COLONIAL FINANCE.
THE article on "Colonial Loans, Finance, and Develop- ment" in " Burdett's Official Intelligence, 1890," published last Saturday, is of more than ordinary interest and significance. The information it contains in regard to the indebtedness and the resources of both the self- governing and Crown Colonies is of special importance just now, since in the present Session another attempt is to be made to empower trustees to invest the funds under their control in Colonial Government securities. Granted that there is no reasonable ground for believing that a Colony is burdened beyond what it can bear, it is difficult to see why Parliament should not accede to the request of the Colonist that the beneficiaries of trust funds should be allowed the same privileges in regard to Colonial stocks that they enjoy in respect of Irish railway debentures. In order that the public may judge for themselves on this and other points, Mr. Burdett has collected a mass of valuable material, showing the progress and development of each of the Colonies, the amount of the loans contracted, the purposes for which they were raised, the amount outstanding, and the objects to which the money has been applied.
Passing over the interesting table dealing with the climatic conditions of Greater Britain, which, by-the-way, shows that the mean temperature at Sydney for the last thirty years has ranged between 71.4° in January, and 53.3° in July, and that in Melbourne the mean annual temperature is 57.2°, the maximum in twenty-three years being 110.70°, and the minimum 27°, we desire to refer to the question of indebtedness. For the purpose of estimating the relative fiscal positions of the Colonies, Mr. Burdett enumerates certain Considerations suggested by Mr. Billinghurst in a paper read by the latter at the Institute of Bankers. Of these, some appear to be of real moment. To begin with, it is unquestionably reasonable to say that "the favour with which the Public Debt of a Colony is regarded is, or should be, mainly contingent on the amount of the debt expended on public works and the relative reproductiveness of such expendi- ture." No doubt if we applied this test to the Debts of England, India, the United States, or of any European country, we should be obliged to pronounce them unsound. Still, it is as well to remember that a mortgage raised for improving the estate is more satisfactory than one spent off the land. Next, the importance of the relation of debt to population is insisted on, since many shoulders bear a heavy burden better than few. Again, since the Colonists are, as a rule, impatient of taxation, the existence of large tracts of unalienated lands in a Colony is a source of security. In regard to the amount of the loans spent upon public works, Mr. Burdett's figures are, unfortunately, far from complete, many Colonies giving, it would seem, - no returns as to this point. For one or two, however, full information is supplied. For instance, the total present indebtedness of Victoria is about £34,600,000, Of which about £30,800,000 has been spent upon productive works. The approximate figures as to New South Wales are : total debt, £44,100,000; spent on productive works, £35,200,000. No doubt the expenditure on productive works does not necessarily afford complete security, because though the money may have been nominally spent on railways, it may in truth have been as much wasted as . if it had gone in red cloth and gunpowder. To show how far the expenditure has been efficient, Mr. Burdett furnishes a table giving the "actual returns per cent, on capital expenditure represented by pro- fits." In the case of New South Wales, the dividend • which would have been paid in 1888, had the railways been obliged to be self-supporting, was 3-32 per cent., and in that of Victoria, 3-56 per cent. If, however, we com- pare these figures with those of ten years before, we shall see that in 1878 the railways earned 3.74 per cent. in New South Wales, and 3-85 in Victoria. In other words, there has been during the last decade a decrease of loan pro- clactiveness in both Colonies. The only two Australian Colonies that show an increase of productiveness in regard to the sums spent on railways are South Australia and New Zealand. South Australian railways earned in 1878, 4-26 per cent. on the capital sunk in them, and 4-80 in 1888; while the New Zealand lines, which earned 2-43 in 1878, earned 2.60 in 1888. Too much stress, however, must not be laid on these facts. The conclusions apparently to be drawn from them may be misleading, unless we know the policy in regard to freights and fares pursued by each Colony. It is quite possible that the Victorian and New South Wales railways might be made to pay 5 per cent, if the Governments of those Colonies did not favour a system of cheap railway rates. After all, the total wealth of a Colony is the best security it can offer, and if this is increased by low charges on the railways, then the fact that the lines are not worked to earn high profits may be a source of strength rather than of weakness,--a security to the State creditor rather than the reverse. That this is actually the case in either New South Wales or Victoria, we are not prepared to say. All we wish to point out is, that to make the figures given conclusive, we ought to consider the system of management. Are the lines being worked to earn large profits, or to develop trade and commerce ? That is the question, and the answer may be sound or unsound, wasteful or the reverse ; but at any rate it is a factor of importance. The next question of moment is the following : Is the debt of any of the Colonies increasing at a greater ratio than the population ? If we compare the amount of debt per capita, we shall see that it is increasing at a greater ratio in every one of our self-governing Colonies. The figures are worth quoting
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It would, of course, be utterly absurd to base upon these facts any theory implying that the point of danger has yet been reached. All that vie can say is, that if the increases in borrowing and population respectively, continue at the same ratio as heretofore, a time must come when there will be far too few shoulders to bear the weight of debt. As a matter of fact, however, there is no reason to expect that such a point will ever be reached. We must not forget that when Mr. Pitt was raising his loans, the rate of in- crease of debt, when compared with that of population, was infinitely more rapid than that of even New Zealand, South Australia, or Queensland. Again, the solvency, not the numbers of the men who back a bill, is the point of importance. Mr. Burdett seems somewhat alarmed lest the Colonists may adopt the policy of forbidding immigra- tion. We do not think, however, that there is any real danger here. They have stopped, and will probably never again adopt, the system of free passages ; but that is a very different thing from prohibiting immigration. As yet there is no sign that ordinary European immi- grants are distasteful. No doubt the influx of Chinamen
Australasian Colonies— 2
Public Debt per Head 1878. 1889.
