The Timaru Herald FRIDAY, JULY 11, 1930. AUSTRALIA’S BUDGET.

Timaru Herald, Volume CXXV, Issue 18616, 11 July 1930, Page 8

The Timaru Herald FRIDAY, JULY 11, 1930. AUSTRALIA’S BUDGET.

Leading financial men in the cities of New Zealand see in Australia’s economic ills and the drastic remedies that have had to be applied by the Federal and State Governments, an important lesson for New Zealand—that we must live within our means. It is strongly urged that over-borrow-ing and personal and national extravagance coupled with the serious decline in the value of her products, are accepted as reasons for the dire trouble in Australia. Delivering the Budget, upon which Mr Theodore has poured his unremitting attention for many months, the Prime Minister of Australia, forecasted that the Government would be faced with a shortage of revenue for the present year of £14,000,000. Owing to Mr Theodore’s resignation, he has escaped the unpleasant duty of presenting to the Parliament of Australia, a budget that discloses the greatest accumulated deficit

in the history of the Commonwealth. The last Budget of the former Treasurer (Dr. Page), admitted a floating deficit of about £5,000,000. The loss on the current year’s working has been so substantial that Mr Scullin, who has taken over the temporary control of the Federal Treasury, announced that the accumulated deficit had grown to £6,457,000, notwithstanding the almost revolutionary measures taken recently to balance the budget. Mr Scullin now shows that Australia has not yet emerged from her pressing difficulties; on the contrary, the Commonwealth is confronted with a shrinkage of revenue estimated at £14,000,000. It was anticipated

that the Federal Budget would contain many unusual features, which would reflect the unprecedented financial position of the Federal and State Governments. It is obvious, however, that if he

looked squarely at the future, Mr Theodore had to prepare either to budget for a large deficit or enormously increase taxation. It is clear, however, that the Federal Prime Minister, in the role of Treasurer, has discovered that it is manifestly impossible to bridge by increased taxation the huge gap caused by the fall in the national revenue. Nevertheless, the Budget proposals which have

been presented to the Federal House of Representatives, disclose the startling fact that additional taxation and charges have been imposed which are expected to yield £12,500,000, but, as Mr Scullin points out, although new and heavier charges have been imposed, “a great proportion represents imposts to replace, not to supplement the taxation of previous years. Actually,” said Mr Scullin, “the per capita taxation will be less than that of 1927.” But the Commonwealth Government finds itself confronted with other lions in the path. The Prime Minister announced yesterday that the

Australian Loan Council must secure overseas not less than £30,000,000, in the near future, in order to clear up the London position. “Failure to make such provision,” explained Mr Scullin, “will lead to an embarrassing position.” The Federal Prime Minister points out, however, that it is not proposed to extinguish the accumulated deficit of £6,500,000 by taxation. This will be covered by a loan appropriation of seven millions. This method of extinguishing the accumulated deficit, while obviously unsound, is regarded in

London as essential to stabilise the position to such a degree as is necessary “to give the Commonwealth the financial buttress that is essential for the fructification of its plans.” For some time Australia has been living beyond its means. It has been said the Commonwealth has been paying part of her interest bills out of borrowed money, and that when she found the London market closed against her, the present crisis was precipitated. There is no doubt that the sudden drop in the price of Australia’s exportable products has caught the Commonwealth in an unfavourable financial position, and to-day from end to end of the great country, strenuous protests are being voiced against the drastic measures the Federal Government is taking to balance the budget. The trend of financial affairs in the Commonwealth should convey a warning to the people of New Zealand, since it is obvious that Australia’s predicament has largely resulted from excessive importation with the resultant adverse trade balance imposing on the Federal Government the unpleasant expedient of meeting interest payments on oversea obligations by further borrowing.