POSITION IN AUSTRALIA.

Otago Witness, Issue 4029, 2 June 1931, Page 25

POSITION IN AUSTRALIA.

REDUCTION IN INTEREST PREMIERS AGREE TO PROPOSAL. SYDNEY, May 27. The Telegraph says that, reaching a unanimous decision to accept the Copland Committee's recommendations for a 20 per cent, reduction in controllable governmental expenditure, the Premiers’ Conference made the greatest step towards a common plan to solve Australia’s problems. As the banks have agreed to the principle of interest reduction as a part of the general plan, and as the savings banks, subject to confirmation by their boards, have decided to reduce interest by 1 per eent., the main obstacles to thragreements have been overcome. Even Mr Lang, although he attacked the economists’ report earlier in the day, bound himself to the 20 per cent. cut. Each Government will decide in what way expenditure reduction will be made. The expert committee was appointed to prepare a plan for balancing the Commonwealth and State Budgets over a period of years. It includes the Commonwealth Statistician, Mr C. H. Wilkens; Mr L. F. Giblin, Tasmanian Statistician; Professor D. B. Copland, of Melbourne University; Professor Melville, and Professor Shann, adviser to the Bank of New South Wales. It made drastic recommendations, including a 20 per cent, reduction in the cost of government generally, a 20 per cent, cut in the aggregate cost of public servants’ salaries, a corresponding reduction in expenditure on social services, and a tax of 20 per cent, on fixed incomes such as interest on bonds, mortgages, and other investments. The committee pointed out that payments by the Commonwealth towards war and other pensions, maternity allowances, and social services generally were enormously greater than in the United Kingdom, Canada, and New Zealand. Therefore they should receive immediate attention. The Commonwealth Auditor-general, Mr C. J. Cerrutty, in bis annual report, which was presented to Parliament recently, urges a thorough revision of pensions, and declares that the cost of old age, invalid and war pensions, namely, £20,000,000 a year, absorbs one-third of the Commonwealth’s revenue. War pensions are on a wholly unjustifiable scale, says the report. Hundreds of men who are suffering from no physical disability are drawing these as well as ordinary pay. Old age and invalid pensions are being paid to twofifths of the women in Australia over the age of 60 and to men over the age of 75-, in-espeetive of whether or not they have led dissolute and lawless lives. Thus thrifty people are called upon to contribute by taxation to people often unworthy of assistance.

ESTIMATED SAVING OF £6,500,000. MELBOURNE, May 27. The Treasurer’s report to the Premier’s Conference on the question of reducing the interest rates on Government bonds in Australia, which proposes to make acut in the internal interest Bill, is estimated to save £6,500,000 and also reduce the average rate of interest to £4 10s 9d per cent. The committee proposes 4 per cent, as the interest rate on converted stock. REDUCTION IN INTEREST. MELBOURNE, May 28. Although finality has not been reached it is regarded as practically certain that the Premiers’ Conference, which is also known as the Economic Conference, since it included a number of financial experts and economists, will adopt the principle of reduction in interest on Government bonds within Australia. The greatest obstacle to overcome concerns the manner in which taxfree bonds should be dealt with. These are guaranteed free of income tax. The Prime Minister (Mr Scullin), the Federal Treasurer (Mr Theodore), and the Premier of New South Wales (Mr Lang) insist that these should be treated in the same fashion as others, thereby meaning that they should now be taxed, making an all-round equality of .sacrifice. Their colleagues express the opinion that this will amount to repudiation and probably recoil upon the Government when it is seeking future•loans. The debt in Australia, inclusive of Treasury bills, is now about £556,000,000 and the annual interest bill on it is £29,000,000, and the average interest rate about £5 4s. The tax-free securities amount to £90,000,000. one-half of which is held by the public. The Experts’ Committee makes no definite suggestion how the tax-free securities should be treated. It leaves that to the conference, but it hints that the holders might be invited to accept a reduction of interest, or, alternatively, some form of compulsion might be adopted. Following the tentative acceptance of the various savings banks of a reduction of 1 per cent, in interest rates on deposits, Mr A. C. Davidson, manager of the Bank of New South Wales, agreed to place a similar proposal before the trading banks. He intends to urge the acceptance of it on condition that it ] forms part of the general economy plan

now before the Premiers’ Conference. The conference agreed to the principle of converting Treasury bills into a new long term loan, details of which will be left to the bankers.

