“WOULD BE DISASTROUS”

Sun (Auckland), Volume IV, Issue 1067, 3 September 1930, Page 11

“WOULD BE DISASTROUS”

WAR DEBT REPUDIATION SUGGESTION POSITION IN AUSTRALIA Press Association WELLINGTON, Today. Professor T. E. Gregory, who arrived yesterday morning from Sydney as a guest of the Government of the Dominion, has been accompanying Sir Otto Nierneyer, of the Bank of England, in his investigations into the Australian Federal and State Governments’ financial affairs. When interviewed yesterday, Professor Gregory was not prepared to discuss anything at present beyond generalities when pressed for his personal opinion on the proposal of a section of the Australian Labour politicians that the war debts of the Commonwealth should be repudiated. “Any proposal of a repudiatory character,” said Professor Gregory, “would be disastrous for Australia. One immediate result would be litigation in the Australian courts. Such action, if it assumed the shadow of being given effect to, would be the first on record that any first-class British Dominion had gone back on its obligations. “No distinction can be drawn between the repudiation of external debts and the repudiation of internal debts. All creditors must be treated alike whether they are in England or Australia. One can’t pick and choose in this way.” If Australian holders of Government stocks were to continue to receive their interest it was practically certain that British holders of such stocks would seek the aid of the Australian courts in safeguarding their rights. But there was another aspect of repudiation to which its propesers had not given sufficient thought or did not intend to take into consideration, and that was the effect of repudiation on Australia itself. The Australian loan debt is very largely held in Australia itself, and the immediate and inevitable consequence of xepudiation would be disastrous. “BANKING PANIC” 'I think it would produce a very severe banking panic,” continued Professor Gregory. “The holdings of the Australian Government obligations include banks, savings banks, life assurance societies and friendly societies. Property would depreciate in value in common with the depreciation in value of securities generally. “Australia can repudiate if it wants to. but in that event it cannot hope to raise fresh loans immediately. If it requires fresh loans, then it is better not to repudiate or talk of repudiation. “Australia must not blink at facts,” said Professor Gregory, in conclusion. “It must square up to the facts, and the sooner it does so the better it will be for everyone.” He danger in any piecemeal action. What had to be done should be done in concert. As he saw it, Australia was in for a trying and dirticult 12 montliji. and the aftermath would depend upon the world situation, which no one could control. 110 did not minimise the uneasiness of the financial mind in Australia and in London to be attributed to the suggestions of repudiation and iniiations. The impression made outside the Commonwealth by such suggestions was more unfortunate for Australia. The working people stood to suffer severely by intlation because they would be paid in money the value of which would be falling. They would be taxed without knowing they were being taxed. If Australia hoped again to approach the London money market for loans, it must be very careful of doing anything that would leave a lasting unfavourable impression on that market. Professor Gregory is staying in Wellington awaiting the arrival of Sir Otto Nierneyer. He will visit New York before returning to London, intending to pursue some economic studies ir« the United States.