the power, by using the powers of the Commonwealth Bank as a central bank, to create additional credit. If we get back to the money value corresponding with the price levels of 1929 we would not devalue the Australian pound or even alter the basis of currency. We should not inflate the currency, but we should certainly enable the country to turn the corner and go forward to a recovery.” It is not thought that the bank’s verdict will be favourable. One banker said that what Mr Theodore really aims at is inflation, though he has expressed himself in delightfully vague terms. It was evident that ho had a desire not to place his house in order. The desire for increased credit came from the Government because it wanted to be saved from facing the real position.