SOUND ECONOMICS

Opunake Times, 14 February 1939, Page 1

SOUND ECONOMICS

COMMITTEE’S ADVICE

VICTORIAN AUTHOR] TIES

The adoption of a policy Ox building up reserves in good times, deferring if necessary some developmental works so that resources will be available for the expansion of public wqrks in a depression, is advocated by the Victorian Economic Committee, which submitted its t'ir*t report to the State Ministry.

The committee comprises Professor D. B. Copland, the State Director of Finance, Mr. A. T. Smithers, and Mr. R. V. S. MacPherson. The Cabinet will consider the report soon.

The committee recommended that State departments should b«; advised by the Government to prepare, in advance, plans of some of their development and betterment projects, particularly the Forest Commission, the Railways Department, the State Electricity Commission (as regards briquetting’) and. the Housing Commission. In the meantime, the committee said, works expenditure by the Government, local bodies and scmi-governmental bodies should r«t be reduced because that would increase unemployment at •>, time when other forces, notably low export prices and an unfavourable season, are exercising a depressing effect on industrial activity.

Employment Expansion Ended In the event of unemployment increasing, however, the committee urged that the Government should seek additional loan appropriations of up to £1,500,000 for deferred maintenance. An additional sum of .-685,000 from revenue could he spent economically on maintenance each year.

The committee thought that, bv providing £500,000 for drought relief to primary producers. seeking a special loan appropriation to meet the expected Budget deficit of £825,000. and maintaining its normal loan expenditure, the Government was doing all that was necessary at the moment.

“There 's no sign of substantial decline in the volume of employment. although therg arc-, indications that the expansion of employment of recent years has now ceased," said the report. “In these circumstances it will be desirable to watch the trend (.r employment closely, and to prepare for anv wwession that may arise through a decline in economic activity caused by the continuance of h»w export prices.’-

Quoting a survey made last March, showing that 35 per cent in a "sample” of 9000 unemployed were general labourers, the committee said that disclosure suggested that too great a proportion of' the population was allowed to drift into that group or that many of the present unemployed were unemployable. Restraint Urged in Good Times While admitting that no Government could control all the forces that caused instability and cyclical unemployment, the committee suggested that the Victorian Government should recommend to the Loan Council the desirability of considering the loan programme and budgetary policv of all Governments in their relation to the problem of promoting stability of employment. A policy of prudence in good limes and expansion in periods of adversity required deliberate exercise of restraint in the face of easy credit conditions, and budgeting for surpluses when revenues were buoyant, added the report. "Financially,” said the report, “the policy could be carried out in Australia by an arrangement between the Commonwealth Bank and the Governments to pay off portion of their floating debts (Treasury bills) on the understanding that the re-issue of Treasury bills of an agreed amount would be permitted if at a later adverse conditions again prevailed.

“Tills would leave a margin for sound expansion bad times, when Budget deficits are likely to occur and increased loan programmes may require some expansion of central hank credit. In a Federal system it is desirable that the Governments should, as far as possible, pursue common policy. The essence of Ibis policy is the exercise of restraint in good times.