The Timaru Herald FRIDAY, FEBRUARY 21, 1930. AUSTRALIA’S ECONOMIC BALANCE.

Timaru Herald, Volume CXXV, Issue 18499, 21 February 1930, Page 8

The Timaru Herald FRIDAY, FEBRUARY 21, 1930. AUSTRALIA’S ECONOMIC BALANCE.

“We are feeling the effects of over-borrowing,” declared the Prime Minister of Australia, addressing the Premiers’ Conference at Canberra yesterday. Mr Scnllin reminded the people of Australia that the country’s difficulties have been accentuated by the swing of the economic pendulum and costly industrial unrest, but the prospects are by no means as black as had been represented. It is generally j recognised, of course, that Aus- i tralia is passing through a lean ! if not difficult period, and her difficulties have been increased by a grotesque and preposterous report emanating from London that there was a prospect of interest payments to overseas investors in Commonwealth stocks being postponed. This canard was immediately destroyed by a joint statement issued by the Prime Minister (Rt. Hon. J. H. l Scullin), and the Treasurer (Mr E. G. Theodore), in which they pointed out that it was absolutely inconceivable that there could be any thought of Australia postponing interest payments or of failing in any way of meeting national obligations. Interest would be paid with the same infailing regularity and promptitude in the future as in the past, the statement declared. The final test of the whole position, the Prime Minister and the Treasurer said, was, to be found in the integrity of the Australian people which had never been questioned. There could be no question of loss of faith in Australia without a loss of faith in the Australian people as a whole. In the circumstances, holders of Australian securities in London and elsewhere would be making needless sacrifices by selling their holdings. This statement had an immediate effect upon the London market and Australian securities advanced by five per cent, next day. Australia began to borrow in the year 1842, when a loan was raised for the purpose of assisting immigration and there has never been a single case in the history of the country of default. No holder of an Australian security has ever had to wait one minute for interest or principal. What the then Prime Minister (Mr Bruce) told the London bankers in his speech on the financial position of Australia in November 1926, still holds good. In the first place 9,74 per cent, of Australians are of British stock. Australia bore ever penny of the cost of her war effort. Of the total national debt of £978,000,000 which existed when Mr Bruce addressed the London bankers £305,000,000 represented war debt, and in addition, between 1914 and 1926, £267,000,000 was provided out of revenue for war purposes. Australia’s growing ability to finance herself is shown by the fact that while in 1901 only 14 per cent, of her national debt was owed in the Commonwealth, to-day more than 50 per cent, of her securities are held in Australia. Last year the Australian Loan Council which controls all public borrowing reduced the loan programme from £43,000,000 the average for the previous five years to £80,000,000. It has now been decided that another drastic cut is necessary, and the loan estimates are* being revised by Commonwealth and State Governments for presentation to the Loan Council which meets again within a couple of weeks. It is also announced that borrowing must be still further be reduced next year. Moreover, the Prime Minister’s statement at Canberra yesterday shows that Australia is giving evidence of her willingness to make sacrifices and to cut her coat according to her cloth. In announcing the shipment to London of gold worth £7,000,000, the Chairman of the Commonwealth Bank of Australia (Sir Robert Gibson), stated that since last July, Australia has sent abroad more than £17,000,000 for the jiurposes of building up reserves to 1 meet obligations. These shipments in no way impair the reserve against the note issue which now stands at 45 per cent. Sir Robert Gibson made it clear that these movements of gold are not designed to provide credits for further importations, but to meet obligations which are falling due. “That the financial position so far as meeting overseas obligations is difficult and indeed serious, the Board has no reason to minimise,” said Sir Robert, “but action will be taken to deal with tiie situation as it arises and to dissipate the fears of those who are apprehensive that Australia will fail to meet her obligations. The only ground upon which such apprehensions can be based is the fact, which cannot be denied, that of latter years the abnormal prosperity of Australia has led her into extravagance. It is unfortunate, but nevertheless for the eventful benefit of this country, in bringing home a realisation of the need of careful finance that n set . of circumstances should synchronise so suddenly to create very serious embarrassment. These are caused by the serious shrinkage of wool values, partial failure of the wheat crop, an inability to tap overseas supplies of loan money for national purposes which have always been

1 available in the past.” Well- | informed observers say, however, j that in spite of all the difficulties j which at present confront the i country, Australia is sound at the j kernel, and will surmount her difficulties and meet her obligations. It is regrettable, but nevertheless inevitable, that for the immediate future at any rate, external trade with Australia must suffer, as it is absolutely necessary that imports of all unnecessary tilings be reduced to the minimum, until the economic balance is adjusted.