Part 8 (1/2)
This increase chiefly arose from the heavier duties levied under the protectionist Customs tariff of 1888; but in 1889-90 there was an almost equivalent shrinkage in both Customs and total revenue. Bad times partly accounted for the subsequent inelasticity of Customs receipts, for not until 1895-6 were the total revenue figures of 1888-9 again touched.
The year 1889-90 was characterised by a deficit of 483,979, for the drop of 402,857 in revenue and the increase of 197,969 in expenditure dislocated the finances, and caused the retirement of the Morehead Government after an ineffectual attempt to impose a general tax of 5 per cent. on all property, both real and personal. The coalition Griffith-McIlwraith Administration followed, but could not in such a time of value shrinkages materially increase revenue, while expenditure was thought to be irreducible. Despite a Loan Act for 1 millions pa.s.sed in 1888-9, to provide for works temporarily met by floating Treasury bills during the two preceding years, another large loan was authorised in 1890, its total being nearly 3 millions sterling. This money was needed to retire debentures maturing on 1st July, 1891, amounting to 1,170,950, and no less than 422,850 deficiency loss on the loans of 1882, 1884, and 1889, thus leaving little more than 2 millions for railway and harbour works. This 3 million Loan Act did not receive the Royal a.s.sent until December, 1890, and the stock was issued a few months later at a most unfortunate time. The monetary tension which culminated in 1893 was already felt in the London market, and the credit of Queensland had become much impaired by the fact that during the preceding decade (1880-81 to 1889-90) the colony's obligations had increased by 16,706,834, bringing the funded public debt up to 28,105,684--nearly 70 per head of the population--while railway net earnings were steadily dwindling.
[Ill.u.s.tration: BARRON GORGE, BELOW THE FALLS, CAIRNS RAILWAY]
The cable soon flashed the unwelcome news that only 1,554,834 was subscribed. After some difficulty a Stock Exchange syndicate was formed to underwrite 1,182,400 of the balance, the price realised for the whole amount taken up averaging 87 6s. 1d. per 100 of 3 per cent. stock. Thus the net proceeds of the loan of 3,704,800 were only 3,234,376, a depreciation loss of 470,424. The interest charge on this new loan was 129,668; so that the interest, while nominally 3 per cent., was really just 4 per cent. on the money received, and, in addition, at due date (1930), 470,424 depreciation will have to be made good. But the tragedy did not end there, for the money borrowed, or the greater part of it, had not reached the Treasury in 1893, but ranked among the ”suspended bank deposits” which then paralysed both Government and private depositors.
That the time chosen for going on the money market was not opportune may be gathered from the fact that in 1889 Queensland 3 per cent.
stock had brought 96 0s. 11d. per 100, and in 1894--three years after the forced sale at 87 6s. 1d. in 1891--an issue of our stock of the same denomination brought 98 14s. 0d. per 100. It may be noted that the Queensland loan of 1890-91 was the first underwritten Government loan issued by an Australian colony, though since that time all Government loans have been underwritten. Heavy as our sacrifice in 1891 may have been, it was infinitely less disastrous than making default must have proved; and perhaps after all the experience gained was worth its cost, for, although the colony staggered under the blow, its progress was checked only for the time.
In 1890 an amending Audit Act was pa.s.sed--Sir Thomas McIlwraith being then Treasurer--section 4 of which made the important provision that it should not be lawful for the Colonial Treasurer to expend any moneys standing to the credit of the Loan Fund Account except under the authority of an annual or special Appropriation Act, in like manner as moneys were expended out of the Consolidated Revenue Fund for the current expenses of government. By section 6 it was provided that, when it was necessary to expend for any work money in excess of the appropriation, then, if such sum were included in any Appropriation Act, the Governor in Council might authorise the additional expenditure from the Loan Fund. By section 8, annual Loan Estimates, specifying the nature of the work proposed, were to be submitted, as in the case of the Estimates of ordinary expenditure.
This Act was pa.s.sed to avoid the evil of placing large amounts of borrowed money at the uncontrolled disposal of the Ministry of the day.
CHAPTER IV.
PUBLIC FINANCE (1893-1898).
Sir Hugh Nelson at the Treasury.--Credit of Colony Restored.
--a.s.sistance to Financial Inst.i.tutions and Primary Industries.
--Savings Bank Stock Act.--Public Debt Reduction Fund.
--Treasurer's Cautious and Prudent Administration.--Money Obtained in London at a Record Price.
When the banking crisis occurred in 1893, Mr. (afterwards Sir) Hugh Nelson, who had previously held office with distinction as Railway Minister for about two years, reluctantly took charge of the embarra.s.sed Treasury. Entering Parliament after the general election in 1883, he had from the first given evidence of more than common knowledge of public finance. Mr. Nelson was an exceedingly modest man, and an indifferent public speaker at best; but he possessed courage, thoroughness, and scholarly knowledge. In public matters he always aimed at taking the line of least resistance; but knowing what he knew in March, 1893, his a.s.sumption of office as Treasurer must be regarded as an act of heroism dictated by regard for the public welfare.
