SHORT-TERM DEBT

Evening Post, Volume CXIII, Issue 29, 4 February 1932, Page 11

SHORT-TERM DEBT

AUSTRALIA'S J3OEROW-

ING 3

LANG'S BIG SHARE

"One of the most momentous meetings of the Loan Council held since its inauguration," was how the Melbourne "Age" described the meeting of the Australian Council, which has just taken place. Its importance was due to three facts—firstly,,the, partial failure of the Premiers' plan adopted in May last;, secondly, th« 3 huge increase in the short-term indebtedness of the Commonwealth and tire States; and, thirdly, the necessity fair making provision to convert the £13,000,000 of long-term debt which falls due in London on Ist November. An added difficulty lay in the huge expenditure incurred by the Lang Government in New South Wales, whiah during the past six months ended 3iUt December last piled up a deficit of" S. 8,279,763. This has been responsible for over 40 per cent, of the short-tettm loans.

When the Premiers' plan was adopted it was not contemplated that.the Budgets could be balanced iin one year, and it was therefore decided to fix three years for the achievement of that objective. But an arrangement was arrived at by which . substantial reductions in governmental expenditure should be made during the current financial year, and figures were fixed to indicate the maximum deficits which each State and the Comrwonwealth should have on 30th June next. But when the Budgots were presented estimates showed that in most cases the maximum would be exceeded. The public were prepared to accept these estimates as showing an earmest endeavour on the part of the various Governments to deal with an. exceed-

ingly difficult situation. There was, however, a profound feeling of disappointment when the' figures showing the actual position for the first sis months of the financial year (ended 31st December last) were presented. These showed that the total deficit for the Commonwealth and the States for the six months exceeded by £.2,810,768 the limit fised for the whole twelve months and was equal to the deficits estimated in the Budgets for the twelve months.

LIMITS FIXED.

The position is clearly illustrated by the_ following table, which shows the limits fixed under the plan, the estimated deficits under, the various Budgets, and the actual deficits for. the sis months ended 31st December last:—

Obviously unless drastic measures are adopted the deficits will be infinitely greater on 30th June next, when the nnancial year ends. . It is hoped that some way out of the difficulty may tie found-^-jf not for this year, at; least tor the two additional years during which the plan has currency. Just as'grave is the position with regard to the short-term indebtedness, representing mainly advances from the banks to .enable the .Governments to meet deficits, and arrangements made through the banks to provide money in London to pay interest on the external debt. Until quite recently the people were unaware of the gravity of the situation ; that' had arisan from these invisible borrowings,- and it came as a shock to : them recently, to learn that the Bhort-term indebtedness, or floating debt, of the Commonwealth ana States had increased from' £5,000,000' in June, 1929, to £78,000,000 in December, 1931. In other words, it has been increasing at 'the rate of £26,000,000 a year!

SHORT-TEEM DEBTsi

Despite the fact that ordinary borrowing had been stopped, short-term loans were being raised at a rate reminiscent of the most prodigal days in Australian history. Speaking in Tasmania recently, the Prime Minister sounded a grave note of warning, pointing out that by 30th, June, the floating debt, would amount to £85,000,000. "We have been getting money from the banks," he said, "and we are still running into debt." The position on 31st December last is shown by the following figures, which indicate the; short-term, indebtedness due in London and in. Australia, and the total amount due:— .'"■''• ■■'"•;■■:

Totals £37,824,000 £39,857,000 £77,681,000 Queensland is not concerned in these loans. _It is a notable fact that New South Wales has been responsible for 'over 40 per cent, of this extra indebtedness. ". A further complication is imported into the "business by the fact that funded external debts totalling a huge amount will fall due for redemption withm the nest few years. Loans amounting to £13,000,000 fall due in London on Ist November next, and tho I Loan Council will have to consider how the situation is to be met. question is that of providing loan money for public works, with a view to relieving unemployment, but | in view of the ■ huge commitments of i the various Governments, the proposal ;is not likely to receive ready support.

Six months . Ended v Plan. Estimates. 31st.Dec. ■■ • ' ■ £ £ £ £ 0™m°MreaItli . 4,380,000 5,170.000- 1.233',000 JJ: S» W; 5,410,000 6,700,000 8,279,763 o^ ? .•••• 1.310,000^ 820,000. 2,964,6*6 Queenslana ..., 760,000 1,870,000 .1,7401215 fn a . T.a • 1-500.000 1,500,000 1.901,300 taif tato • 1.200.0P0 1,210,000 1,080,171 laamanls ... 90,000 230,000' 261661 'otals .. 1^,650,000 17,500,000 17,460,768

London. Australia. Total. Com-wealth 10,220,000 8.225^00 18,44^000 vifi ! " 12-968-000 18,134,000 31,102,000 X te'orla- . 6,836,000 5,898,000 12,734,000 s>. Australia 3,816,000 3,700,000 7,516,000 W. Australia 3,493,000: 3,500,000' 6,993 000 lasmania 491,000 400,000 891 000