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The Pamphlet Collection of Sir Robert Stout: Volume 70

The Burden of Interest

The Burden of Interest.

The burden that interest may be to a community is far more serious than is generally understood; yet we have only to consider the position of either New Zealand or Queensland daring recent years to know how serious it may be. In both those colonies, after a too rapid development brought about by enormous supplies of new capital, reaction set in, the stream of Dew capital almost absolutely ceased to flow, and of the days of exuberant prosper, nothing was left but the heavy burden of interest. The public finances of those two colonies give evidence of how grievous that burden was, Hitherto, or during the last ten or fifteen years, if the supplies of new capital have ceased in some colonies, they have continued, perhaps grown Iarger, in other colonies. Let it be remembered that the time will come when the supply will, if only for a period, cease as regards the whole of Australasia. The private investment stream very quickly ceases to flow when times become dull; the stream of official borrowing can be continued longer, but a marked degree of depression here or a financial crash in Great page 40 Britain would make such borrowings impossible. It will be well, then, for Australasia to face the possibility of an entire cessation at a very early date of all supplies of new capital, Such a cessation must take place sooner or later. In 1801 the statistics of imports and exports showed an excess of exports, indicating that the supplies of new capital were not sufficient cover the interest charges on Australasian indebtedness which as we have seen, probably means from fifteen to eighteen millions. Evidently it would be a very serious thing if the tide turns so completely in the other colonies as it has already done in New Zealand and Queensland. Yet it is exceedingly probable that it will do so. Last year the two colonies named between them paid away for interest charges, through the medium of exports, as much as five millions sterling, whilst in Victoria, on the other hand, at least four millions, and in New South Wales one million of new capital was received, If Victoria has without assistance to pay her own interest charges, then her trade, like that of New Zealand and Queensland, must soon show further heavy reductions in imports, until they leave the exports in excess by the amount of Victorian interest charges. In two years the excess of imports in Victoria has fallen no less than six millions. The difference between last year's figures in Victoria and the point at which that colony would be paying her own interest charges means a further fail of probably eight millions, and a considerable portion of this fall will evidently be accomplished this year. It is this mighty change—for mighty it is—which is the principal cause of tie collapse at present existing in Victoria. It is five years since New South Wales showed any actual importation of new capital on a heavy scale—and then it was only one-half of the extraordinary Victorian figures of 1888-89—and she has been able to keep up her imports by largely increasing her exports. Yet in 1891 even New South Wales must have obtained nearly six millions of new capital, the bulk of which was required to simply balance her interest payments. It will therefore be seen that if New South Wales ceased to obtain new capital it will, as compared with 1891, make a difference of six millions. Hitherto as the stream of new capital has failed in some colonics, it has continued—even increased very greatly—in others, and population thrown out of work where the supply has failed has proceeded to where the supply was continued. It is noteworthy, in illustration of this fact, that in 1888, that extraordinary year page 41 in Victoria, the excess of immigrants over emigrants for all Australasia was only 17,580. yet in that year Victoria alone showed an increase of population from this source of no less than 25,757. This was made possible by an exodus of population from four of the other colonies—10,548 from New Zealand. 8477 from South Australia, 1053 from Western Australia, and 383 from Tasmania. Clearly, the Victorian "boom" year afforded considerable relief to the congested labor market of Australasia generally. The lesson seems to be that if all the colonies have to pay their way without supplies of new capital, the congested labor market of one colony will find it unusually difficult to obtain relief in any other colony.