OPTIMISM

Evening Post, Volume CXII, Issue 83, 5 October 1931, Page 8

OPTIMISM

WAVE IN AUSTRALIA

SPECTACULAR RISE IN SHARES

WOOL BAEOMETER

(From "The Post's"* Representative) SYDNIIJ, Ist October. Following quickly on the resuSts of England's action in abandoning the gold standard, a wave of optimism has swept over tfie whole of Australia, and on all hands it is being said that the' corner has at last been turned. There has beei ' a spectacular rise in the price of shares. on all the Stock Exchanges, notably. Melbourne and Sydney, and the stock most affected are those associated with pastoral and mining concerns. Actual* ly,. there has been an advance in the price of wool of about 20 per cent., and if that is maintained, it willmean an. addition of £5,000,000 to the value of the whole clip. Average prices in Sydney last week were £9 4s 4d.a bale, as against £8 15s 3d. for the ..sales during the week ended 10th September. The movement is regarded by wool people ■ ,as a, sure indication of returning con-' fidence ' ' ' . It is ])ointed out that the increase in. the price of wool practically coincided with the depreciation of sterling. The most gratifying feature of the sales has been the keenness of operators to majce purchases. The competition betw'etn. Japanese, Continental, and British buyers has been most marked,: and the withdrawals last week were few. All proposals for limiting the amount of fleece to be offered have been abandoned, and growers generally have every reason to be excited about the turn of. events. They are confident that before long there will be a return to prices which will make production payable. ABANDONMENT OF GOLD STANDARD. The possible effect; of the abandonment of the gold standard is perhaps best expressed by the Acting-Common-wealth Statistician (Professor Giblin), who, reckoning on the burin *>f exports, estimates the relief to Australia on account of the interest bill at 25 per cent. "Our obligations," he said,."mre practically (measured in sterling, bat are paid for by our exports, which ara valued in gold. The real relief is thus the 25 per cent, that Britain has gone off the gold standard, irrespective of what happens to the exchange late. Iv effect, we have brought off a conversion! loan in England on exactly the. same " scale' and with the same thoroughness as we have in Australia. The sacrifice, in effect, is being voluntarily offered by the British bond-holder as was offered by the Australian bond-holder. The burden of our overseas del>t still, however, requires consideration and negotiation. Although the present relief may be only temporary, it is as much as we can expect, and it gives us a breathing space in which to try'to get our overseas obligations put on a permanent basis which should be, dependent on. our capacity to pay." : . . Professor Giblin hoped no move would be made to reduce the exchange rat«on. London. There was a theoretical case for a free exchange market,,but Australia had no machinery for such a market. Exchange rates would become very erratic if : left to the open market under present conditions. |t would be time enough to think of. reducing rates of exchange when our trade was balanced sufficiently to meet bur interest obligations and London bank balances had been restored to healthy condition. When that was achieved exchange rates should, and would, com* down. Other European countries were apparently going off the gold standard. That would relieve the pressure on gold. Those countries would not have to worry about maintaining their gold etores, and that would mean that other countries which stuck to the gold standard would have plenty of gold, and the price of gold would fall. That meant _ that prices expressed in goods would rise, so that Australia's exports would obtaui first, a rise in gold prices; second, added rise in sterling prices; and, third, » premium on sterling. All the good feeling with which the departure from sterling had been taken offered an immediate stimulus to trade, which would continue so long as it was not offset by want of confidence. That stimulus might mark the turning point of a general world recovery from depression. EFFECT ON STOCK EXCHANGE. Not for two years has such a healthy, feeling prevailed as that which characterised operations on the Melbourne and Sydney Stock Exchanges this week and last. Influenced by events oversea* • ana particularly by the substantial nw* in the markets for Wool, wheat, metals* and other primary products, buyers came forward with confidence, and their operations lifted all leading stocks and shares at least £3,000,000 in the aggregate. A. gratifying feature has beea. the manner in which the improvement was maintained. First advances _ were sudden, but subsequent betterment wm steady, and has been well maintained. Buying support has come from well-in-formed quarters. In the banking group notable advances have been scored by; all Australian controlled institutions, while banks with head offices,in.London were also much stronger. Compared with prices a weekearlier, Bank.of New South Wales and Commercial Bank of Sydney were both up 255. In Melbourne base metal stocks ■ have commanded a most active turnover due t» the rising market in London.. Thili is not surprising in view of the fact that the following a^an«s in metals^oecur. red within a weekt-Standard. copper, £7 16s 10id; lead, £4 1* 3d; *P*%*> £3 8s 9A; tin,' £21 6s 3d; sUwr.W per oz. Not since 24th September, 1930, has a corresponding price f or tra we* quoted on the London metal market. On that day the quotation *•£**** 16s 3d. All metal dealers attribute tn« advances to the continued depreciation of English currency. < There has even been a notable aavanco in wheat and flour prices, representing a gain of thousands of pound* to tnoL more in need of heljv than anyother section of the community. Wheat,, is now worth at least 3d a bushel mora than it was a fortnight ago,. «**■*»"■ represents £250,000 on the exportable surplus. Many holders of # wheat xa New South Wales are declining to sell, firm ia the belief that wheat will g» still higher. Two weeks ago they would have sold at almost any price. Ti>e dairy farmers are sharing in the increased prosperity, and in sympathy with the London market -the price or butter has advanced -id, with the prospect of tfoing still higher. Of course, all these things affect the cost of living, and maybe an increase in wages will be necessary to counteract this. •Notning, it Beems, can erase the so-called vicious circle. : .