BOTH TO BE CUT

Wanganui Chronicle, Volume 74, Issue 139, 15 June 1931, Page 10

BOTH TO BE CUT

WAGES: INTEREST “BUT NEITHER MUST SHIRK" QUESTION OF METHOD. 0 Reduction of interest can be brought about in an orderly, hones!, way, even now, notwithstanding the unfavourable atmosphere created by repudiation. ’’ This opinion, tho opinion of “one authority” in Sydney, is quoted by the Sydney correspondent of tho Argus under date May 27. In the same issue the Argus comments editorially on the proposal of a committee of the Premiers’ Conference to reduce Government bond interest by 25 per cent. The correspondent’s quotation of the above opinion is interesting as throwing some light on the reaction of Australian opinion to interest-reduction proposals. Some people might have thought that, by the school of commercial thought reflected in the Argus, interest-reduction proposals would necessarily receive short shrift. But it is not so. The attention is focussed less on the principle than on the method. In fact, the correspondent states “off his own bat” that 4 ‘there seems to be little lack of confidence in the ultimate reduction of interest rates. The only difference of opinion concerns the honest and the dishonest way of bringing it about.” “After Other Measures.” The keynote of editorial comment on May 27 seems to be not 4 ‘hands off interest,” but an insistence that reduction of interest must bo accompanied by corresponding reduction of all Government expenditure; and that reduction of interest shall not be made an excuse for keeping the pruning knife off the public spendings. The Argus says in an editorial: — 44 xk reduction of interest by means of a consolidated loan can be effected only by legal compulsion or by an appeal to the public spirit of bondholders. If either means bo adopted it should be only after other measures have been exhausted. A compulsory measure is scarcely distinguishable from repudiation unless it be accompanied by relief from special taxation. The main point, however, is that no no proper estimate can be made either of the extent of the additional taxation necessary or of the amount by which interest must be reduced until economy has been exercised to the greatest degree possible. The order of procedure, is dictated by common sense. It would be weakness of the most deplorable kind to increase taxation and to limit the taxable area by the reduction of intert until Government expenditure had been cut down to the lowest point. That course is necessary also if the full beneficial effects of the plan arc to be realised. New taxation will undoubtedly retard the recovery which other provisions of the plan are expected to assist, and the measure of the taxation will bo in direct ratio to the benefits enjoyed. The inference to be drawn from the speech by Air Theodore, however, is not merely that the whole scheme hangs together, but. that taxation and the reduction of interest are to take precedence of departmental economies. Interest-Cut Must Not Excuse Waste. Members of the conference, will no doubt carry away an impressive knowledge of the gravity of the present financial situation, but under political pressure the sentiment for economy is likely to become weaker. It is not for the purpose of making easy the way of a Treasurer that reforms are to be effected. The expenditure of Government Departments will have to be reduced, and there must be an altogether new outlook upon tho duties and the responsibilities of Government. In days of affluence it was easy to engage in a generous way in social legislation, involving an expenditure of millions of pounds annually. That expenditure will

have to be The cost of old age pensions, for instance, has grown steadily. There is no reason whv tin expenditure should not be brought down to a scale which will still afiuiu relief to the recipients equal to that which they enjoyed, when the cost of living was higher. The maternity allowance, too, should certainly be reviewed, having regard to the fact that the expenditure has not yielded the benefits expected of it, and that claims under it have been made by those who are not in need of Government assistance. Can’t Have it Both Ways. “One of the first effects of the reduction of interest generally will be upon public revenues. Governments cannot have it both ways. If they enjoy the reduced rate of interest in public undertakings they will receive also less in taxation from those whose incomes are derived from interest. There is another reason for rigid economy. The compensation will lie in a stimulus to industry. The most difficult task will be that of convincing public men that the way to reform lies in permitting greater facilities to industry for its development along its ow*n lines. All the financial plans that have been propounded by Governments and all tho taxation raised have been designed for the purpose of giving money to the Government for expenditure either on public works or on private charity. In neither department of activity has the Government excelled. The financial crisis has been brought about in a great measure by the unwise spending of Governments. The lack of confidence which has depressed the community is due to a well-founded feeling that money given to the Governments will be badly spent. The immediate reform lies in the direction of readdressing the relative positions of Governments and private undertakings. The more drastic remedies should wait upon tho results of such a policy.” On Thursday of last week, the conference of Premiers, having considered committee reports, arrived at a full conference decision to impose a 25 per cent, tax on the interest-yield of all Government bonds whose holders abstain from converting them into the new lower interest bonds of the 4 per cent, conversion loan. Mr Lang, ]?reruier of New South Wales, moved to impose the same amount of tax on the interest-yield of tax-free bonds, but four States out of six voted against. The States voting against are Victoria, which has a Labour Government, Queensland, Tasmania, and Western Australia.