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On this Page 1
prime minister meets
bank board.
Loan Decision Expected
TonigHt
details cause delay
Decision by the Premiers' Conference on the pro
posal to raise a loan to fund portion of the short term
jfebt and to provide money for relief works, has been
further delayed.
The Conference adjourned at one o'clock until three
ij'clock this afternoon. In the interval the Prime
Minister (Mr Lyons) and the Assistant Treasurer
(Senator Massy Greene) interviewed the Chairman of
the Commonwealth Bank Board, Sir Robert Gibson.
The result of this/riterview was reported to the Premiers
(his afternoon.
On his return to the Conference, Mr Lyons said
there was a possibility that the loan position would be
finalised by this evening.
No indication was given by the Prime Minister
when the Conference adjourned of the questions he and
Senator Massy Greene would discuss with Sir Robert
Gibson.
II is understood, however, thnt the outstanding points were
Ike nnioiint of the loan, the allocations for funding and relief
work respectively, and the question of underwriting.
Appnrcnliy there is 110 doubt about the decision to raise a
loan, but the points mentioned have still to be settled to the
satisfaction of the Premiers and the Commonwealth Bank.
HELP FOR WHEAT INDUSTRY
federal Ministers and members of the
delegations who had hoped to
ne Melbourne tonight liave cancelled
a railway bookings.
Because of the Inte arrival at Confer
:te this morning of the Premier ot
iv South Wales (Mr Stevens), discus-
si on the loan proposal was tempor
shelved. Delegates spent an hour
jnissing the plight of the wheat in
tfry nnd proposals foi assistance to
iutgiwcrs, This is one or the quot
as which must bo settled at the Con-
rtncc. but so far no decision has been
ichod.
It can he stated definitely, however,
it necessitous growers will receive
at assistance; but the form which It
3 take has still to be determined.
DEVISING T1IE SCHEME
I As Commonwealth is definitely op-
ad to a bounty on the lines of that
«jcd 011 Inst year's harvest, which
9 cost approximately £3,800,000. The
too, realise that these bounties
cat be paid indefinitely, and that a
jtinuancc of the system will lead to
axial chaos.
Boris, therefore, are being made to
ra a schemo which will help to sta
rs the industry, but which will not
suae a gruwing burden on the tox-
t-ts. Some support has been found
? toe suggestion thai there should be
wbsidv on fertilisers, and this will
iconsiderwl in connection with future
It is felt generally, however,
at tnis proposal would not assist
necessitous whentgrowers over the com
ing harvest.
The position, when the Premiers' Con
ference was resumed this morning,
was that all States with the exception
of New South Wales, were in favor of
the flotation immediately of a loan of 20
millions. Half of this amount, it was
proposed, should be applied to funding
Treasury bills, and tne other half to
loan works.
It is understood that the bank would
prefer n division on the lines of three-
fifths for debt redemption and two-
fifths for loan works.
Tho discussions yesterday indicated
that the Commonwealth Bank would be
willing to underwrito the loan. It was
also revealed that no attempt would be
mado to carry out the big London con
version of nearly 90 millions until early
next year.
STRAIGHTENING FINANCES
Tho decision of the banks to reduce
die interest on Treasury bills by a half
per cent, as from November 1 will re
present a saving In the first complete
year of approximately £325000, This is
based on the estimate of Treasury offi
cers that at the end of the year the float
ing debt in Australia alone will amount
to 76 millions, less the amount to be
funded under tho loon arrangement
It is understood also that tho Com
monwealth Bank contemplates a further
reduction in the interest rate on deposits
and advances.
REPORT ON SHORT-TERM DEBT
taling to n return submitted to the
m council by Treasury officers, short
en indebtedness in Australia (apart
3 the £37,325,000 held in London)
rM reach £76.280,000 by the end of
r. if all requirements of Govern
5h wcie financed by means . of
fciury Bills.
jf June 30 Hiis year, Treasury Bills
-standing in Australia amounted to
Milton i (muds. The estimate of the
Jwy officers, therefore, indicates
J ilhoM a loan, this indebtedness
M be increased by 31 millions before
5 fflo of the financial year.
-'i millions to march
fcsof a special nature include
u.fl.WO London debt transferred to
Jfuia. and half a million under the
I'ing of other special items, Further
ivunents of the Governments up to
p next are:—
:-SaC\ £1WWM)00; trust account,
a ,i Joan account, £11,240,000 — a
ji of £21.510.000. Cash balances at the
of June were 2 millions, making the
requirements £22,510,000.
»Wircmer>Ls for tne June quarter
total £6,500,000, made up of £1,650,000
for Trust Account and £4,850,000 for
loans. Revenue is expected to show a
surplus of £1,930,000, making the net re
quirements for the last quarter of the
financial year £4,570,000. and the total at
the end of the year £76,280,000.
The cash requirements for the year to
meet estimated deficits of the State
Governments wcro originally estimated
at D millions.
According to latest figures, tho total
deficits will be £8,775,000. This Is made
up by:
New South Wales .. .. £4,350,000
Victoria £851,000
Queensland £1,485,000
South Australia £1,195,000
West Australia £765.000
Tasmania £129,000
Tho original loan provision for the
year, including the Commonwealth's
share of winter relief, was £17,080,000,
How arguments against a loan were
overcome— sec page 4