FURTHER FALL IN PRICES. SYDNEY, May 28. On the Stock Exchange there was a further drastic adjustment of bond prices to-day. Values fell heavily all round, and touched the lowest levels for years. One issue was down £5 and another £6. Similar conditions prevailed on the Melbourne Exchange. However, the sentiment in the investment market is favourable to the Government's scheme for the conversion of the internal debt on a 4 per cent, basis provided it is accompanied by a substantial cut in Government expenditure.

RECONSTRUCTION PLAN. SYDNEY, May 28. Mr A- C. Davidson, manager of the Bank of New South Wales, who has returned to Sydney from the Premiers’ Conference, said that a plan for reconstruction was now before the Premiers’ Conference at Melbourne based on three principles—equality of sacrifice, the reduction of Government expenditure by 20 per cent., and the reduction of the deficit by £13,000,000 without inflation. He claimed that the plan was sound and would restore budget equilibrium within a reasonable period. WATERSIDE WORKERS’ REGULATIONS. CANBERRA, May 28. The Senate, by 16 votes to 5, again disallowed the Government’s regulations giving preference to Waterside Federation members on wharf work. The Leader of the Opposition (Sir George Pearce) moved that a petition be sent to the Governor-General requesting him to refuse his approval during the present session of any regulation being in substance the same as that already disallowed by the Senate. Sir George Pearce directed attention to the grave constitutional aspects involved by the Government’s defiance of Parliament and said that if the executive wrongly used its powers Parliament’s only redress was to address his Excellency to take the extreme step of refusing supply, and so bring the Government to an end. Sir George’s Pearce’s motion was agreed to by 17 votes to 7. INFLATION OR DEFAULT. MELBOURNE, May 29. Professor D. B. Copland, chairman of the Economic Committee at the Premiers’ Conference, addressing Stock Exchange members, declared that there were only two alternatives to the plan of reconstruction before that conference —namely, inflation with all its evils and immediate default. He added that no Australian Government at present was able to pay its way, while even with the proposed drastic reduction in expenditure and reduction in interest there would be a deficit of £13,000,000 on Government Budgets at the close of the next financial year. This, however, could be reduced as normal conditions returned. CONFIDENT OF SUCCESS. MELBOURNE, May 29. An official statement on behalf of the Premiers’ Conference, issued before the adjournment for the week-end, expressed satisfaction at the progress made during the week. It is unanimous in the opinion that a comprehensive plan for the restoration of Government finances and the economic rehabilitation of the country can be evolved and adopted before the sittings terminate. However, many details must be settled before draft measures can be adopted to give Legislative effect to the final decisions of the conference, which will resume on Monday afternoon. During this morning’s discussion on the conversion loan, Sir James Mitchell (Premier of West Australia) remarked: “ I take it that the conversion will be voluntary.” The Prime Minister (Mr Scullin) replied: “Yes, of course.” Mr Lang (Premier of New South Wales) : “ Everybody has to walk the plank voluntarily.” THE CONVERSION LOAN. MELBOURNE, May 29. A clause imposing 25 per cent, extra tax on interest on securities not converted into the proposed new 4 per cent. £556,000,000 conversion loan is included in the tentative scheme adopted at the Premiers’ Conference. The new loan is to have a currency of 40 years, with the option of redemption after 10 years. A number of proposals was referred to a conference with bankers and Stock Exchange representatives. It is stressed that the final adoption of the loan proposals is contingent on the adoption by the conference of the full plan, which includes 20 per cent, reductions in Governmental expenditure. NEW SOUTH WALES TANGLE. SYDNEY, May 29. The financial year will end on June 30. No Budget speech will be delivered in the State Parliament before that date, and none has been delivered since 1929. This is probably the first time in the history of the New South Wales Parliament that the financial year has 1 passed without a Budget.

