The After-consequences of Heavy Borrowings Deplorable Ignorance on the Subject.

It is astonishing how little attention has been paid in Australasia to the economic effects, the after-consequences, of the enormous and continuous supplies of new capital which these colonies have obtained. There is no man of the least prominence in active political life in any one colony who has M anything to say on the subject; indeed, there is not one who appears to have' studied the subject in the slightest degree. There never yet has been an occasion when a marked increase of prosperity, clearly traceable to the influence of British money, has not been treated as a natural expansion, the consequences often being of the most deplorable character. Take as an example the most notable instance in the financial history of Australasia. We refer, of course, to recent years in Victoria, Within a few years new capital by tens of millions was obtained by Victoria, and a period of most wild prosperity set in; but the public men of Victoria were blind. The writer of these articles, both in the Argus of Melbourne, and the Sydney Morning Herald, two or three years ago pointed out the exceptional character of the times, and affirmed then, as he has now done in the second article, that never before in the history of the world had so many millions of new capital been thrown into the midst of a single million of people in so brief a period. But the warning page 28 was not heeded. The inevitable reaction set in, but still the truth was not learnt. During the past two years of gathering depression in Victoria, every now and then it has been stated in an authoritative sort of way that the worst was passed, an expression of opinion that would have been impossible had the real facts been realised. Sir Graham Berry, the late Victorian Agent General, on his return to Melbourne recently, expressed lib surprise at the marvellous change for the worse that had taken place in two years in the position of Victoria. Yet had lie known anything of the financial history of Victoria during the past ten years he would have known that the change that had taken place was one absolutely certain to take place sooner or later. Last year the Victorian Premier, in his financial statement, deliberated estimated that in the year 1891-92 he would not only receive as much revenue as he did the year before, but an increase also. The statement showed the moat gross ignorance of the condition of affairs in Victoria, the most entire innocence of any knowledge of the real causes affecting for good or evil the revenue of the colony. In a letter to the Herald, shortly after that financial statement was made, the writer pointed out that the Victorian revenue had been inflated by the vast imports of new capital, and that as that stream of wealth was now drying up, a decreasing revenue was all that was to be expected in the coming year. The truth is now becoming apparent, for the Victorian year, 1891-92, ends with this month, and a deficit of a million is expected. Other colonies have at times shown proportionately distressing financial results, all evidencing the complete want of recognition of the influence on public affairs of the increase or decrease in the volume of British capital flowing towards Australasia. It is strange, indeed, that this influence—the most potent of all influences which have affected these colonies the past fifteen years—should be so little acknowledged, should even be so little known. Capital comes to us in the form of goods, which, according to the tariff, must pay toll at the custom-house. The heavier the arrivals of new capital the larger the collections at the custom-house. If by such arrivals there be an increase of a quarter of a million in the revenue it is obvious that that increase partakes rather of a temporary than a permanent character. But immediately such an increase takes place in Australia it is treated as a permanent increase of revenue; it is at once spent and permanent expenditure arranged. The new capital inflates the revenue in other ways also, and the whole page 29 increase is looked upan as permanent accretion due to natural development. Then a change conies; the flow of capital is checked or stopped altogether, and of course, unless offset by the resulta of true development. These accretions disappear and the expenditure alone remains. That is practically what is the matter in Victoria at the present moment. There have been large accretions of revenue—due to British capital—and expending has been increased in proportion. To-day the accretions of revenue are a thing of the past, and the expenditure, having been kept up, there is a deficit of, it is thought, one million sterling.

Australasian Statistics: Imports and Exports.