Premiers' Conference
Continued trom Page 1

FACTS ABOUT THE
CONFERENCE
How Opposition to Loan
Was Overcome

By Our Political Correspondent

Whether it be agreed that It was
through force of sound argument, force
of personality, or through the plain cir
cumstance of holding the purse strings,
the fact is that tho Chairman of the
Commonwealth Bank. Sir Robert Gibson,
scored a decisive victory over indecision
and opposition at the Premiers' Confer
ence yesterday.
In the interests of tho public whose
money his board holds fn trust, the
chairman of the bank has come to tho
conclusion that the emergency measures
which require the banks to keep finan
cing Government deficits and public
works by the purchase of Treasury bills,
lias reached a danger point. The floating
debt of Australia at June 30, 1932, was
£52,670,000. This year the Governments
will have to raise 22 millions more than
they will be receiving in revenue, If
new Treasury bills had to be Issued for
that amount, the floating debt would be
£104,670,000 by June, 1933, The Govern
ments are paying 4 per cent. Interest on
Treasury bills, and the Commonwealth
Bank could be required to discount them
at three months' notice,
SIR ROBERT GIBSON'S OPINION
It has become the opinion of Sir
Robert Gibson that this is an unsound
state of finance, which should be reme
died as soon as possible. It has further
become his opinion that the situation can
at least be partially remedied now.
When the Premiers' Conference met
on Monday, the Premiers of Victoria,
South Australia, Queensland, West
Australia, and Tasmania had open minds
on the advisability or otherwise of a
public loan to redeem Treasury bills and
to finance public works. The Common
wealth Government was the formal
sponsor of the proposal of a public loan
as a basis of discussion. The Premier
of New South Wales was known to have
come to Melbourne primed with argu
ments against the loan proposal.
PERIOD OF INDECISION
The Monday meeting of the Conference
did not carry discussion very far. The
Premiers heard the Commonwealth Gov
ernment state the alternative of a public
loan or an increase of Treasury bills,
with the balance of advocacy in favor
of a public loan, but they were all
chary of committing themselves, especi
ally as some of them had, for the first
time, been made acquainted with the
arguments that were being advanced
against the loan. The distribution among
the Premiers of n circular letter issued
by a stockbroking firm with arguments
against the loan proposal, and the ad
dress given by Professor Copland to the
Constitutional Club on Monday after
noon, had raised doubts and questions
in the minds of some of the Premiers.
The.v wanted "to sleep on it." This in
decision gave cplor to a report that there
would be opposition from more than one
source to tne loan proposal.
The process of "sleeping on it" (which
in most cases meant consulting as much
outside expert opinion as possible) re
sulted in the Premiers of South Aus
tralia and Queensland going into the
Conference yesterday with their minds
firmly made up in favor of the loan.
The Premiers of Victoria, West Austra
lia and Tasmania still retained open
minds, but were inclined to the attitude
that, as the money must be found some
how, they would be mainly guided by
the financial advisers of the Common
wealth Government.

