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Wednesday, 7 December 1938


Mr SCULLIN (Yarra) .- Before I speak to the Loan Bill I desire to say that the admirable speech made by the Leader of the Opposition (Mr. Curtin) this afternoon was delivered with the definite authority of the Labour party. I support the honorable gentleman in his excellent presentation of the views of that party.

Dealing now with the bill, I must say that I heard with grave disquietude the statement of the Treasurer (Mr. Casey) that, in the circumstances now existing, the Government has in contemplation the raising of some portion of the £10,000,000 on the British market. I wish that the honorable gentleman had been frank, and had indicated what portion of the £10,000,000 is to be raised on the British market, I do notagree that any portion of it should be raised overseas. Various excuses for this action have been put forward. One of them is that certain equipment is to be purchased in Britain. That may be, butI point out that equipment can be purchased there without raising an overseas loan. That is not a sufficient reason for the proposal to raise portion of the loan on the British market. Another excuse is that if we were to raise in Australia all this money - and I admit that it is a colossal sum - we should deplete our resources. I heardthat statement repeated over and over again during the years from 1922 to 1929 - seven prosperous years, when Australia had abundant seasons and high prices. We were told by Sir Earle Page, the then Treasurer of the Commonwealth, that we had to borrow overseas because there was only sufficient money in Australia to provide for certain State works. During those seven years the overseas debt of Australia was increased by £53,000,000. In the same period Australia had an excess of imports over exports amounting to £70,000,000. Then we reached the depression years, when all that colossal and tragic burden was heaped upon the heads of the people of Australia. Another flimsy excuse which was put forward twelve months ago is being repeated today, namely, that if we purchase our equipment in England with English money, or sterling, we shall save exchange. On one occasion that argument was advanced by a prominent member of this chamber. If we buy in Great Britain equipment for £8,000,000 sterling valued in Australia at £10,000,000, we shall still owe £10,000,000 in Australian currency. Moreover, we shall have to pay interest and sinking fund, with exchange added. Obviously, we shall save nothing in that connexion. But by borrowing overseas, we shall have started again the old policy which was so ruinous to Australia in the past. I suspect that the reason for this proposal to borrow money overseas is that it is desired to take advantage of tho defence position to borrow money overseas in order to strengthen London funds which the policy of the Government has allowed to get weak.


Mr Nock - How would the right honorable gentleman strengthen London funds ?


Mr SCULLIN - I should strengthen London funds, not by borrowing money overseas, but by adjusting imports to exports, and allowing for an excess of exports to meet our obligations overseas. I have not forgotten the dark years of 1929, 1930 "and 1931. I reminded the Treasurer of them in December last year, when the Government proposed to take the first step towards borrowing overseas that had been taken since 1929. Early in that year two attempts to float loans on the London market failed. More than a broad hint was given that Australia's credit had been stopped because of excessive borrowing in times of prosperity. When the crisis came upon us wo ' were without funds in London because of previous borrowings and the fall of prices of export commodities. A year ago, almost to the very day, a start was made with an overseas borrowing policy. It is true that the loan then floated was only £2,000,000. The Treasurer sought to excuse the action of the Government by saying that it was only a small sum. I reminded him then that the small trickle may become a rushing mighty torrent, but the Treasurer assured us that last year was an extraordinary year, that special circumstances existed, that Australia had heavy non-recurring expenditure that year and a big conversion loan to meet. I asked him whether it was not a fact that Australia would have to face similar circumstances in the following year, and the year after that, and, indeed, in practically every year for the next 25 years. I argued then, as did my Leader, that there was nothing extraordinary about last year's finances. Nevertheless, the policy of the Treasurer prevailed with honorable members. I cannot allow these things to pass without at least striking a warning note. I handled the position in these days, from 1929 to 1931, as Prime Minister, and for part of the time as Treasurer, and I know what happened. To-day we have talked patriotically about defending our country and its people. I suggest that we should be sufficiently patriotic not to pawn our country and bring it again to the verge of default, as was done when for seven years both Commonwealth and State governments pursued a policy of borrowing money overseas. As a private member in what, I believe, was his first speech in this House, the present Treasurer referred to the period of the depression, and to the action taken by my Government to save Australia from bankruptcy and default. The honorable gentleman then said that those drastic measures were not necessary because, with the cessation of borrowing overseas, the lack of funds in London would have automatically adjusted the excess of imports. But he did admit that it would not have been adjusted so quickly as it was adjusted by the drastic measures that my Government employed. Those drastic measures would never have been necessary had a little caution been exercised, during previous years. I admit that the measures then taken were drastic, and upset trade and industry considerably, but they were the only measures left to us to correct the position in time to save default. I come now to the Treasurer's own argument that a cessation of borrowing overseas would have allowed the balance of trade automatically to adjust itself. Then why interfere with that method of adjustment by borrowing abroad? The proposal of the Government means that Australia is taking another step down that slope that on a previous occasion led us to the verge oi bankruptcy. I urge the Government not to take it. A year ago, when the Opposition urged the Government not to borrow money overseas, the Treasurer met our pleading with the argument that a peculiar set of circumstances existed at the time. That was in 1937. The Treasurer then said, " The Government does not propose to make borrowing overseas a permanent part of its policy. This is a special operation." The Treasurer cannot make the policy much more permanent than by repeating the dose every twelve months. He started in 1937 by borrowing £2,000,000 overseas. Now, twelve months later, another loan is to be floated, some of it overseas; we do not know what proportion is to be raised outside Australia. What is .to prevent similar action from being taken next year, and in subsequent years? If that course be followed, it will not be long before Australia will again be in the position to which I have referred. Australia will experience a lean time this year; there is ahead of us a period of low prices, because export values are low. With export values falling, increasing obligations overseas, and no gold to export as there was on the last occasion, how are. we going to meet our commitments? I warn the Government to take a lesson from the past. I do not think that there are many members of the present Ministry who really faced that situation in this Parliament. The Prime Minister was the only one who was in the Ministry at the time when it had to be faced. I should have thought that he would have learned a lesson from what we had to face; that he would have seen the difficulties which met us in our Cabinet meetings and in this Parliament when we tried to preserve the fair name of Australia by saving it from default. If we again reach a crisis and have the same difficulties of low prices and bad seasons, special adjustments can be made to meet the financial obligations which the country has to meet in this country just the same as we can meet a run on a bank by Special action. But none of those methods can be employed to meet the obligations overseas. The meeting of £10,000,000 worth of treasury-bills on three months' terms in London, an overdraft from the Bank of Westminster, a short-term debt - fancy borrowing on short term in London without having knowledge of how we were to meet it - were nightmares to us in 1930-31. They will be nightmares to future governments if the policy of borrowing overseas is again allowed to be applied in Australia. I warn the . Government that it is now taking the second step down the slippery slope.







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