AUSTRALIAN TRADE

Otago Daily Times, Issue 23529, 18 June 1938, Page 23

AUSTRALIAN TRADE

FAVOURABLE BALANCE SHRINKS EFFECTS ON LONDON FUNDS • From Our Own Correspondent* SYDNEY, June 9. As a result of an unexpected retrogression in Australia’s overseas trade account in May. the trading balance for the current year may not be sumdent to meet annual commitments overseas for interest on public debts. Thus, for the first time since the depression years, the Commonwealth Government will probably have to call on London funds to complete the payment of its interest bill. The extent to which London balances will have to be used is uncertain, but between £2,000.000 and £4.000.000 may be .reqUDuring May, the commodity balance went against Australia, imports being valued at £9.772.600 and exports at £9.298.000. Even after transactions in bullion and specie are taken into account. there is a favourable trade balance for May of only £647,000, compared with a favourable balance of £4.347,000 for the corresponding month of last year. The collapse in the commodity balance this year is due partly to sustained heavy imports, but mainly to the sharp decline in export prices. , ~ At the end of May the favourable commodity balance for the 11 months was only £1,712,000, compared with £27.820,000 at the corresponding date last year. The balance, including gold, was only £12.290.000. compared with £36,602.000 a year ago. In addition to the visible trade balance of £12,290.000, an “invisible balance" of about £7.000.000 has been built up by way of credits from investments funds transferred to Australia But, even taking this into account. it is unlikely that Australia’s overseas balance of payments for the year will appreciably exceed £20,000,000. The interest obligation amounts to about £23,000,000. The Treasurer (Mr R. G. Casey) said that rising imports and falling prices for exports were not causing the Government anxiety, and Professor E. C. Mills, dean of the faculty of economics at Sydney University, endorsed this view. “ This sort of thing," said Professor Mills, “is apt to happen at any time, and that is the reason for the building up of the London fund. The position needs watching, and should it become critical, then we will have to cut our cloth to suit our needs. Yearly figures are purely arbitrary and often misleading. The drop in export values, due to lower values and less exports of wool and wheat, is particularly responsible for the present trade balance, but these things will correct themselves.