BANK BOARD'S CASE

Sir Robert Gibson attended the Con
ference and gave a thorough and force
ful exposition of the case in favor of
the loan. He stressed the Insecurity of
the present financial position of the
nation when over 82 millions was on
loan practically at three months call.
He pointed out that the Commonwealth
Bank Board might feel compelled by its
responsibility to its depositors to Inform
the Governments that it could not
justify the risk of purchasing more
Treasury Bills. This would leave the
Governments without means of financ
ing deficits or public works. Govern
ments might tli,en be forced to default.
He gave it as his opinion that it was
now feasible to raise money from the
Australian public for redeeming a por
tion of the floating debt and tnat such
action would improve the financinl
security of Australia and have a good
effect on our credit overseas.

EFFECT ON INDUSTRY
Sir Robert dealt trenchantly with the
arguments that had been advanced in
opposition to the loan proposal. He com
bated the view that a public loan would
take money nway from possible invest
ment in industry. So far ns it would
be used, he said, for redeeming Treasury
bills, the loan would merely be a trans
fer from one bank entry into another.
The amount that would be used for new
works would come from bank deposits
that were now being put to no use and
would go into circulation. The figures
of bank deposits were quoted to show
that there is a large balance of excess
deposits that could bo drawn on without
restricting tho ability of the banks to
advance money for industrial enter
prises.
Sir Robert met the objection that the
flotation of a public loan at this time
would stabilise interest at a higher rate
than that which could be expected to
rule in a few months time with the argu
ment that whatever action the Govern
ments might take now over raising a
sum of about 20 millions would neither
further nor prevent the coming of
cheaper money, nor would it deprive the
Governments of the advantages of
cheaper money if it did come. In ad
dition, he stressed the opinion that the
floating debt was so serious a menace
that there was no justification of miss
ing a favorable opportunity to reduce it
on the ground of an uncertain chance of
a slightly lower interest rate.
He admitted that the flotation of a loan
would probably have the immediate effect
of depressing oil stocks, but he was of
the opinion that this would be very tem
porary. In conclusion, he again reminded
the Conference that the Governments
were otherwise dependent for money to
meet Budget deficits and public works
on the willingness of the Commonwealth
Bank to purchase Treasury bills, and that
tho Bank Board might be forced to state
that It did not feel justified to purchase
any more thnn It already held.
: MR STEVENS AND SIR R. GIBSON
The effect of Sir Robert Gibson's ad
dress was to bring all the Premiers, with
| the exception of the Premier of New
South Wales, into line in favor of the
! loan. Mr Stevens made a strenuous
, effort to impress the Conference with his
, point of view and there were some lively
i passages between the New South Wales
Premier and the Chairman' of the Bank.
Some surprise and resentment was
caused among the Premiers by Mr
Stevens' action in producing and read-
- ing a communication from the Chairman
of the Bank of New South Wales which
' could be interpreted as a threat against
' the Conference. As the discussion pro-
i ceeded it became obvious that Mr
Stevens' opposition to the loan proposal
was making little headway with the
Conference. On the contrary. Sir Robert
Gibson's presentation of the case, his
answers to objections and the support
he was receiving from the other Pre-
1 micrs weakened even Mr Stevens' oppo-
\ sition.
Most of the Premiers were anxious
that a resolution should be put settling
1 tlte matter right away, but as it was
1 then too late to go into the full details
of the loan, Mr Stevens succeeded in
Sersuading the Conference that a final
ecislon should bo / delayed until this
morning so- that he coula further con
sider his attitude.

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