EXHAUSTION OF CREDIT

Wanganui Chronicle, Volume 74, Issue 149, 26 June 1931, Page 9

EXHAUSTION OF CREDIT

AUSTRALIAN SITUATION URGENCY OE ECONOMY PLAN | I KIJERAL LEGISLATION BEGUN The fact that the Australian Governments would reach the limit of then credit at the end of this mouth was admitted by the Primo Minister of the Commonwealth, Air J. IL Scullin, in a speech at Canberra Thursday week, when he introduced the Debt Conversion Agreement Bill. The Government’s taxation and economy proposals were outlined on the same occasion by the Federal Treasurer, Air E. G. Theodore. Thu bill provides for Parliamentary approval of the debt conversion agreement, and embodies the conditions finally adopted by tho conference. Details of these have already been published. The uncertainly regarding the basis of conversion id removed uy a clause which provides that “the tquivalent amount of new stuck is to be determined by actuarial valuation, after tak ing into account tho interest rate and date of maturity of each existing security, and after allowing for the general reduction of 22| per cent, in the interest yield.’’ State of the Budgets Air Scullin said that since 1928 the national income had fallen from £650,000,000 to £450,000,000. In the same period, expenditure of all the Governments had increased from £187,000,000 to £198,000,000. Expenditure on interest, sinking fund, exchange, and unemployment relief had increased by £27,t'oo,ooo in the same period. The deficit of all the Governments iu Australia at the end of this month would be £30.000,000, and it was estimated that if no action was taken to reduce expenditure or increase revenue the deficits of all Governments at the end of June last year would be £40,000,000.

The short-term indebtedness in London amounted to £38,000,000, and that in Australia to £25,000,000—a total of £63,000,000. The Commonwealth Bank, said Air Scullin, was carrying the bulk of the short-term indebtedness, but it had notified all the Governments that the credit limit for Government overdrafts in Australia had been fixed at £25,000,000. This limit would be reached at the end of this month. The limit to oversea credit had been reached about nine months ago, for they had had no credit iu London since September. Air Scullin added that the unemployed numbered 360,000, and the cost of their sustenance and relief was £9,000,000 a year. If no action was taken it was estimated that sustenance and relief would cost from £.12,000,000 to £14,000,000 a year. Critical Position in July After reviewing the proposals of the Melbourne conference, Air Scullin said: —“The oversea interest, sinking fund, exchange, and payments to the States amount to £25,000,000. Interest in Australia totals £14,000,000, pensions and wages £32,000,000, and remaining expenditure £9,000,000. Is it possible to effect savings without touching wages and pensions? We have examined every field of expenditure, and we have explored every field of extra taxation, and we find that it is impossible to face the position without adopting the measures that we are suggesting. “Were it not for the gravity of the situation, nothing would induce this Government to accept this plan—were it. not .for the fact that there is no other alternative but disaster and default. What are wo confronting? The banks announced that uur overdraft limit had boon reached. We therefore have to depend upon our resources—revenue and taxation. Next year our revenue will be about £60,000,000, and our expenditure £80,000,000. We therefore could not pay more than 15s in tho pound on the whole of our liabilities. The position in July next will be:—Revenue, £4,400,000, expenditure £7,100,000, leaving a shortage of £2,700,000, so that iu July next we are faced with the rationing of payments to 12s in the pound. If we meet oversea obligations, we would only have 9s in tho pound to pay, and there is nothing to show that tho position will improve within the next six months of the new financial year. Assistance by Banks “This plan will give a sense of security to tho people, and enable business to bo restored, and money raised for employment. I believe we shall then turn the corner and stop the present downward trend,” Air Bcullin added. “It is obvious that the Governments cannot employ the 300,000 men out of work, but we have had assurances that when the Governments put this plan into effect the banks will carry them over a period of three years, and will make further advances to industry. Sound propositions will receive the necessary assistance. These proposals are as complete as it was possible to make them in the time at our disposal.” Dealing with the Budget position, Air Theodore said the Estimates for 1931-32, on the basis of existing expenditure and taxation were:—Expenditure, £BO,(iOO.OOO; revenue, £60,200,000; a deficit of £20,400,000. The Government proposed to meet the position, in part, by several methods, among which were the increase of the sales tax from 24 per cent, to 5 per cent.; the increase of primage duties from 4 to 10 per cent.; and increased income taxation. It was hoped that an estimated deficit of about £20,000,000 would be brought down to about £4,500,000. The total proposed reduction of interest on the whole Australian debt would be about £6,500,000. Tho interest payable in Australia and chargeable to the Commonwealth budget was a little more than £11.000.000, and the net savings from the proposed reduction of 224 per cent, was estimated at about. £2,470,000. The banks had in mind a proposal to reduce rates of interest by I per cent. Public Service Salaries Referring to Public Service salaries, Mr Theodore said that upon the standards obtaining on July .1, .1930, only 10 per cent, of the total amount for salaries and wages was absorbed by salaries exceeding £5OO. To meet the present emergency conditions, the ser vice basic wage would be brought into line with the current cost of living figures. The present plan aimed at a reduction of 20 per cent, on salaries at .Inly 1, 1930, by a reduction in accordance with tho fall in the cost of living, together with percentage reductions on a sliding scale. For an adult male, tho plan was a flat rate reduction of £34, inclusive of any cost of living adjustment already

1 effected; further reduction on remain ing salary varying from approximately 3 per cent, up to about 24 per cent. No adult male officer was to be reduced below the basic wage of £lB2. A similar plan would be applied to females and minors to suit the varying conditions. Air Theodore outlined proposals for reductions in war pensions, saving £1,291,000, and in civil pensions, saving £1.825,000. Before the Government could claim te> have reduced its expenditure by 20 per cent., added Air Theodore, additional economics amounting to £1,000,000 would have tu bo made from a very limited field, covering only , £8,650,000. This included the Defence i Department, the repatriation service, bounties, (Lommouwealth superannuation contributions, ordinary votes of departments, the post, office, railways, and territories. Tho Government would outline tho additional economies to be ' made when tho Budget was brought down, which would bp witbin two or three weeks.