1925 QOVEBNMENT BOBBOWINQ AND LNVESTYENT 145

account of the fact that so many Commonwealth loans are free from taxation. Where large amounts are involved this will mean a handsome addition to the nominal interest rate. Life insurance societies, it should be explained, on account of their basis of assessment, do not get the full benefit of the freedom from taxation these loans involve, and it must therefore be as- sumed that to other large investors the attraction is even greater.

When comparing the interest rate on these tax free loans with the rate yielded by industrial securities, it is necessary to take into account the fact that the freedom from taxation amomts virtually to added interest. But it is almost futile to attempt an estimate of the added attraction, as it depends en- tirely on the amount involved. Not only does the amount in- vested enter into the question, but the total income of individual investors must also be considered. The clnly thing that is per- fectly clear is that to the large investor these tax free loans must be infinitely more attractive than to the man with a few hundred pounds to invest.

It appears from the few figures that are available that the general effect of an abundance of gilbedged Qovernment stock at very high interest rates is that capital available for industrial purposes is rather scarce. Industrial and trading concerns do not appear to be able to compete with the terms which Qovern- ment securities offer. Possibly this is a passing phase, which will right itself with better times, but i t is nevertheless very real a t present. If some capital has to be borrowed overseas, the question is whether Governments should do this borrowing, leav- ing private borrowers some of the Australian field, or whether they should 6ll their requirements here and let trade and in- dustry go overseas. Government stock has undoubtedly a better chance in London, inasmuch as it has the advantage of being trustee stock, and also has other obvious advantages over com- paratively unknown private securities.

T. H.

THE LIMITS TO AUSTRALIAN IMMIGRATION.

(Abstract of a Paper b y Professor Brigden, read before #he gobart and Melbourne Branches of tke Society.)

Australian policy concerning immigration is based upon several assumptions, which map be summarked as follows :-It K

THE ECONOMIC BECORD NOV. 146

is supposed that we have vast areas of land suitahle for farming and other resources, including the espansion of secondary in- dustries, which offer unused opportunities. It is supposed that we ourselves, and people in the overcrowded land of our origin, are neglecting these opportunities, and that British people mill not come unless we bring them. It is supposed that the same opportunities a re attractive to Asiatic peoples, that they desire to migrate here in large numbers, and that they may even attack US if we do not people the land ourselves. I t is supposed, further, that more people mould share the cost of our Gorern- ment a n d of our existing public debt. Lastly, there is a general idea that Australian population is growing too slowly.

The last of these is answered by My. Wickens. The other assumptions have no substantial foundation. Since the beginning of the century the unoccupied area in Australia has decreased by over 27 per cent., and the reductions in the size of estates have promoted greater intensity of farming. The amount of assistance, however, which it is found necessary to give to settlers does not suggest that the opportunities for a fortune, o r even for a really good living, on unoccupied land are very great. On occupied land, when the price which i t can earn by growing wool is paid, there is not much left over for the small cultivators, according to Australian standards of living, which, presumably, me seek to maintain. It may also be noted that the assumption of danger arises from the same notion of great opportunities, especially in the north of Australia.

Mr. Wickens has shown that t h e average rate of absorption has been 54 per thousand per year. This average rate has not been exceeded during the last Mten years, despite the strenu- ous endeavours which have been made in that period to attract immigrants. T h e war interruption checked a tendency to excess and another reaction is now upon us. Disappointment is ex- pressed in Great Britain, and the claims of Australians are being put to the test.

Experience shows that in the absence of unpreceden tcd opportunities, Australian capacity is not likely to exceed 35,000 a year. I n order to absorb this number we require an equivalent inflow of new capital such as accompanied our immigration be- fore the war. The present capital per head of population is about 2300. To equip 35,000 people, who include a larger pro- portion of prospective “breadwinners,” we need at least the same value per head, and we cannot do more than eqiiip our own natural increase from our own savings To absorb 35,000 il

1925 AUSTRALIAN IMMIQRALTION 147

year we need a t least €10,000,000 a year in new capital imports. The present unemployment in Australia cannot be disassociated from the fact that we have been accelerating our imports of men and retarding our imports of capital.