It must be said that Australasian statistics lend themselves with singular facility to the creation of deceptive views of Australasian affairs. Statistics are like edged tools—they require to be used with care and knowledge, and the number of those who are skilled in their use is exceedingly small. The result is, the existence of very exaggerated ideas on the development, resources, and importance of these colonies. It will be will to note some of these points. Take first the simple figures of imports and exports. We have seven colonies, all importing and exporting, not only from and to the rest of the world, but with one another. Imports and exports are simply the names given to goods when they cross political boundaries; as political boundaries are increased, so imports and exports are increased; as they are lessened, so imports and exports are decreased, Millions of pounds' worth of commodities pass between England, Scotland, Ireland, and Wales, but there being no political boundaries between these countries, the trade between them goes unrecorded—is not included in imports and exports. In Australasia we have seven—with Fiji eight—colonies, and every particle of trade between them goes to swell the volume of imports and exports. In 1890 the combined imports and exports of Australasia came to a total of £132,801,164, equal to £85 10s, 8d. per head of the population. For the same year the imports and exports of Great Britain showed an average of £21 3s. 11d. This gives the idea of a relatively vastly larger external trade in this part of the world. But looking further, we find that more than two-fifths of the Australasian trade was simply inter-colonial, that is entirely between the colonies themselves, and that the true Australasian imports and exports only aggregate page 30 £75,223,727, or £20 2s. 4d. per head. Instead, therefore, of Australasian imports and exporta being per head very much heavier than those of Great Britain, they are really rather lighter. Even this reduced figure of £75,000,000 includes at least £15,000,000 new capital imported. Australasian external trade, apart from borrowings, would not give an average of over £16 per head, as against £21 for Great Britain. The moment these colonies become federated, and the political boundaries between them are swept away, there will be a real increase of trade between them, but import and export returns will show a mighty shrinkage. In the absence of federation we can continue to exaggerate our trade in the way referred to. Mr. Coghlan, the able statistician of New South Wales, has divided the external from the inter-colonial trade in his book, the "Seven Colonies," and it would be well if the distinction were generally remembered. The imports and exports per head of the United States are £5 18s. 8d., of Canada £9 6s. 2d., of France £11 10s. 10d., of Germany £11 1s. 11d., so that, with all deductions, Australasia still makes a comparatively good exhibit in her record of external trade.

Statistics of Income.

Let us look next at the figures representing the income, the private income, of Australasians. Statistics of income are very difficult to prepare, and at the very best they can only be accepted as approximating to accuracy. In the United Kingdom the work of calculation is much facilitated by the returns made for assessment to income tax, which cover about one-half the entire income of the country. According to Mulhall, the income per inhabitant of the countries mentioned is as follows:—United Kingdom, £53 14s.; France, £27 16s.; Germany, £23 4a.; Denmark, £32 5s.; Canada, £26; United States, £39; Australia, £40 4s. It will be seen Australia is put first, the United States second, and the United Kingdom third. Coghlan, in his "Seven Colonies," published last year, placed the private income per head in Australasia at £41 14s. In this year's publication of the same work, presumably dissatisfied with the data available, the author has omitted his calculation for all Australasia, and is content to give an estimate for New South Wales alone. This comes out at the high figure of £57 per head, or an aggregate income of sixty-three millions. This, it will be seen, makes a very brave show for New South Wales as compared with any page 31 other country in the world. Indeed it is an admirable item for use on the public platform, and it does not sound at all bad when read from the prospectus of a new loan. But in truth the statistics need a little examination. In the first place New South Wales out of her income, whatever it is, must pay at least five millions yearly for interest, &c, on her public and private indebtedness, so that if her aggregate income be sixty-three millions this needful deduction at once brings it down to fifty-eight millions, which is only about £52 10s. per head. Then comes another consideration. How are we to distinguish between the income which is the result of our own actual production, and the income which is simply the result of the expenditure of other people's money? Clearly the former only is the real income; the latter is just a temporary addition. During the past ten years New South Wales has probably obtained something like seventy millions of new capital, thirty of which, it may be estimated, has been imported, and forty used to pay interest; that is an average of seven millions a year. In 1890, He year for which Mr. Coghlan's estimate of £57 per head was made, the sum did not exceed five millions. A portion of this would be used to pay for railway plant in England, but the bulk of the money was certainly expended in the colony itself, and as a matter of income would count more than once. Probably this expenditure of "other people's money" would account for eight out of the fifty-eight millions, and it might then be said that the New South Wales income per head consisted of £45, the product of her own industries, and £7 10s., the result of the expenditure of new capital. It will be seen that these considerations place a very different light on the question of income. There is a further point, which, though it does not at all lessen the actual earnings, yet makes a material difference as far as toy comparison with the earnings of other countries is concerned. In Great Britain there are 1047 females to 1000 males; in Australia there are only 843 females to every 1000 males, This means that men are 24 per cent. more numerous in proportion to the population than they are in Great Britain, and that this must of necessity tell heavily in favor of Australian figures, and against those of Great Britain in any "per head" calculation of income. Indeed, the relative effectiveness of the Australasian population ought to be remembered in connection with all statistics that can be affected thereby, and it is a point that goes to the credit of these colonies in considering their page 32 indebtedness. With regard to the income for all Australasia, it may be said that it is subject to a yearly payment for interest, &c., of from fifteen to eighteen millions; and further, that during the past ten years it has been buoyed up and inflated by the yearly expenditure, on the average, of something like twenty millions. No one eau form a true idea of the income Australasia unless the whole of the facts here set forth are borne in mind. The subject of production is closely allied to that of income; indeed, production is the basis of true income. In the previous article we gave Coghlan's figures showing the total production from the primary industries to be eighty-six million. If to this we add twenty millions for the manufacturing industry, we get an aggregate production for Australasia of one hundred and six millions for the year 1800. This year we may estimate the total at one hundred and ten millions divided amongst four millions of people, which is equal to £27 10s. per head, a large sum in comparison with the production of other countries, though it must be remembered that the interest charge of equal to £4 per head must ultimately rest on ibis production.

