DOMINION FINANCES

Wairarapa Daily Times, 28 January 1933, Page 4

DOMINION FINANCES

ESTIMATED DEFICIT. NEARLY TEN MILLIONS. 'Statements presented to the House of Representatives yesterday by the Prime Minister (the Kt. Hon. G. AY. Forbes) and tlie Minister of Finance (the Rt. Hon. J. G. Coates) revealed that the Government is faced with a gap of £9,850,01)0 in the national figures next year. Air Coates outlined the steps which the Government proposes to take to meet the position, and stated that it was hoped to reduce the prospective deficit to £4,500,000. Air Coates intimated that there would be further increases in taxation to provide revenue amounting to £2,400,000, but he gave no indication of the nature of the fresh imposts. There is to be a further liquidation of discharged soldier settlement securities, and it is hoped to secure another adjustment of statutory debt repayments to the extent of £l,400,000. The Government aims to bring about a voluntary reduction in interest rates, and negotiations are proceeding with a view to effecting reductions in bank deposit and overdraft rates. A 15 per cent reduction in railway freights is to be made, at a present cost of £160,000 to the Consolidated Fund. Both Air Forbes and Air Coates referred to the economic difficulties confronting the country, and made a brief defence (as reported in other columns) of the Government’s decision to increase the exchange rate. Air Coates stated that the expectation was that, with the utilisation of reserves amounting to £2,500,000, the present financial year would close with a deficit in the vicinity of £700,000. For the next financial year, it was necessary to add to this £700,000 further anticipated shrinkages in revenue and any unavoidable increases in expenditure. “While the raising of the exchange rates will be of immediate benefit to the primary producers,” the Alinistcr observed, “it will be some time before the beneficial reaction can be felt by the rest of the community or be reflected in the Budget. In fact, it is anticipated that the immediate effect on the Budget will be an adverse one, pending the time when business generally can be adjusted to the changed conditions. Accordingly, so far as next financial year is concerned, it is considered advisable to allow for a further falling off in revenue, and particularly in Customs revenue.” Air'Coates went on to state that allowance had to be made for the cumulative effect of slump conditions, and, in'estimating Customs revenue, that the concessions given following on the Ottawa Conference would be operative for the full year. TheAlinister dealt- in some detail with the following anticipated revenue deeerases totalling £5,550,t)00: — £ Customs ■ 1,400,000 Income tax 750,000 Stamp and Heath Duties .... 250,000 Interest receipts 220,000 Post and Telegraph profits .. 470,000 Other items 260,000 Reserves 2,500,000 The following increases in expenditure are anticipated, totalling £2,400,000: £ Exchange— Extra, cost, external debt charges, on account of full year at. 110 350,000 Extra, c-ost, external debt charges, by reason of exchange increase to 125 1,050,000 Allowed for cost of exchange on surplus bank funds, London (indemnity to banks) 1,000,00.0 Additional debt charges to £350,000, motor txation amounting to £500,000, payable to the Alain Highways Fund, and £50.000 for pension increases, bring the total prospective to be dealt with next year to £9.850,000 (current year ’s deficit, £700,000; revenue decreases, £5,850,000; expenditure increases, £2,400,000; other items, £900,000.) REDUCING THE DEFICIT.

With some further economies, it is proposed to continue the assistance received from the Main Highways Fund (£500,000) to effect a net saving of £400,000 in interest, to liquidate Discharged Soldier Settlement mortgages up to a further £2,000,000 'and to impose new taxation producing £2,400,000. Stating that the deficit would thus be brought down to about £4,500,000, Mr Coates added:—

‘‘This will mean increasing our floating debt by that amount, but against that it should not be overlooked that the expenditure will include provision for £1,400,000 under the statutory debt repayment scheme. This will mean that the net increase in debt as a result of the prospective shortage will not be much in excess of £3,000,000, which amount may be considered as safe, that is to say, it will not be large enough to in any way endanger the financial stability of the country Wjhieli must besafeguarded at all costs. “The Government have felt obliged, in the general interest of the Dominion, to take a- course of action of an unprecedented character. This has been done with a clear realisation of the implications and of the difficulties in the way. We are confident that the country will recognise as the days pass that the decision made is amply justified. ’ ’