r. d. a. d.
New South Wales 17 7 11 40 14 6 Victoria 20 14 5 31 14 10 South Australia 21 6 11 60 1 7 Queensland 42 9 4 66 13 10 Western Australia 5 14 3 30 5 3 Total 21 14 1 42 15 3 Tasmania 15 17 0 30 15 9 New Zealand 48 7 10 60 17 6 Grand total 26 0 3 45 5 6
South African Colonies—
Cape of Good Hope 2 16 2 16 3 0 Natal 411 6 9 8 5 Canada 7 1 5 9 13 10
will not be allowed, but the objection in their case is, in a great measure, the outcome of the feeling that Australia would be wise not to subject herself to the demoralising influences exerted upon the white races by an inferior pagan population. Because Australia does not want to develop a yellow nightmare capable of becoming some clay as formidable as that black one which oppresses the Americans, we must not assume that she will endeavour to prevent the growth of her white population. The table comparing the imports and exports of the venous Colonies is one of the most interesting things'in Mr. Burdett's book. It would not, however, in our opinion, be right to infer, as Mr. Burdett seems to suggest, that the Colonies which have the biggest trade with this country are necessarily the most valuable to us. There are thousands of advantageous transactions between the Colonies and the United Kingdom which never appear it such returns. It is very remarkable, however, to observe how large is our mercantile interest in many of the Crown Colonies. For instance, the Straits Settlements, with a population of little more than half-a-million, "import nearly £4,000,000 of goods from the United Kingdom; in addition to £8,020,000 from other Colonies and nearly £13,000,000 from foreign countries ; while the exports to the United Kingdom nearly equal those of New Zealand, and exceed those of all the other Australian Colonies except New South Wales and Victoria."
In regard to the question of allowing the Trust Invest- ment Act of 1889 to be extended so as to include Colonial stocks, Mr. Burdett declares that there is an almost unanimous feeling that the time is not yet ripe. Upon this point, however, we cannot agree with him. It must be remembered that the statute does not override the will of the creator of the trust, but merely declares that unless he for- bids it, the trustees shall be allowed to invest in certain stocks. It will therefore be always open to testators and others to add a few words to the instruments they are execu- ting, forbidding Colonial securities. Again, it must be re- membered that to grant the demand of the Colonies is not merely to benefit them. Considering the enormous sums held in trust, it is important that trustees should not be limited more than is absolutely necessary in their choice of stock. The concentration of the trustees' attention upon .a small number of securities is apt to unduly raise them in price, and thus to injure the cestui-que trust. Of course, if the Colonies were really likely to become insolvent, there would be the best possible of reasons for preventing trustees investing in their debt. But can any one pretend that the stock of Victoria or New South Wales does not offer as good security as the debentures of Irish Railways or Irish Water Companies that have paid dividends for the past ten years on their ordinary stock of 3 and 5 per cent. respectively, securities expressly included in the Act Of last year ? Since, to bring the Colonial stocks under the Act is not to force them on trustees, we do not see why they should not be included. It is possible, however, that certain conditions should be imposed. For in- stance, it might be declared that only the stock of Colonies that for the past ten years had paid interest on their loans should be allowed. Again, it might be pro- vided that only when at least half the debt of a Colony had been expended. on productive works, should it be open to trustee investment. In all probability, however, the better plan would be to declare that, in cases where the amount of debt per head was not greater than, say, £70, trustees might invest. This would give a sufficient margin of security, and might act as a check upon Colonial borrow- ings, for no Colony would care to put itself outside the Act by raising excessive loans. Before closing our necessarily inadequate notice of Mr. Burdett's paper, we must men- tion a matter of considerable importance referred, to by him. "It will be observed," he says, "that the burden of the debt upon a Colony is not the amount of the annual charge thereon, but this sum less the net revenue derived from productive works. In other words, more than half the annual charge on the Public Debt is defrayed by the revenue from productive works in more than one Colony. The annual gross revenue from productive works at the Cape of Good Rope in 1888 (X1,666,504) exceeds the annual charge for the debt, which was £1,067,116, although the per-centage of revenue from productive works fell from 7-819 per cent. in 1875 to 7-42 per cent. in 1888." This fact is one to which proper attention should always be given in estimating the financial position of the Colonies.
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