Statistics of Wealth.

The third point in Australasian statistics to which we must draw attention is that of wealth. The prodigious wealth of Australasia has of late been a well-worn theme, and if anyone has presumed to criticise Australasian borrowings a reference to "our wealth" has been supposed to be sufficient to end the controversy. Mr. Coghlan has published a table of the private wealth of Australasia, from which we take the following:—

Private Wealth, Australasia, 1890.

If the value of public works be added, the total of Australasian wealth is, says Mr. Coghlan, brought up to 1,329 Bullions. This is without including anything for Crown lands, Earning now to "Mulhall's Dictionary of Statistics," we find the following comparative figures:—

Wealth, Mulhall's Estimate In Millions of £.

These two tables present the position of Australasia, as regards wealth m the most flattering manner, Mulhall, it will be seen, Hakes a higher estimate than Coghlan, which arises from the bet that he includes Crown lands in his valuation. It is from these and similar tables that the popular statements about Australasian wealth are taken. To be able to say that the wealth per head of these colonies is far and away in excess of that in every other country, the United Kingdom not excepted, is very pleasant, but alas ! each of the two statisticians we have quoted accompany their tables with certain remarks which are invariably ignored, Mulhall (p. 589) says:—" As regards the amount of wealth per inhabitant the United Kingdom stands second only to Australia; and when we consider that most of Australia is mortgaged to British capitalists, we may say that in reality the United Kingdom has most wealth per head." As far as we know this important qualification is never referred to. Coghlan ("Seven Colonies," p. 817) says:—" The figures relating to the wealth of the provinces are irrespective of the money owing to persons outside Australasia. That this is considerable is certain from the value of some of the known items. Thus the banks trading in Australasia have British deposits to the extent of some forty-two millions, of which at least twenty-six are used in their Australasian business." Mr. Coghlan's statistics of wealth are often quoted, but the accompanying qualification is generally page 34 forgotten. The fact is that statistics of wealth are simply a statement of the wealth in a country, and not of the actual wealth belonging to the population—the wealth in and not of a country, But invariably Australian public men speak of the wealth inAustralia as being the wealth of Australia. This is a striking illustration of the way in which Australian statistics lend themselves to the creation of erroneous views. Mulhall's remark that "most of Australia is mortgaged" may, however, be set down as an exaggeration in the opposite direction to that usually taken.

