The Timaru Herald. THURSDAY, JULY 24, 1930. AUSTRALIA'S BIG TASK

Timaru Herald, Volume CXXV, Issue 18627, 24 July 1930, Page 8

The Timaru Herald. THURSDAY, JULY 24, 1930. AUSTRALIA'S BIG TASK

Reviewing in his budget speech the main factors, which have reacted so seriously upon the financial position of Australia, the Prime Minister and Treasurer (Rt. Hon. -T. H. Scullin) pointed out that the serious economic disturbance at present prevailing in nearly all countries has been preceded or accompanied by a disastrous collapse in commodity values. The effect upon the price of wool, wheat, metals and other products which constitute the major portion of Australia’s exportable production has been to cause a loss in real income for the financial year just closed variously estimated at from £50,000,000 to £70,000,000. Reduced spending power in Australia has caused curtailment of credit, reduced trade, increased unemployment and derangement of governmental finance. Drought conditions over a large area during recent seasons have also had a serious effect by reducing the volume of primary production. The ultimate effect upon Commonwealth finance has been accentuated by the necessity for restricting importations, with the consequent sacrifice of a large proportion of the Customs revenue. Mr Scullin states that the fiscal and financial policy of Commonwealth Governments in recent years, has been ill-adapted to withstand any disturbance of the trade equilibrium except by an increased dependence upon ;the overseas loan market. “The failure of the London market as a supplementary source of national income precipitated the monetary stringency from which the whole country is now suffering,” Mr Scullin declared. Upon the flow of overseas loan money becoming interrupted, Australia was faced with a shortage of London funds with which to meet her external commitments, and to pay for services and goods purchased abroad. The position has, been temporarily met by shortdated accommodation from the bill market, and by advances in London from the Commonwealth and from the Westminster Banks, but a more permanent solution of the London position must be faced. When the adverse trade balance could be made good by raising long-dated credits in London, the needs of the moment could be met. It is clear, however, the British investors were not indifferent to the unsound position that had developed, and equally clear that they had become unwilling to provide Australia with loan money with the same promptness as before. The opinion in London that Australia was overborrowing, Mr Scullin ' said recently, “was confirmed by the fact that Australia was issuing loans in New York as well. In 1927, Australian Governments, Commonwealth and State, floated overseas loans aggregating £70,000,000. During the three years ended 1929, Australia put out loans averaging £6,600,000 every two months. It must be remembered, however, that £3-1,600,000 of this money was for conversion.” In the above passages, the position of Australia is frankly set out. The picture is not so gloomy really as it appears. Australia’s taxation, which involves personal sacrifice by every individual in Australia, has been introduced to balance the budget. Overseas borrowing has been wholly discontinued. The loan expenditure of Commonwealth and States has been cut in halves, and for several years past the whole of Australia’s national debt has been covered by sinking fund. The adverse trade balance has been reduced by drastic restrictions of imports, and by measures aimed at increasing exports. During the present year, more than £50,000,000 of the overseas debt has been converted in Australia, thus substantially reducing the external interest bill, and in addition'the current £10,000,000 loan for public works has been completely successful. Australia possesses ample internal resources to enable her to find the money required for development, and to convert gradually her overseas debt into an internal debt. The total Australian public debt disclosed in the Commonwealth Budget for the current financial year is just over £1,100,000,000, of which sum £372,707000 is owed by the Commonwealth and the balance by the six States. Of the Commonwealth debt, about £17,155,000 is owed in New York, £204,000,000 in Australia and the balance in London. This indebtedness though large for a nation of 6,400,000 people, is entirely covered by sinking fund. The Great War enormously increased Australia’s indebtedness, and the extent of the drain it is making upon Commonwealth finances is shown by the fact that during the current year, twelve years after the Armistice, tlxe Commonwealth has to spend more than £30,000,000 on Avar interest, repatriation and other war services, exclusive, of defence—equivalent to nearly half of the entire Commonwealth revenue. War pensions alone will cost nearly £8,000,000. But for the enormous borrowing necessary to equip, train and send overseas more than 300,000 soldiers, Australia’s financial position today would be very strong. During

