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Wednesday, 27 April 1932

Mr JAMES (HUNTER, NEW SOUTH WALES) - I said that the debts of this country- were occasioned by the war.

Mr PATERSON - The honorable member also referred to the debt which Australia is carrying on account of the war. I want to remind him of something of which he should not need to be reminded. Owing to the arrangement initiated by President Hoover, which has resulted in a sort of financial holiday so far as inter-governmental war debts are concerned, Australia is not at present paying one penny in interest overseas in connexion with the war.

Mr Gander - How long is that to last?

Mr PATERSON - I hope that it will continue until the different countries of the world regain stability. New South Wales, the one Australian State that has repudiated its obligations, does not owe one penny on account of war debt. At the present, time the overseas interest debt of the Commonwealth and States amounts to approximately £36,000,000 per annum, of which about £5,000,000 may be attributed to' war debt. A portion of that amount represents interest, and also embraces payments to a sinking fund to wipe out Australia's war indebtedness to Great Britain. Fortunately for this country, most ofits war debt is owing to its own citizens. Of the balance that is owing overseas, not one penny has to be paid while the moratorium initiated by President Hoover exists. Great Britain lent that money to Australia at the rate of £4 18s. 4d. per cent, interest, phis £11s. 8d. per cent, sinking fund contributions, making a total of 6 per cent. That is slightly less than the rate which Great Britain has to pay for money that she has borrowed. So that we in Australia cannot hold up the Mother Country as being usurious, or even ungenerous in her financial transactions with us.

Now let me deal with the way in which the State of New South "Wales has incurred its debts. Only recently the magnificent Sydney Harbour Bridge was completed. It cost approximately £10,000,000. On the underground and suburban railways and their electrification, New South Wales has expended no less a sum than £33,000,000, making a total of £43,000,000 for those three items alone. The pretentious building which housed the State Government Savings Bank of New South Wales cost over £1,000,000. Unfortunately, that institution was compelled to close its doors during the regime of Mr. Lang, of whom the honorable member for Hunter (Mr. James) appears to be so ardent an admirer. Various governments of New South Wales have expended money in many directions, in some instances prodigally, in others on railways, water conservation, and like schemes which tend to increase the possibilities of production in the State. Money has been borrowed from the people in the Motherland in order that the State might be enriched. Now the representative Government of New South Wales refuses to pay its interest commitments in respect of that money.

The honorable member for Hunter described the overseas people from whom New South Wales has borrowed as wealthy foreign money lenders - rich Jews. I remind honorable members that, because for so long Australia has preserved its financial integrity by meeting its obligations, the British Government conferred upon this country the incomparable advantage of having its bonds placed upon the trustee stocks list. Because of that, trustee companies, friendly societies, and other similar organizations, which will not put moneys entrusted to their care into an ordinary investment, have been encouraged to invest in Australian securities, regarding them as gilt-edged. An investigation reveals that the average amount of interest that has been paid to the average bondholder in Great Britain from Australian securities is less than £50 per annum. Will any one suggest that such persons are wealthy individuals, whose income from this source could be written off without harm to them?

Mr Gander - Is the honorable member in favour of reducing the rate of interest paid to those people?

Mr PATERSON - I hope that it may be possible, as the result of action which may be taken iu Great Britain, to bring about at a lower rate of interest a consolidation of our overseas debts on lines similar to that of our internal debt. At the same time I point out that it is not within the competence of this or any other Parliament in ' Australia to pass legislation reducing the rate of interestto be paid on' overseas commitments; the consent of the investors concerned must be obtained for any alteration of the conditions of the loans. The borrowing of the money was not a transaction between the Government of this country and the Government of Great Britain. In the main our overseas commitments are to individual bondholders, many of whom are minor investors who supplement their small earnings by this average income of £50 per annum from Australian bonds. Further, a number of them are aged, with no other income than that received from this source. It is the commitments due to such people that the Government of New South Wales desires to repudiate. That State has also defaulted in respect of its internal bondholders, notwithstanding the fact, that within the past twelve mouths, the Commonwealth Parliament has enacted legislation which reduced the rate of interest on internal bonds by over 22£ per cent., to an average of approximately 4 per cent.

Mr Holloway - By compulsion.

Mr PATERSON - Whatever the method, that was the result. Many Australian bondholders are of mature years, with incomes amounting to less than £.100 per annum, sometimes below that enjoyed by a man and his wife who draw the old-age pension. Those are some of the people whom the Commonwealth Government is stepping in to protect, as it is in honour bound to do, and on whose . behalf it has met the commitments of the Government of New South Wales.

The honorable member for Hunter (Mr. James) referred to unemployment. Our best chance of industrial recovery lies iu encouraging overseas investors to put their money into enterprises in Australia. By that I do not mean that we should necessarily endeavour to obtain government loans from overseas. We should attempt to lift our credit to a point which will re-establish our financial integrity, and thus encourage overseas investors to put their money into private enterprises m the Commonwealth. A young country like Australia can develop only by additions to its capital, and the best additions are those which go into private enterprises. I should like to ask the honorable member for Hunter and his colleagues what prospects there are of encouraging the flow of money from overseas to develop this young country if we refuse to pay investors abroad the interest that is their duel If the Commonwealth Government did not step in and meet the commitments which the Premier of New South Wales refuses to meet, we could not expect one additional halfpenny to our national capital from overseas. Instead, we could be certain of the total destruction of our credit, with the result that our unemployment problem would be infinitely greater than it now is, Dur financial rehabilitation would be alarmingly delayed, and the future generally would indeed he black. If we desire to place the reputation of Australia on a higher plane, we must pay our debts. That is why the Commonwealth Government is accepting the responsibility of paying on behalf of the Government of New South Wales what that Administration is in honour bound to pay. However, this Government cannot continue doing so indefinitely. This afternoon the Prime Minister (Mr. lyons) reminded us that while the default of the Government of New South Wales was a little over £900,000 in February of this year, it will be approximately £5,700,000 by the 30th June next, the end of the financial year; that is after deducting the sum of £250,000 a month, which the Commonwealth Government has to pay the Government of New South Wales under the terms of the Financial Agreement. One can visualize what would be the result in another twelve or eighteen months if the default were allowed to continue, while we waited for the ordinary processes of the law to take their course.

Mr Gander - What does the honorable member mean by the " ordinary processes of the law " ?

Mr PATERSON - The suing of the Government of New South Wales in the ordinary way, as distinct from applying the provisions of the Financial Agreements Enforcement Act.

Mr Gander - How much has the Commonwealth collected by enforcing the act?

Mr PATERSON - I am not quite sure, but I hope that by means of this amending legislation it will collect a good deal more, and with much greater rapidity than has been the case in the past. This is not merely a fight between the Commonwealth Government and the Government of New South Wales, it is an attempt to obtain justice on behalf of the Governments of the Commonwealth and the other five States, against the defaulting State of New South Wales, which is endeavouring to drag everybody into the abyss into which it has deliberately slipped. I shall support this legislation, and I hope that it will have the effect which the Government desires.

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