WORLD FINANCE

Hokitika Guardian, 6 October 1932, Page 3

WORLD FINANCE

AUSTRALIAN POSITION. DEFINITE SIGN'S OF RECOVERY. The September Review of 11. Byron Moore, Day, and Journeaux, sharebrokers, Melbourne, discussing tlie world depression and the definite signs of recovery in Australia, makes the. following comment

After three years of financial, political, and economic disturbance a iperiod of cailm is now in sight. The gravity of the problems which arose was beyond comprehension, and the whole world was confronted with the reserve which threatened to 'wreck the ideals and principles of mankind. The scientific mind suffered defeat, trade and commerce-was shattered to, fragments, monetary policy was doomed to failure, and economic laws failed to function., Public confidence was lost, and capital was unable to insist the persistent and vicious attacks of deflation. The masses, swayed by psychological forces, 5 moved wearily along a course of obviously unknown destinaion, and attempted detours met with disaster everywhere. ' Debtor and creditor countries were faced with difficulties which they attempted to overcome by selfish practices, and tariff barriers were erected to prevent the importation of foreign .goods. In the struggle to meet heavy war debts and private obligations debtor countries suffered financial embarrassment, whilst the flow of gold to the

creditor countries became a menace even unto themselves; The continued conversion of long term to short term investments aggravated the anomalous •position already existing, and the accumulation of short term funds provided facilities which encouraged flight of capital. The? terrific drop in national .into,me,..,, was responsible for heavy budget, deficits, and completely destroying the few remaining threads of confidence. Heavy foreign withdrawals of capital forced many countries to abandon the gold standard, and the foreign exchange market became entangjefj in a mass of depreciated currencies, the reactions from which caused chaotic complications in international trade. The drastic fall in commodity prices ruined the credit of primary Producing countries,. many of which were set a gigantic task in. meeting their obligations ith a heavily depreciated currency, whilst, eventually some were forced to default and oth r rs evaded their responsibilities by; deliberate repudiation. , / RETROSPECTIVE VIEW. Taking a retrospective view of the past few years, it is tvo.-iowledo-ed throughout the world that Australia has faced her troubles courageously and honourably, and her struggle against overwhelming odds will go down in history as, one of the outstanding events in the world depression now ending. The sacrifices she has made have not been in vain, for in the new era of prosperity now approaching, many benefits will aoerv 3 which otherwise would not have hre.i possible. Before the depression first descended upon Australia we had been enjoying a prosperity, brought about by high prices for our exports, heavy external and internal borrowing at high rates of interest, and -extravagant Government expenditure. It was apparent at the beginning that these conditions, could not continue, and a period of readiuistfiient and retrenchment was essential in which many sacrifices would have to be made and many hardships endured. Unfortunately considerable delay was experienced in taking steps to Ui 'Ot the altered conditions, and our difficulties rapidly accumulated. Exchange rates commenced to soar, budget deficits' reached dangerous levels, cqnit :1 left the country at an alarming rale, and stringent monetary conditions followed. Imports heavily exceeded exports, and London funds were so .seriously depleted that default was imminent. Extreme legjsAtjon and various attempts to inflate currencies totally destroyed our credit '•.brand, and further arcoinniodation in London was impassible to obtain-. A UOMI-LKTK CHANGE During the pant- few months a comdetc change has overtaken the trend ..I' events in Australia. The uuecr- )• ?iintv which prevailed for over two years lias given place to a (eolin of confidence and hope. The removal of (he ip’desirnble elements .in. Australian politics and the assurance, of , stable Government in the future" have' been

important facto s in relieving the internall strain which has been intensified ,by tne depresjug conditions in the world’s economic and financial affairs.

Already Australia's overseas trading figures disclose a satisfactory position, which has strengthened ner credit ,tbroad. These figures tire capable of improvement, and should the present t.-rend of world prices continue upward

exports must, increase in volume and value, and a very satisfactory balance accrue. The Commonwealth and all the State- Governments are determined o reach budget equilibrium, whilst the trading hanks are in a particularly strong position to supply whatever funds may be required to* meet legitimate, industrial expansion.

Wages have been lowered in keeping with the reduction in the cost of living figures, efficiency in industry has increased, and much of the waste and extravagance of former years has been eliminated. Present production costs are, therefore, considerably lower than they were tl’.re. 1 years |?.go, which is on e of the most important phases in the recovery due to take place. Seasonal conditions are particularly favourable, and another year of high rural production is in prospect. AUSTRALIAN CREDIT. Australia’s credit abroad has definitely improved, and several' Commonwealth and State Government is lies are now commanding a premium in London, whilst local issues of Australian Consolidated loans are firm fit or around par The London-exchange position, is der finitely easier, and an early reduction m the ■ existing race is imminent.

This will offer tremendous relief -to our yarious Governments in reaching budget equilibrium, although teuipprarily. „the, .-primary -.producer. ..pmst suffer unless commodity prices further improve. Prospects for a successful "Ouversion of f-tie New South Wales loan of £12,330,000 maturing on November Ist. next are particularly favourable, whilst there is every indication that our floating debt abroad may he funded at a reasonable rate of interest.

The gold mining industry is being revived and gold production .promires again to become, ail important part ( f our export trade. Several my ort--ant discoveries have recently • been made and developments are indeed satisfactory. Capital which previously was driven from Australia under the fear of inflation or extreme political interference is rapidly returning, whilst evidence is available which indicate-' an influx of foreign capital for investment in Australia. Interest rates are low *n-i- money plentiful. Bank overdrafts and deposit rates have been reduced, and considerable relief is accruing to primary producers and manufacturers. - Stock Exchange prices have recorded substantial gains, hilst a little more activity is being shown in real estate.

Retail houses report increased turnover, 'particularly since- June last. Unemployment is less acute and considerable work is -being provided by Government grants l . The employment oi die workless influences the employment of others, and provided the credit machinery continues to revolve, it is likely that national income will grow , and public spending increase. Taking all these factors into conideration and in making a comparison with the condition of affairs a few months ago, there is every justification in believing that the prevailing deireasioq is .steadily hut. surely denart--2'