the past financial year, more than £10,000,000 was contributed from the national sinking fund, and from other sources towards the redemption of Commonwealth and States debts. The total debt redemption during the year was equivalent to more than 1 per cent, of the indebtedness, but the sinking fund contributions are so fixed that the ratio of debt redemption increases progressively each year. Legislation under which the Sinking Fund was established in 1927, provides that the whole of the debt existing in 1927 would be extinguished in 1957. AH public borrowing is now controlled by the Federal Loan Council, a statutory body without the approval of which no loan for public purposes be raised in the Commonwealth. This body consists of the Treasurer of each of the seven Governments, with the. Federal Treasurer, who may call the Council together at any time, acting as chairman. This system effectively checks public borrowing, and ensures that the credit of the entire Commonwealth and States is behind any loan that is issued. It is quite, clear that although Australia is feeling this burden, the measures being taken to restore the finances of the country to some more stable position, have deeply impressed the financial authorities in the metropolis of the Empire. NEW PETROL TAX. Aptly described by one Member of Parliament as “a blind Samson pulling down the pillars of the temple,” the Prime Minister has struck such a staggering blow at business in New Zealand that his proposal to increase the petrol tax is being denounced even by the journalistic supporters of his own Party. Many industries throughout the Dominion view with no inconsiderable measure of uneasiness and almost alarm, the tax levying habits of the present Government. Some of the people who have been busily engaged, within the last day or so. in estimating the weight of the new burden the Government proposes to impose on the people, can recall with some uneasiness of conscience, the simple manner in which they were gulled into easting their votes for a Party which has been so unfaithful in the performance of clearly-defined promises. So general is the surprise at the Government’s new and far-reach-ing proposals, that one Member of Parliament, who has consistently supported the present regime, urged in the House of Representatives on Tuesday that the Government, having found it could not honour its election pledges, ought to resign. It is just as well to remember, however, that although the new scale of customs charges was put through the House without much discussion, the matter has not been finally settled, since opponents will have an opportunity to challenge the Government when amendments to the Customs Act are submitted, for the consideration of the House. Then we shall see who’s who! In the meantime, heavier customs duties are being levied on many lines, but it is obviously clear that the increased duty on petrol will inflict considerable injury on many classes of business. It is not surprising, then, that the Government’s proposals have aroused considerable comment, not only in motor circles and in the country, but in the camps of the United Party; indeed, a Christchurch journal, which wholeheartedly supports the Forbes Administration, thus comments on this phase of the new taxation:

This increase in the duty on petrol is quite unjustifiable, and the Government has been badly advised in imposing it. Petrol is dear enough to suggest that its users are already being exploited, without having to pay the staggering duty of eightpence a gallon. Moreover, the additional tax according to the Prime Minister, is to be paid into the Main Highways Fund for roading, and that fund is more than adequate already to carry out a programme of roading considerably in advance of the ideas of many of the local bodies, upon whom the responsibility of making a decision devolves. It is a pity that the Prime Minister was not a little more explicit on this point because, while insisting that the petrol tax would be paid into the Highways Fund, he qualified his statement with the remark that the revenue would be used in regard to the counties’ requirements, and also in connection with road making, particularly on back-blocks roads. This is a complete deviation from the principle upon which the motorists consented to tax themselves for the maintenance of main highways, and while the new taxation may please country interests it will be highly unpopular with the great majority of the people.

It is somewhat premature, of course, to discuss the Government’s financial proposals, before the Budget is presented, but it can be said at once that the heavier dips into the pockets of the taxpayer, which the Government proposes to make in the form of a heavier impost on petrol, will be strongly condemned by all sections of the community.