AUSTRALASIAN DEBTS.

Globe, Volume XXI, Issue 1668, 25 June 1879, Page 3

AUSTRALASIAN DEBTS.

(From the " Saturday Review," April 12.) The frequency with which the Australasian colonies are applying to tho London loan market for accommodation has directed attention to the large debts they have already incurred, and excites in the minds of thoughtful observers a doubt whether they are not too rapidly mortgaging their future. Young communities have a very strong temptation to borrow, which is quite unknown to the people of an old country like our own. We in England have inherited from the labors of countless generations conveniences of all kinds which they have to croato for themselves. Our lands have been brought under cultivation, fonced and improved; our towns havo been built; our roads have been made; our churches and our law courts, our schools and prisons have been constructed. But the colonists of Australia, New Zealand, and Tasmania have had to do for themselves, within living memory, tho work that here at home was spread over centuries. Going out from a highly civilized country, they found themselves without the elementary appliances of civilization, and naturally were impatient to procure them. Indeed, without them the wealth that lay in abundance around them in their new homes could not be made available. The vast flocks that fed upon their pasturages were of little value unless the fleeces could bo exported to Europe. Their gold mines and their corn fields would be comparatively worthless if the surplus produce could not be disposed of. Hence tho need of roads and railways, of harbors, wharfs, warehouses, and landing stages. On the other hand, tho illimitable resources of the colonies required labor to develop them, and labor could be obtained only by immigration. Therefore it waß clearly desirable to attract settlers by every legitimate means. Thus the first condition of colonial progress is large expenditure—expenditure on a scalo that can bo supported only by borrowing. We would not be understood, then, to imply that the Australasian colonies ought not to have raised loans. To say this would be, in effect, to say that they ought not to have developed their resources, or turned to the beet account their great opportunities. But, while we fully admit that they wore right in incurring debt, we venture to think that they have not shown due moderation in doing so, and we must add that, unless the rate at which they are piling up obligations is materially slackened future embarrassment is to be apprehended. The Australasian colonies—that is, Australia, New Zealand, and Tasmania—have an area somewhat over three millions of square miles. In other words, they are collectively more than twice the size of India. But, while India has 240 millions of inhabitants, their whole population is about two and ahalf millions. That is to say, where there are 192 persons in India there is but one in the Australasian colonies. From these figures we may form to ourselves some vaguo conception of the sparsoneefl of population at the antipodes. We have already pointed out how such a state of things necessitates a large expenditure. But, on the other the scantiness of the population, its insufficiency for the tasks laid upon it, the undeveloped condition of the country, and the boundless calls upon the energies of every family make a heavy rate of taxation in the highest degree injurious. The problem which the colonies have to solve is how, by associated effort, to provide themselves with the necessary instruments of civilisation without drawing too heavily on their accumulated wealth or unduly mortgaging their future, nave they solved this problem ? It would certainly be going too far to reply that they have failed to do so, but at the same time there ia need to address to them a word of warning. The aggregate revenues of these colonies amount to about sixteen and a-half millions per annum, which is at the rate of £6 12s per head. This revenue, however, is not all raised by taxation. Part of it is rent paid by the occupiers of the public domain, and a still larger part is the proceeds of the Bales of land. The former is strictly revenue, and therefore is rightly included in the current income. But the latter is as clearly capital. We all know what wo should think of a private landowner who should sell his estato bit by bit, and apply the price to defray his current expenses. It may, however, be urged in defence of the cobnial mode of proceeding that a very large part of the outlay is on capital account; and this is true. A private landowner would be fully justified in Belling part of his property in order to reclaim and fence the rest and provide it with farm bnildings, or to sink and work a mine, or, in a word, to procure for himself capital to turn the estate he retains to the best account • and bo far as the colonies apply the proceeds of land sales to railway construction or the like, they do what is equivalent to this. But when they use the money to defray current expenses they are clearly drawing upon their capital. We do not say that even this may not within limits be a legitimate proceeding in the case of a very young community whoso resources are as yet undeveloped; but plainly the diminution of capital is to be taken into account when we are considering the question of the debt. Communities which are simultaneously expending their capital and adding debt to debt axe prima facie pursuing a very perilous course It may bo a wiae course, all the circumstances considered, but clearly it is one that may be carried too far if the greate3t caution is not observed. The debts of the seven colonies added together amount to very nearly seventy-three millions —that id, to almost tour-and-a-half times the revenue, including in it the land eales. Per head of tho population it amounts to £29. If tho debt of tho United Kingdom bore tho same proportion to the papulation, it would very nearly reach ono thousand millions; in other words, it would exceed its present amount about 40 per cent. The accumulated wealth of tho United Kingdom is out of all comparison greater than that of the colonies, and yot wo should think a debt of a thousand millions enormous. In fairness, however, it ought to bo observed that the Australasian debts havo been incurred for reproductive purposes, whereas our own debt ia tho consequence of wars. This circumstance makes a vast difference between the two cases. The burdensomenegs 'of a debt is measured by tho yearly charge which it imposes. If a Stato laid out tho money it borrowed so advantageously that it yielded a return equal to the interest on the loans, tho debt would of course be no burden whatever to tho taxpayers, and consequently its magnitude would be a matter of indifference. We need hardly say that the Australasian colonies have not displayed the consummate prudence here supposed. Still their loans have been for purposes of undoubted public utility, and some at least of the work 3 constructed yield revenue, while it is to bo presumed that, as time goes on and population grows, their profitableness will ir r :. ise. The railways, for example, will . ■•••.. moro and more as cultivation is extended and wealth developed. There are indirect advantages also arising from useful public works which ought not to bo overlooked. Tho making of a railway, for instance, opens up a new tract of country previously inaccessible, and euablee population to push forward, and therefore to multiply moro quickly; at the same time it supplies the farmers of the districts through which it passes with tho means of sending their produce to market, and thus adds to the export trade. In like manner tho construction of a harbor or breakwater, or of commodious warehouses, facilitates trade, though it [may directly yield no return. Again, nijney spent in attracting or convoying immigrants may appear an unprofitable; outlay, yet indirectly it may be tho very best investment that cauld bo made.

