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Wednesday, 3 June 1942

Mr BLACKBURN (Bourke) (6:55 AM) . - I protest against the method of financing the war effort which is being employed by the Government. There are two objections to it. One is that the income from every £1 actually loaned to the Government will be free of tax, so that the more money is loaned to the Government the more income is withdrawn from the operations of the taxation system. That is not fair. The other objection is that a great deal of money that the Government has raised and will raise has been newly created for the purpose by the banks. This has an inflationary effect. I have never been able to see any wisdom or justice in inflating the currency and paying interest at the same time. I cannot see how inflation can be avoided in time of war, but there is no reason why the nation should be obliged to pay interest in addition to suffering loss caused by inflation. The people are forced to pay in two ways - through the diminution of the real value of money, and in interest bills. This is wrong. Unless the war ends soon in favour of our enemies it will last a long time, and the Government will be forced to discard orthodox methods of finance just as Germany has done. That nation relies less and less on taxation and more and more on the liberalization of credit. The important thing to us is not inflation but the winning of the war. Inflation and the consequent reduction of the real value of money must be faced. But I object to having inflation and a burden of interest as well.

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