NATIONAL DEBT

Otago Daily Times, Issue 21829, 16 December 1932, Page 13

NATIONAL DEBT

AUSTRALIA’S SINKING FUND HOPES NOT REALISED, (From Oub Own Correspondent.) SYDNEY, November 17. Although in the nine years of its existence the Commonwealth Debt Sinking Fund has been responsible for the redemption of £50,000,000 of Australian public debt, the bright hopes which animated its founders have not been realised. They foresaw the extinction of the National Debt in less than a century, as a result of its operations. Actually new additions to the public debt during the period of the funds existence have been more than three times as great as the subtractions made by the commission’s efforts.

Last year the commission obtained £7,200,000 to pay off the public debt, but figures in the annual report show that during the same period the debt funds increased by more than five times the amount. More than £1,100,000,000 is now owed by the Australian Governments. A definite plan is now guiding the commission’s operations, and with a return to balanced budgets, it may hope to overtake the additions being made to the debt and begin the big task of rcduc-

ing it. Regarding the Commonwealth debt, provision is made for the redemption of the Post Office debt in 30 years by means of an annual contribution from revenue at the rate of 30s per cent. On other Commonwealth public debts the annual contribution is at the rate of 10s per cent., which was designed to redeem the debt in 50 years from 1923. Sinking fund contributions for State debts are in accordance with tho Financial agreement. On the debt existing to June 30, 1927, the annual contribution was 7s Cd per cent., of which 2s Gd is payable by the Commonwealth and 5s by the States. These contributions are calculated to redeem the old debt in 58 years. On State debts created since 1927 the annual contribution is 10s per cent., of which half is provided by the Commonwealth and half by the States. These contributions are designed to extinguish the now debt in 53 years from the date of its creation. The commission does not accumulate its funds with the object of paying off large loans on their maturity, but, so far as possible, expends its income in the year in which the money is received. The funds expended by the Commission last year were used to repurchase, or to redeem, Commonwealth and State securities. The bonds and stock so acquired were at once cancelled, and the National Debt reduced accordingly. On all the cancelled securities the commission will in future receive from the Commonwealth and State Treasuries additional contributions which are in the nature of interest due on tho cancelled securities. This will bring about practically the same result as if the commission’s funds accumulated at compound interest. Tho advantage of this plan is that it is unnecessary for tho commission to have in its possession large holdings of investments. Since the commission was set up in 1923, its total receipts for tho Commonwealth debt amount to £38,428,087. And since the establishment of the sinking fund for State debts, it has received £17,135,355. Altogether its receipts total £55,563,442, In addition, revenue amounting to £15,580,138 has been appropriated and used for debt redemption.