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Thursday, 15 May 1924

Dr EARLE PAGE (Cowper) (Treasurer) . - In the few moments which remain before this debate must be adjourned, I shall not be able to deal with many of the matters which have been referred to in the lengthy speech of the honorable member for Martin (Mr. Pratten). Every honorable member in the House must feel grateful to that gentleman for the care and time which he must have spent in preparing that speech. Honorable members must also recognize that it was an importantspeech. I dare say that a number of the honorable member's conclusions will be disagreed with ; but that will not prevent us from recognizing the sincerity of his convictions, and we congratulate him upon the manner in which he has expressed them. Very shortly the Government will place before the House a comprehensive banking Bill. I propose, therefore, to withhold my remarks cai his suggestions for the creation of a Bank which will be national in function as well as in name. When the measure to which I have referred is introduced, the views of the Government on currency and exchange will be placed before honorable members, and they will be asked to express their opinions on those matters. The honorable member for Martin made two suggestions with which I propose to deal now. The first concerns the control of public borrowing. This Government hae already taken a definite, step to control public borrowing, at least in some degree, for last year provision was made for the establishment of a statutory sinking fund. In future, all borrowing contracts will contain specific provision for contributions to a sinking fund. That will place an automatic check upon Treasurers, for it will mean that a definite sum will have to be taken from revenue each year and ear-marked for sinking fund purposes. Honorable members will recollect that when I presented the Budget last year, I stated that the public debt of the Commonwealth had been reduced during the year by £5,000,000. I hope that when I present the Budget this year I shall be able to indicate that, in addition to providing certain moneys for the sinking fund, a portion of the revenue will also be used for debt reduction. The Government have attempted also to secure some coordination between the Federal and State authorities in borrowing. We tried to fix a borrowing limit which should not be exceeded. In 1920-21, the total borrowing of che Commonwealth and States amounted to £47,000,000; in 1921-22. the figure was £38,000,000; in 1922-23. it was £36,000,000; and for 1923-24, it was proposed to borrow £48,000,000. I suggested that the Treasurers of the various State Governments should reduce their figures. I pointed out that if we maintained the. borrowing rate of the last few years, we should be borrowing at the rate of £320 per head.

Mr Gregory - Were the amounts mentioned by the honorable the Treasurer new money?

Dr EARLE PAGE - Yes. I urged that, if the borrowing policy were not cut down as far as I wished, it should, at least, be reduced to such an extent that the total debt per head of the people should not exceed the present figure of £160 per head. That would have meant borrowing only £20,000,000 this year instead of £48,000,000. The Treasurers could not agree to my proposition. When the Federal Loan Council, which is composed of the Federal Treasurer and the Treasurers of the various State Governments, met in January of this year, I found that each State Treasurer had large commitments. They told me confidentially in turn that they had made a good fight with their respective fellow Ministers to keep the Estimates down. I imagine that it is not 111]Usual for a Treasurer to do that. The Treasurers informed me that it was impossible for them suddenly to cut their loan policy in half. To do so would have meant the immediate dislocation of practically all the public works in progress in Australia. It would also have meant that the completion of large public works which were expected to be reproductive in the near future would have been delayed, and that instead of them providing revenue, extra expense would be incurred because of the money already spent on them continuing to lie idle. The Conference agreed, however, that borrowing should be reduced. We tried to determine the total amount that could be borrowed this year without unduly interfering with private enterprise, but that was not possible. For the first time in the history of Australia it was decided that the rate of interest to be offered for money by various Governments should be uniform. The Honorable member for Martin stated that the Tate of interest paid by the Commonwealth Government for the War Gratuities Conversion Loan would probably fix for some time the rate of interest to be paid on money borrowed for public works. I point out to him that the interest rate was fixed, not by the Commonwealth Government, but by the condition of the money market. It will be remembered that last year the first Commonwealth conversion loan was offered for 25 years at £5 ls. 9d. per cent., and the second at £5 9s. per cent, for five years. After that loan had been floated the various State Governments of Australia began an active competition against each other to secure the balance of money available in the Australian market. The rate then was 5^ per cent., subject to Commonwealth tax, which is considered to be equivalent to \ per cent. One Government came forward and offered 5J per cent., tax free. Another Government then offered 5£ per cent., tax free. Last December s|till another Government offered 6 per cent., tax free, and found it very difficult to obtain money even at that rate. The Commonwealth Government rate for the last loan was 6 per cent., subject to- Commonwealth tax, which is less than was paid by one of the State .Governments in December last, because our loan was subject to taxation. The rate which we offered was the market rate at the time. That was proved by the subscriptions to the loan. The Commonwealth Government has also tried to secure the appointment of one borrowing agency for all the Governments of Australia. The State authorities did not agree to this proposal, but some progress was made, for it has been arranged now, that instead of having seven different authorities borrowing money, only five authorities shall go on the market. This was made possible by the Governments of "Western Australia and Queensland, for they were able to state their commitments definitely, and to agree to the Commonwealth Government raising them. Thus in the latter part of the year, a lesser number of borrowing authorities were competing in the market. In the early part of the year we secured another measure of reform, for the various Governments agreed that no two of them should go on the market at the same time. While the Commonwealth Government was trying to secure the conversion of the War Gratuity Loan, it had an absolutely free hand. That was very different from the situation that prevailed when the previous loan was floated. Time will not permit me to deal with the other points which I had in mind, but I suggest to honorable members that an ounce of practice is worth a ton of theory. The experience of the United Statesof America, which is a highly Protectionist country, shows the necessity of obtaining outside capital for developmental purposes. I have a copy of a report presented tothe British Government in 1923 by the British Trade Commissioner in New York, which traverses the history of American development since 1820. I trust later to have the opportunity to inform honorable members of its contents. I ask leave to continue my remarks.

Leave granted; debate adjourned.

Sitting suspended from 6.27 to 8 p.m.

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