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The Pamphlet Collection of Sir Robert Stout: Volume 70

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

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.