The Leader of the Opposition (Mr Bavin) said that they were faced w'.th an unprecedented position. The whole finances of the State and the finances of the public service had been carried on without proper authority by appropriation. Neither Parliament nor the public knew anything about the state of the finances. FOOD RELIEF DISTRIBUTION. SYDNEY, Mav 29. . The Acting Premier (Mr Baddelcy) in the Legislative Assembly, stated that since March 1 food relief inspectors revealed that there had been 12 000 unsatisfactory cases. There had beeu glaring instances of fraud, and the appointment of the inspectors had berni justified. LOAN CONVERSION SCHEME. , LONDON, May 29. lhe Financial News says that London banking circles strongly criticise the loan conversion scheme, some contending that if a general scaling down of interest could be achieved by appeal to patriotism, it would not be objectionable, but a differential tax, applicable to holders who refuse conversion, constitutes arbitrary interference in contractual obligations tantamount to partial repudiation. It would not assist the solution of the ultimate problem, which is a funding loan for London indebtedness and the raising of new money, but would aggravate ° the serious damage which politicians hara done to Australian credit. LETTER TO MR SCULLIN. , r T . _ SYDNEY, May 31. ilr J. A. Lyons, the Leader of the federal Opposition, and Mr J. G. Latham, the Deputy Leader, have addressed a letter to the Prime Minister, in which objection is made to the proposal now before the Premiers’ Conference to compel conversion of internal loans at a reduction of interest. Thev describe it as repudiation, the effect of which was already obvious on the Stock Exchange in Australia and abroad. Persistence in the advocacy of this policy will, we fear, make an honourable voluntary conversion impossible, and greatly prejudice the success of any new loan to assist the farmers and the unemployed,” says the letter. “ We therefore appeal to the conference to consider with the utmost care and sense of responsibility the inevitable effect of this policy upon the financial and ‘economic position of Australia.” Mr Scullin will bring this letter before the conference on Monday.

HOW TO SAVE THE COUNTRY. Mr Stanley Bruce, formerly Prime Minister of Australia, in an address at Mornington, near Melbourne, recently, stated that a general election was the only thing that could save Australia. What was wanted above everything was leadership. The real cause of the present depression was the fall in prices for Australian produce in overseas markets. The printing of fiduciary notes was suggested as an easy way out of the difficulties, but there nnist be no easy solution. The Prime Minister (Mr Scullin), in proposing a fiduciary note issue of £18,000,000, stated that the notes would be redeemed by raising a loan. Why did he not raise the loan first? For the simple reason that he knew the people of Australia had not the confidence in the Government to subscribe to it. When the loan of £28,000,000 was raised in September last year the people subscribed only after promises had been made that there would be no repudiation, inflation, or fiduciary issue of notes. In Ballarat the Federal Treasurer (Mr Theodore) had been asked what he proposed to do when the £18,000,000 had disappeared, and in an unguarded moment he replied that the Government would print more. Once this was begun it would not stop. Mr Bruce said that he had visited all the countries in Europe in which inflation had been practised, and he did not want to see such a thing happen in Australia. The working man would feel the first effects of it. Thera would be no question of a 10 per cent, reduction in wages. It would be more like a 60 or 70 per cent, reduction. Mr Bruce said that it had been stated that when he was in office he had increased the annual expenditure by £5,000,000. This bad been spent on increases in old-age, widows, and war pensions. The people who were condemning him for having spent that amount of money were the ones who would have opposed him for not increasing such pensions. He offered no apologies for having spent that amount. The people of Australia must stand up to all their obligations and remove from the minds of people overseas aui in Australia any idea that debts would be repudiated, and thus restore confidence. It would take more than a year to balance the Budget. In England the bank rate was 2J per cent., which was a phenomenally low level. This showed that there was an over-abundance of money to be invested, and it required only a restoration of confidence for this money to be released. The Ministry must go to the country, and one must be returned which had a majority in both Houses. Anything was better than stagnation.