AUSTRALIAN FINANCES

Taranaki Daily News, 6 May 1930, Page 15

AUSTRALIAN FINANCES

DANGER OF BANKRUPTCY DECREASED SPENDING POWER. FIFTY MILLIONS A YEAR LESS. The statement that Australia was heading for national bankruptcy when the Federal Government took its recent drastic action, was made by the Treasurer, Air. E. G. Theodore, in a speech in Sydney recently. He declared that there would be a diminution of £10,000,000 in revenue and £30,000,000 in taxable incomes. The London market was inaccessible to Australia, except at rates that no reputable nation would agree to pay. The people, he said, had £50,000,000 a year less to spend. ‘ . “I know that the occasion is not one for an incursion into the domain of politics,” said Mr. Theodore, “but there are certain problems facing our Commonwealth which are commc'n to us all. The most important problem is the financial condition of Australia. Onr exportable products declined in value last year by about £40,000,000. That decline was caused partly by drought, but mainly by a fall in the market value of exportable products.. In spite of that enormous decline in the national income we went on, as a community, buying oversea goods very extensively, and were not far from reaching a very difficult problem if we had continued to purchase abroad on the same extensive scale as we had been doing in recent years. “We were undoubtedly heading for national bankruptcy. With only £lOO,000,000 worth of exports, we could not be expected to pay for £147,000,000 worth of imports, and, in addition, to pay £30,000,000, or more, overseas to meet our interest bills. That was the problem which faced this country, and is still facing it, although attempts have been made to meet the situation. “The Australian banks and the Commonwealth Government have taken certain measures, described as sensational and drastic, in order to bring a corrective to bear upon the situation and prevent a national default, overseas. It is because the people generally have recognised that drastic action was required that they have, generally speaking, found no fault with the action taken by the banks and the Government. To put it plainly, we have had to take steps to see that no more goods are imported to Australia than can be paid for in hard cash.” IMPORTS AND HARD CASH. Mr. Theodore continued: “The diminution in our national income has resulted in the people having at least £50,000,000 a year less to spend. There is an explanation of our most serious problem. It is as plain as a pikestaff. The facts are so obvious that every intelligent man must realise that a solution must be found. Whether we like it or not we are compelled to resort to economy —economy by Governments and by communities as well. If we are to have economy is it not sound to reduce our expenditure on imported goods and support our own products as far as we can ? “•Some of our critics say that we should have gone to London and raised sufficient loan money to tide us over our temporary difficulty. Whether that would be a solution or not, the London market has not been, and is not now, accessible to us. That is one of the melancholy facts facing us to-day. Of course, I want to make it plain that tire market is not accessible at the interest rates which any decent or reputable nation would agree to pay. If we were to go to London to borrow £30,000,000 or £40,000,000 we would be only putting off the inevitable day of reckoning. FATAL BORROWING POLICY. “We shall be compelled to go on the London market as soon as we get a favourable opening, but the entire proceeds of such loans will be required to reduce - our existing overdrafts in London, and for the purpose of retiring certain Treasury bills recently sold to the market. It is my opinion, as Treasurer and head of the Loan Council, that there is no prospect of Australia looking to London for loan money for public works or development for: some considerable time to . come. We • will be compelled to depend in the futile. more and more on our own financial resources, .whatever they may prove to be. I think that I can lay’ it down as part of the policy of the present Government that we shall not be approaching the money market in London, New York, or anywhere else for new money_for a long time. Any money we can get there must be for the purpose of extinguishing overdrafts, which are an enormous burden on Commonwealth and States alike. •

“Australia has been borrowing . too freely on the oversea market,” Mr. Theodore declared. “In one year she secured £57,000,000, which is quite, beyond our capacity to meet.. The result of the policy in the past has been to flood Aus-, tralia with imported goods. • As a nation we have! to look more to our own •resources and to bur capacity to supply our own needs''in goods or money. If we can improve our' capacity to■ carry out our own development programme and get our own money locally we shall become more independent, our credit will improve infinitely as a result, and we shall be more capable of facing future problems.” “GREAT DIFFICULTIES TO FACE.” Mr. Theodore said he did not wish to appear in the role of striking a pessimistic note, but Australia had great difficulties. Not the least of the problems wore those facing the various Australian Treasurers. He was able to sympathise with the State Governments, because he knew the position they were in. “Next year —that is, after the end of this financial year —the Commonwealth Treasurer,” said Mr. Theodore, “will no doubt face a situation, such as this: With a revenue declined by at least £10,009,000 there may be little prospect of making up the deficiency without causing some hurt here and there. If our Customs revenue suffers we know Zhat iil.'ome tax will suffer also, I believe that there will be a diminution of £30,000,000 in the taxable incomes of the people of Australia. There are great difficulties to face, but I believe that the Governments will be doing their duty. I am confident that the people will give full credit to the Government that faces the position honestly, and that ultimately things will go along swimmingly.”