Nevertheless, while we make full allowance for these considerations we arist not forget that in some of the colonies the ordinary revenue is not sufficient to cover the ordinary expenditure, the balance being made up by the sale of Grown lands; that the value of these lands is dopendent upon the continuance of immigration ; and that, if from any cause immigration were to cease, there would either be deficits, or taxation must be seriously increased. The ability, therefore, of the colonial community to pay interest on the debt without unduly pressing on the taxpayer depends upon the continued flow of immigration. This consideration makes the amount of the debt a serious matter. And its gravity is not lessened when we examine the debts of tho colonies separately. Thus New South Wales, with a population of 630,000, has a debt of twelve millions; Victoria, with 860,000, has a debt of twenty millions ; and New Zealand, with 400,000, has a debt of twenty-four millions. Not less serious is the rapidity with which these debts have been run up. In 1872 the debts of the seven colonies only amounted in the aggregate to fortyone millions, now they are nearly seventythreo millions. In seven years, therefore, they have increased nearly 80 per cent. This is a rate of growth far more rapid than that of either population or wealth, and, if continued, it must end in embarrassment. It is not enough that the purposes to which the money is applied are good in themselves, nor even —what is much more problematical—that they are suited to the requirements of the country. The very best kind of investment may be overdone. There is no doubt at all that the United States are imperfectly supplied with railways, that the existing system will have to be largely increased, and that at some time in the future it will pay. Yet the over-construction of railways in the years before 1873 led to panic and to the depression of trade that has since prevailed. A good thing, it is thus seen, may be overdone; and, if the Australasian colonies are not more moderate in the future than they have been in the past, we fear that a similar experience may bo in store for them. In their own interest it is to be desired that they should find it somewhat less easy to borrow than they have hitherto done.

[From the "Globe," April 14.] The "Saturday Review" gives a ra her alarming picturo this week of the rapid growth of public indebtedness in Australia and New Zealand during recent yearß. In 1872, the aggregate debt of the seven colonies stood at forty-one millions, now the amount is seventy-three millions, an increase of 80 per cent, in seven years. At first sight this rapid increase has a very unpleasant appearance, bringing to mind the recent financial history of Turkey and Egypt. But there is a vast difference between the cases, for the money borrowed by our antipodean settlements ia spent on reproductive works of one sort or another, which already pay fair rates of interest, and will become more remunerative as the prosperity of the colonies increases. Two objects are of paramount importance in Australia and Now Zealand ; the encouragement and direct promotion of immigration and the development of railways and telegraphc. By these means immense tracts of land are being brought under cultivation, and as the unoccupied soil belongs to the Governments, its enhanced value forms a very substantial set-off against the cost of opening out the country and providing it with labor. A more legitimate field for the employment of the surplus capital of the mother country could not readily be found. Apart from the "sweet simplicity of Consols," there are few if any forms of investment whioh present the same advantages as colonial securities. And although the sum of present indebtedness looks formidable on paper, we think our contemporary would have found it adequately balanced by aseets in one shape or another, had due inquiry been made on that head. The joint revenue of the colonies now amounts to sixteen and a-half millions, so that the average debt only equate less than four and a-half years' income. It is true that a considerable portion of the revenue comes from the sale of lands, which are thus alienated from the Stato for ever. But our cousins outre mir get in exchange for their landed property more openings for the profitable employment of capital and labor, which, being attracted to the spot by these inducements from Europe, will hereafter greatly increase the tax-paying power of the community. The colonies will do well to be cautious when borrowing money to see that it Is intended for productive purposes. With reasonable care on that head, there is nothing in the present state of their indebtedness to justify misgiving.