fiNCREASED COST OF LIVING. 507 



•circumstances the depression in trade resultin-^, which would tend 

 to lower prices of luxuries first and of necessaries subsequentlvt 

 would be aggravated at first by the high prices resulting from the 

 depreciation of gold ; but such prices would tend to sharply and 

 heavily fall owing to lack of effective demand. The depression 

 would, however, be lessened in duration because of the gold pro- 

 duction, as prices must eventually rise again in sympathy with the 

 maintained increase of the gold supply. This contingencv, however, 

 does not affect the position as a whole, being of a transitory nature, 

 acting as a temporary check to the general trend of events. There 

 will, on the whole, probably be a demand for a considerable readiust- 

 ment of fixed incomes, including therein the fixed wages of the 

 working classes ; and, as political power is now so largely in the 

 hands of the masses, an era of political and economic changes 

 seems to be imminent, the probable effects of which cannot yet be 

 forecasted. 



It must not be overlooked in this connection that a very serious 

 responsibilitv rests upon Australian public finance in connection 

 with the early and rapid increment in the amounts maturing out of 

 the total sums now outstanding as public debts. The Common- 

 wealth Statistician, in his Official Year Book, has pointed out tha 

 during the 15 years 1910-1924 no less than 120f millions of the 

 •existing State debts will mature ; or more than half the total public 

 debts, whilst in the five years 1910-14, alone nearly £28,000,000 

 falls due. That the London money market will stand out for the 

 best possible terms for conversion is evident. What makes the 

 matter more serious, and may have the effect of causing interest to 

 rise, apart from other considerations, is the fact that both the 

 Commonwealth and States Governments, as far as indications go, 

 are prepared to launch out extensively into new enterprises — 

 the Commonwealth in connection with defence, continental 

 railways, development of the Northern Territory and Papua, the 

 building of the Federal Capital, etc., and the States Governrnents 

 being desirous of making new railways and improving existing lines 

 and equipment, etc. This at a time, too, when the Commonwealth 

 Government is considering the desirableness of speedily taking over 

 the management of the existing State public debts. Of course, if 

 a spirited pubHc loan poKcy be embarked upon for the purpose of 

 constructing public works which will return 4 J per cent., whilst the 

 money borrowed for the purpose is obtained at 3 J per cent., then 

 financial safety is secured, but any increase in the rate of interest 

 above 3| per cent, must militate against the advantages which 

 otherwise public borrowing would confer. It is significant that in 

 New South Wales the rate of interest on local inscribed stock has 

 recently been increased from SJ per cent, to 3| per cent. If there 

 be competition between the States as to the monetary accommoda- 

 tion desired, then the tendency to greater cost attending public 

 borrowings must be accentuated. The situation would be aggra- 

 vated by continuance of the depreciation of gold above re- 

 ferred to. 