The British-Australian agreement provides for an influx of 45,000 people per year for ten years, or 10,000 per year in excess of our normal absorbing capacity. It provides for a loan of €75 per head. The Secretary for the Dominions (Mr. Amery) has stated that “the scheme could not sacceed unless Great Britain favoured a policy of Empire marketing and invest- ment,” but Australian action does not wait upon this. We have budgeted for an expenditure of €305,000 for passage money and incidentals during the current year, and we are warned off the English capital market. It is indeed very doubtful if, under present conditions, Great Britain can supply us with the capital required for our normal inflow.

What will be the effect of adding 10,000 extra people each year to our liabilities? Among the considerations are (a) the climatic and other conditions of our “empty spaces,” (b) the cost of development, supposing we could get the capital, and (c ) the standard of living me have, and have promised to the immigrants. Settlement upon our empty spaces may be made in patches only, and the cost of transport and other essentials is likely to throw additional burdens upon those already here.

We may be required to share our resources and lower our standards, but presumably we do not seek the latter. The pres- sure of population in Great Britain is so great that assistance is not required from us. It mould pay the British Govern- ment to supply passage money out of i t s Unemployment Insur- ance Fund. An optimistic survey of our future suggest3 that we may continue our present rapid rate of expansion, provided we get the necessary capital through private enterprise and Oovernment investment, as hitherto. The system of nominated passages is adequate, both for o u r requirements and our responsi- bilities. Further extension of Government enterprise in this sphere is dangerous, and requires the most complete justifica- tion. Immigration policy requires a realistic outlook and the abandonment of romanticism, which, a t present, is as fanciful as the expectations created in 1919 concerning the possibilities of getting thousands of millions of pounds from the Germans.

Note.-Tbe Fcdml Corrrnmcnt lchane prorldo for a &us1 inet;c..c in nombcn : 26.000 auited in 1924: 81 600 are to k wLcrd In “the first JCV and E 000 addl- tiond each par. brinrini the pmpeetiw nnmberm to about 0,’OOo in b e tcarh JCU. Onb Victoria and W s t a r n Alutrrlia have u) far weep4 State rsponiibili- tie. The Immediate pmbbrn fa. therefore. not one of numbers but of capital. “he

143 THE ECONOMIC RECORD XOV.

a t h a t e of u p i t r l r w h a d in Autrdia u based upon (a) Sir Ceorce Knibbs’ Inrentow -te. d d d from the W d t h Ccruui of 1926 esehdfni land d u a and ‘‘=mumen* &.” snd brwsht UP to drtc: (b) dublte investments In produetfve rorka. Reference may be nuda for comparison to the loan &ow- ance of L626 to moldier v t t len for wuipmanf and the i n v m e n b in manufachtrina induatn wr ~ m p l ~ ~ c t . T h e fact. mar be ascertained from the “Commonwdth Year Book.”

COMMONWEALTH BANK (RURAL CREDITS) BILL, 1925.

Fur ther legislation amending the Commonwealth lBank Act was passed by the Federal Parliament last session. Pro- vision is made for the establishment of a Rural Credits Depart- ment of the Commonwealth Bank. The new department is to be quite independent of the ordinary busin’ess of the Eank. The funds of the Department a re to be provided as follows:-

(i.) Loans from the Commonwealth Treasury to a maxi- mum of S3,000,000.

(ii.) Twenty-five per cent. of the net annual profits of the Note Issue Department, to a maldmiim of

(iii.) The issue of debentures by the Rank to an amount that will not exceed the amounts advanced on primary produce by the Rural Credits Department, or four timcs the aggregate of (i.) and (ii.) abovc, together with half the accumulated profits of the Rurai Credits Department, whichever is the greater.

The issue of these debentures mill be quite a novel feature of the money market of Australia. It will be noticed that an issue of %12,000,000, i.e., four times the advances made by tKe Treasurer, would be possible, but the issue map be much greater and is limited only by the total advances made by the new De- partment. The debentures will, of course, be mainly short time paper and, if the Rural Credits Department is administered soundly, good security. The dates for redemption of the de- bentures a re to coincide a s f a r as possible with the dates a t which advances a r e repayable, and no advance is to be made fo r a period of more than one year. For this reason the new legis- lation should assist in developing a short loan market, which is an important feature of most well organised money markets.

It is proposed to use esisting financial machinery in making advances. The Rural Credits Department is empowered to ad- vance funds upon the security of primary produce placed under the legal control of the bank to any of the following:-

s2,000,000.