Quietly and un.o.btrusively he worked, refusing all invitations to appear on public platforms, and while affecting contempt for politicians who constantly apostrophised ”the people,” he determined to set the affairs of the colony straight. Revenue at that time had almost touched bottom, and was very inelastic; and Mr. Nelson followed the example of his immediate predecessor in keeping a tight hand upon expenditure. For 1892-3 there had been a reduction of outlay of about 70,000 only, as compared with the preceding year, the June deficit having been reduced to 111,676; but in the next year he realised rather less revenue, yet reduced expenditure by 206,000, closing the year with a small deficit of 8,467. As this was the time in which most commercial and financial disaster was suffered from the crisis, this economy was a feat worth accomplis.h.i.+ng, although the drastic reduction of expenditure tended to aggravate the crisis by delaying the restoration of confidence. After 1893-4 followed six surpluses.
In the midst of the bank reconstructions of 1893 there had been a general election, and Parliament met on 25th May. Between then and 18th October, 1893, Mr. Nelson, as Treasurer in the McIlwraith Ministry, pa.s.sed those financial measures which were the greatest achievements of his career. An unpopular measure was his Civil Service Special Retrenchment Act, but it was imperative, and civil servants were indeed fortunate, when so large a number of their friends in private life were left dest.i.tute, in being able to draw their diminished salaries month by month. The Queensland National Bank Limited Agreement Act enabled that inst.i.tution to resume business, though the public sacrifice was great. Acts were also pa.s.sed for encouraging meat and dairy works; for advancing guaranteed loans by the Treasury to sugar works companies; for Treasury advances upon the notes of suspended joint stock banks; for the issue of Treasury notes, made legal tender throughout the colony save by the Treasury; and for the imposition of a yearly tax of 10 per cent. on notes issued by banks. In the same session was pa.s.sed an Act for giving relief to public depositors, such as treasurers of hospitals and other public inst.i.tutions, by making Treasury advances upon the amount of their locked-up deposits.
Another important measure of this period was the Government Savings Bank Stock Act of 1894, under which any savings bank depositor may exchange his deposit for 10, or any multiple thereof, of Government stock redeemable in 1945, and bearing not more than 3 per cent.
interest. In 1897 the amount of such stock issuable was increased from 1,000,000 to 2,000,000. The object of this measure was to give depositors the opportunity of making investments in small amounts of Government stock, for which there would always be a buoyant market in the event of cash being required; and also to safeguard the Treasury by reducing the amount of money held on account of savings bank deposits repayable at call. In 1897 the total deposits did not exceed 2 millions; to-day they total over 5 millions. It is therefore satisfactory to note that the Treasurer (Mr. Hawthorn) early in the current year made arrangements for enlarging the sale of savings bank stock in the manner intended by the author of the Act.
In 1895 Mr. Nelson pa.s.sed the amended Audit Act under which, if it appears by the Treasurer's annual statement that there is a surplus of receipts for any financial year, the money shall, before the 31st day of December following, be paid to the trustees of the Public Debt Reduction Fund created by the Act, and by them applied, first to the purchase of Treasury bills, and then to the purchase of inscribed stock at the current market price, stock so purchased to be cancelled.
As a Treasurer with a deficit is bound to make provision for its liquidation at the end of a financial year, the effect of the Act has been to start every year with a clean sheet. By this practice an ingenious Treasurer is deprived of the opportunity of juggling with acc.u.mulated surpluses.
[Ill.u.s.tration: ON THE ROAD TO MARKET, CENTRAL QUEENSLAND]
[Ill.u.s.tration: FAT CATTLE, CENTRAL QUEENSLAND]
In April, 1898, when Sir Hugh Nelson retired from active politics, he had just completed five years' service as Treasurer. During that time he had gone to the London money market only twice, and had issued stock to the amount of only 3 millions. Of that sum, moreover, the 2 millions asked for in 1894 was for retiring Treasury bills, and for the liquidation of the deficit on account of previously issued loans.
In 1896 the Loan Act totalled 2,324,480, though it was not all placed by Sir Hugh Nelson. It provided for further railway extensions, and included half a million sterling for loans in terms of the Local Works Loans Act under the Sugar Works Guarantee Act; 600,000 was applied to the purchase at par of savings bank stock for cancellation, only 1 millions being placed on the London market. Of these two loans issued subsequent to the 1893 crisis, the first, bearing 3 per cent.
interest, realised 98 14s. 0d. net per 100 of stock, and the other, floated in 1897, bearing 3 per cent., brought 95 15s. 10d., the record price for money obtained by the issue of Queensland Government stock in London.
CHAPTER V.