The Timaru Herald. AUSTRALIA'S CHOICE. AUSTRALIA’S CHOICE.

Timaru Herald, Volume CXXV, Issue 18653, 23 August 1930, Page 8

The Timaru Herald. AUSTRALIA'S CHOICE. AUSTRALIA’S CHOICE.

“Australia’s credit,” said Sir Otto Niemeyer, the Bank of England expert, addressing a conference of Australian State Premiers and Treasurers, held yesterday in Sydney, “is lower than any of the Dominions, not excluding India, and is in fact lower than some British Protectorates.” This is a staggering comment on Australian finances. It was pointed out by this financial expert, who has been rather facetiously described in Australia as “Our Bailiff,” that Australia’s credit both at home and abroad is at a low ebb; it lias receded to a 6 per cent, basis in Australia, and rather more abroad. No country can afford to borrow at such rates except for emergency purposes, but it is obvious that Australian finance will require the most careful handling to avert an economic catastrophe. Early this month, Sir Otto Niemeyer attended a momentous meeting of the Federal Loan Council, at which after the Bank of England’s special representative had appealed to both State and Federal authorities to regard national finance as the dominating question of the day, it was decided to pool Australian bank credits in London from which Australia’s obligations to overseas creditors must first be met. The Loan Council, which consists of the Treasurer of each State Government with the Federal Treasurer presiding, was told by Sir Otto Nieweyer, that Australia has not kept in step with the outside world in reducing costs, and that placed her exported goods at a great disadvantage. Production costs must he reduced, and Government budgets must he balanced. It is clear from the tenor of Sir Otto’s statement that a period of rigid economy and readjustment lies before Australia. The Loan Council decided that the budgets must be balanced and a plenary Council of Premiers and Treasurers was called. The loan programme which was cut in half at the beginning of the year, is to be further reduced, and an attempt is to he made to reduce the cost of the State railways which are losing heavily. In an official statement, the Prime Minister (Mr Scullin) said “For some years past, Australian Governments have been able to borrow substantially on the overseas market. Money so raised in London was used for paying interest and other obligations overseas chargeable to revenue, and at the same time, a similar sum of revenue money was made available in Australia for expenditure payable out of loan funds. With the cessation of overseas borrowing, other means have to be devised for transferring money from Australia to London to meet the overseas payments due there. A concrete proposal for the mobilisation of Australian credits in London has been agreed to and will operate from September. Overseas requirements for interest and services for government and semi-government purposes will be about £30,000,000 a year. Under the pooliug arrangement, this amount will be paid by the Government in Australia to the banks, in return for the provision of an equivalent sum in London by the banks.” This arrangement will, it is expected, enable Australian payments in London to be met without difficulty. The minimum value of Australian exports during the financial year will be £90,000,000. Of this, interest payments and services will absorb £36,000,000, leaving £54,000,000 to pay for imports into the Commonwealth. In addition to the amount due by Australia each year for interest and other services, there is an accumulated overdraft in London of about £33,000,000. Liquidation of this amount has been causing the Government some anxiety, and Sir Ootto Niemeyer is in Australia as the result of an invitation by the Commonwealth Government to discuss this problem. It is hoped by the Australian Government’s that the overdraft will be funded by means of a short dated loan issued by the Bank of England to the Commonwealth Government. But, if London financial authorities are to assist Australian finance to regain its feet, Australian Governments'—both Federal and State—must do their part. Sir Otto Niemeyer warns Australia that it off Budget equilibrium and off exchange equilibrium. The people of the Commonwealth are reminded that Australia is faced by considerable unfunded and maturing defts, both internal and external, in addition to which she has on her hands a very large programme of loan works, for which no financial provision has been made. This is a gloomy picture, indeed. Doubtless some of the Labour apologists will say that Australia has been forced into the valley of depression by the drop iu the prices of products; but it is most significant that a fertile and rich country like Australia, after years of Labour domination in politics and experiments in Socialism, should find her credit iu the London market lower than some of the British Protectorates. Sir Otto Niemeyer declares that Australian standards have been pushed too high, relatively to Australian jjroductiviitf and to

general world conditions. In other words, Australia has been living beyond her means. The representative of the Bank of England warns the politicians of Australia that if the Commonwealth does not face the issue she will not be able to keep her existing standards; hence timely and if necessary, drastic action must be taken to rehabilitate Australian finances.