PREMIERS’ CONFERENCE

Wanganui Chronicle, Volume 74, Issue 138, 13 June 1931, Page 7

PREMIERS’ CONFERENCE

REPORT BY MR LANG LABOUR CAUCUS ADOPTION CONVERSION LOAN FIRST SALARY CUTS COME LATER ißy Telegraph—Press Association —Copyright.) Received Juno 12, 9.10 p.m. SYDNEY, June 12. Tho Labour caucus has adopted Mr Lang’s report on the financial plan evolved at tho Premiers’ Conference. Mr Lang assurer his Ministers that their salaries would not bo cut until the success of the Federal Conversion loan hud been achieved. DETAILS OF PLAN COMPLICATED UNDERTAKING THREE CLASSES OF NEW STOCK The proposal to reduce the interest charge on Government stocks held in Australia has presented an extremely difficult problem for the Premiers’ Conference and the group of financial and economic experts associated with it. Tho original proposal was to convert all existing stocks into ono consolidated stock bearing interest at 4 per cent., with a currency of 40 years. Last week, the conference adopted a plan submitted by the committee of umn r-treasurers providing foi threo classes of stock with different rates of interest, and currencies ranging from seven to 30 years. The final details of tho ficherne ha.l nor. been elaborated when the last mail left oydney Existing stocks carry interest rai ging from 3 .0 p-J* eent. The basic principle appears to to that 1I <- interest retur i to indi vidual holders shall in every case be reduced by 22| per cent. This will be effected by conversion into new stock, in some cases with a small inc re: sc in the nominal valus of tho holding and in others with a small capital reduction, based on actuarial calculation.

Classification of Debts The sub-committee said it was convinced that it would be impracticable to make tho adjustment merely by a variation of interest rates. In every new rate there would be broken pence. This would involve much trouble and expense in administration. Moreover, as it was necessary, in view of the largo sum involved, to spread tho maturities over about 10 fixed dates, the number of existing stocks and maturities would virtually bo multiplied by ten. As the chief objection to variations in the principal sum arose in cases where discounts became necessary, the under-treasurers made an effort to evolve a plan that would provide: (1) A limited number of securities; (2) even rates of interest; (3) tho elimination of issues at a discount. The sub-committee reported that the debt of £556,090,000 was divided as follows: £450,000,000, carrying rates between 6$ to 5$ per cent.; £45,900,000 at 5 per cent.; £30,000,000, at 4J to 4 per cent.; and £31,000,000, between 3$ and 3 per cent. Subjecting these groupings to a 22| per cent, reduction, the committee decided to recommend that the conversion should be covered by three flat rates —4, 3 7-8, and 3 per cent. Various Options Proposed. The existing securities, carrying per cent, and over, arc to be converted into 4 per cent, stock, each issue carrying a small premium in conversion; the 5 per cent, stock to be converted at tho option of the holder into 3 7-8 per cent., maturing in 13 years at pat, or 4 per cent., at a small discount; the remaining securities —£61,999,999 —now bearing interest at less than 5 per cent., to be converted at the option of holders into 3 per cent., maturing in seven years and 16 years, or into 4 per cent. If converted into 3 per cents., the existing 4| to 4 per cent, stock will receive a small premium, and other issues will bo subject to a discount.

The conference decided that to facilitate the issue of new securities, all fractions below £lO should be paid in «cash, Subject to hulders being entitled to contribute cash to make up the next higher £lO. The currencies of the new stuck pro posed were as follows: Seven years, 4 and 3 per cent.; 10 years, 4 per cent.; 13 years, 4 and 3 per cent.; 16 years, 4 and 3 7-8 per cent.; .19 years, 4 per cent.; 22 years, 4 per cent.; 24 years, 4 per cent.; 26 years, 4 per cent.; 28 years, 4 per cent.; 30 years, 4 and 3 per cent. An elaborate set of recommendations regarding tax-free securities was made by the committee, but the ’conference had not reached any conclusion on this problem by the end of tho week. Exemption From Taxation One of the committee’s proposals was that the interest on the new securities should be free from the present Commonwealth super-tax of 7J per cent, and from any further taxation which may be imposed by the Commonwealth or by any btate, but to be subject to other existing Com monwealth and btate taxes. In is was criticised by Professor Giblin, who said the conference should consider whether it was not piling up a very difficult problem for tho future. If they were going to make, loans free of taxation for 39 years, they might be making a serious problem for the people 19, .15 or 29 years hence. Thero was a considerable body of opinion which held that interest rates were going to fall •considerably after the present, crisis was over, and they might bo saddled with interest of 4 per cent, up to 39 years when the market was something like 3 per cent. He thought the conference should introduce a provision that all these bonds could be paid off after 10 years at the option of tho Government, or, alternatively, that tho freedom from future taxation should bo limited to a period, say, of 10 years. If cither of these proposals was embodied, it would safeguard the future. However, tho conference accepted the committee’s recommendations regarding exemption from taxation., but with provision that the. Government

should have the right to redeem stock after 1950. FEDERAL ENDORSEMENT Received June 12. 8.55 p.m. CANBERRA, June 12. The Federal Labour caucus, by 26 votes to 13, endorsed tho economy plan of the Premiers 1 Conference. Immediate stops will bo taken by the Government to enact legislation giving effect to its part of tho plan. NS W. FINANCES. ELEVEN MONTHS’ DEFICIT SYDNEY, Juno 12. Expenditure for tho cloven months of the financial year exceeds revenue by £8,897,241. The revenue totalled £35,063,294 and expenditure £43,960,535. LANG’S SALARY PLAN. CABINET’S APPROVAL. SYDSEY, June 12. The State Cabinet Ministers unam mously agreed to Mr Lang’s salary reduction plan. The Public Service Association ( xecufive, however, says that the idea is •‘revolutionary and preposterous” and would place tho Chief Justice and his Court reporter on the same rate of pay.