If we would ascertain the true net wealth of Australasia we must deduct 400 millions from the ordinary estimates of wealth, this being the sum at which we approximately fixed the Australasian wealth owned by persons resident in Great Britain. Mr. Coghlan has estimated the gross wealth, private and public, at 1829 millions, Mr. Mulhall has estimated it at 1373 million Making tire allowance of 400 millions, we find these estimates reduced to 929 millions and 973 millions respectively, equal to £232 per head on the lower and £243 per head on the higher estimate when divided amongst four million people, a marked reduction on the per head figure representing the gross wealth, In taking extracts from Mulhall's table representing the aggregate wealth of each community, we also took the figures shoeing the proportions represented by lands and houses. In Great Britain these cover 42 per cent. of the total wealth; in France, 51 per cent.; in the United States, 42 per cent.; in Canada, 42 per cent. In Australasia, however, the proportion in very much greater, being no less than 61 per cent, without any inclusion of Crown lands. Indeed, it comes to 70 per cent. on the figures given by Mr. Coghlan, 821 out of 1169 millions, but the inclusion of public works makes the percentage 61. Adding public works, we have, as we have seen, an aggregate estimate of 1329 millions, of which 821 millions represent land and houses, and 508 millions all other forms of wealth. The estimates of the value of lands and houses in Australasia have been carefully made by the Statistician; they are not at all based on guess work, they are based on the municipal valuations, and on declarations taken in connection with the census; they are trustworthy as far as they go. But when we talk of Australasian wealth, we must remember that the vast proportion of it is represented by real estate, which is liable to most rapid and violent changes in value, and that the valuations now before us—1890-91—are those taken after a time, page 35 in some colonies at least, of inflation; after the full influence of an unprecedented rush of new capital had made itself felt. According to Mulhall, Australasian wealth rose from 320 millions in 1870 to 1378 millions in 1888. The great bulk of this increase was in real estate, and the very advance is so enormous is to suggestdoubt3 as to its having been permanently established. In passing, it is not without interest to refer to the extraordinary fall in the value of land in the United Kingdom, In 1843, the value was 1677 millions; in 1850, it had risen to 1704 millions; in 1850, to 1748 millions; the advance continued at an accelerated speed till in 1868 it stood at 1925 millions, and in 1877 it 2077 millions. The culminating point was reached in 1877, since which year there has been a continuous and very heavy fall, until in 1888 the total value only stood at 1544 millions, a lower due than known for fifty years. The great fall in the value of land in Great Britain has been accompanied by a marked rise in the value of land in distant countries. The two changes, so diametrically opposite, are probably mainly due to the same cause—the cheapening of the cost of moving produce from country to country. It is probably true to say that the value of wheat land in Great Britain to-day only exceeds the value of similar land in Australia and in America, quality being equal, by a sum representing the capitalised equivalent of the cost of taking wheat from Australia or America to Great Britain. This tendency towards a closer approximation in the value of the agricultural and pastoral lands of the world may be relied on to continue, and it forms an element of strength in the value of such lands in Australasia. It will be understood that this fall in value in Great Britain is purely in agricultural and pastoral lands, as real estate in the towns and cities of Great Britain has continued to rise in value.

The most important points affecting the wealth statistics of Australasia have been dealt with in the foregoing remarks, and although it is clear that there has been a substantial, quite a wonderful, increase during recent years in the wealth of these communities, it is equally clear that there requires to be a very considerable modification in the popular estimate, both as regards the aggregate amount and as regards the comparison with the wealth of other countries. The "per head "estimate of wealth in Australasia is, in comparison with that of Great Britain, made to appear to greater advantage by the very much larger proportion of workers in Australasia. Indeed, the way in which nearly page 36 all the statistics we have referred to tend, to the creation of exaggerated views of the financial strength of Australasia is quite remarkable.