The Waikato Times. With which Is Incorporated The Waikato Argus. TUESDAY, NOVEMBER 4, 1930. AUSTRALIAN FINANCE.

Waikato Times, Volume 108, Issue 18167, 4 November 1930, Page 6

The Waikato Times. With which Is Incorporated The Waikato Argus. TUESDAY, NOVEMBER 4, 1930. AUSTRALIAN FINANCE.

The remedy put forward by Mr Theodore for the financial troubles of Australia is the issue of paper money. It is a remarkable thing to find Mr Theodore 'taking part in this Conference of Prime Ministers and Treasurers. He is not a minister either of the Commonwealth or of any of the States. At present he is to stand his trial on a charge of making away with the funds of Queensland, and till that charge has been heard and decided one way or the other he certainly should not be taking part in public matters.' We cannot pretend to know the rights of the charge against Mr Theodore, but we feel pretty certain that he is likely to do more harm to the Commonwealth than he could possibly have done to Queensland. Within the last few.years we have seen the effects of inflation in Germany, where it has practically ruined all those who had incomes from invested money. Fluctuations in the value of. money are bad whichever way the value fluctuates, but inflation can be carried to far greater, lengths than deflation. In Germany they reached the stage where the mark with a ,nominal value of a shilling exchanged at several millions to the pound sterling. Long before that figure was readied .farmers were refusing to bring food into the towns to sell for marks which had no value and shopkeepers would not take down their shutters to offer goods for sale for marks. We do not anticipate that matters will go to such lengths in Australia, inflation will be a failure before it reaches so far, lor Australia like Hew Zealand is a country that

lives on the sale of its primary produce abroad. Inflation will raise costs j of every kind, and make production for ! export impossible. Labour will no j doubt be able to obtain high wages, 'but will find little satisfaction in them , ! for the prices of everything will rise j faster than the wages. -Mr Scullin, Mr Lang, Mr Theodore, and every one of the leaders have scouted the idea of : ! repudiation, and doubtless they are j 1 genuine in their declarations, but how j ! do they expect inflation to help them in 'placing money in London to 'pay the i interest on the debt held in Britain? j As far as the debt in Australia is concerned its value will be depreciated by the amount of inflation. The same amount of interest /will be paid, but it will have much less purchasing power. Mr Theodore says Australia must reconcile itself to having the exchange against it. At present it j costs TO per cent, to send money from j Australia to London. The banks do not hold themselves open to make exchange except on their own terms. The result is that the cost of imported | goods is greatly increased. Soon people will refuse to buy and imports will shrink, and in some cases cease. Government revenue will fall away for want of Customs duties. At first some spurt may be given to secondary industries, but the experience in Germany was that industries of all kinds suf- | fered severely. When experiments of this kind are made there is always some particular in which they vary from previous experiments, and the results differ accordingly. The only thing which it is _safe to say is that inflation is sure to cause more or less injury to everybody. It is impossible that we should escape entirely from the effects of Australian financial troubles. We are suffering from them already in the matter of exchange although not so far to any serious extent. It is not clear that we should be paying. as high an exchange as the present rate. The protest that has been made has resulted in some difference being made between the Australian and the New Zealand rate. It may pay the banks to use London funds to finance Australian exchange, but this would be unfortunate for New Zealand. We have no State Bank to control such matters, and Ministers have neither the knowledge nor the power to do so. Banking is a great mystery to the public who only see that it results in j profits which no other business of any j kind can make. We hear sometimes of the generous assistance afforded by the banks. That is to say the banks have accepted deposits either at 3t' per cent, or at no percentage whatever, and have re-lent it again at 7 per cent. We may think highly of the business acumen of those who can do this, but the term generosity seems somewhat out of place. The rate of exchange which we are charged may be justified; we have no means of knowing. The banks are under the necessity of publishing various statistics every four weeks, but the really interesting item, the condition of the funds in London, is not stated, and it is a measure of the general ignorance that when the Government de- ■ creed that certain particulars should be given they did not ask for these. Australian conditions should be watched j carefully! They are certain to affect us, and may do so to a serious extent. Government leave the control of the financial side in the hands of the bank, and forget "that the interests of the bank- and those of the country do not always coincide. It is even possible that the. Government are more concerned with the dividend on their j shares in' the Bank of .New Zealand than with the effect of banking policy on the country. We do not suspect them of anything .worse than leaving the matter in the hands of others, but under present circumstances' that may result in a good deal of harm.