AUSTRALIAN LOAN COUNCIL

Otago Daily Times, Issue 23107, 5 February 1937, Page 11

AUSTRALIAN LOAN COUNCIL

KEEN CONTROVERSY EXPECTED

SHORTAGE OF MONEY FOR WORKS

(From Our Own Correspondent) SYDNEY, Jan. 30. Keen rivalry and controversy between the Commonwealth and most of the States are anticipated when the Loan Council meets on February 4 in Melbourne. Loan money and interest rates are the principal bones of contention. Several Premiers, it is stated, favour raising a loan in London for their works programmes. Realising that most Slates are likely to press for a radical change in loan policy, the Prime Minister (Mr Lyons) has decided to go to, the council himself. The Prime Minister’s decision indicates the determination of the Commonwealth to oppose strongly any move which may have the effect of increasing interest rates. The Treasurer (Mr Casey), who is chairman of the Loan Council, would otherwise have been the only Federal member. Those Premiers who are expected to press for the London loan will do so on the ground of shortage of money for Government works and the failure of the last Australian £7,500,000 loan. It is expected that this proposal will be abandoned on the advice of Mr Casey and the Commonwealth Bank Board.

Drastic revision of loan expenditure for the remainder of the current financial year is almost certain to be proposed after a review of the loan position. This will inevitably cause serious disputation. States’ representatives will point out that to cut the programme at this stage would not only mean the abandonment of major works, but would leave them with no carry-over to finance works needed early in the financial year. The Loan Council, in deciding in November to grant an extra £1,000,000 to Western Australia because of drought conditions in that State, increased the total loan programme for 1936-37 to £22,450,000. An amount of £5,000,000 from the June loan of £9,000,000 to carry on the programme and the £7,500,000 raised recently brought the total loan money available to finance works this year to £12,500,000. This left £9,950,000 still to be raised. The amount of money available in the various States for financing loan expenditure is not accurately known, but it is stated that a cut of at least £4,000,000 in the works programme will be necessary if it is decided not to raise any further loans this financial year. Some of the States are very short of loan funds, while others and the Commonwealth have substantial reserves. In the event of the Loan Council deciding that it would be unwise to approach the market so soon after the failure of the last loan the State Premiers who have depleted loan funds are certain to advocate a reallocation of the available money.