PUBLIC FINANCE (1884-1893).
The Ten-million Loan.--Ministers Practically Granted Control
of Five Years' Loan Money.--Vigorous Railway Policy.--Effect
of Over-spending.--Inflation of Values.--Increased Taxation.
--Succession of Deficits.--Second McIlwraith Ministry.
--A Protectionist Tariff.--Temporary Increase of Revenue.
--Heavy Contraction in 1890.--Another Big Loan; Failure of
Flotation.--The First Underwritten Australian Loan.
--Amended Audit Act Limiting Spending Power of Government.
At the end of 1883 the Griffith Ministry succeeded to office with a
strong following. It was early in March, 1884, that the Appropriation
and Loan Acts for 1883-4 became law, but the regular session of the
year did not begin until 7th July. It was in this session that the
Government introduced their colossal railway extension scheme, and
their famous "Ten-million Loan Act"--actually, however, the amount was
L9,980,000. This sum was to be spent during the following five years,
which meant that the members of the Assembly voted in a lump sum, and
on an unprecedented scale, the loan expenditure for the maximum term
of the Parliament. The effect was also to ensure the life of the
Ministry for the same term, as it was intended to expend about 2
millions sterling a year, or about L6 10s. per annum per head of
the population. This was equal to about three-fourths of the total
consolidated revenue for 1884.
The Ministry no doubt meant well, and their preparation of a schedule
of works to extend over five years was in the abstract commendable.
But the expenditure of so much loan money provoked inflation in
values, and led to unhealthy speculation in land. Although Ministers
did not in any one year quite reach their 2-million conventional
limit of loan outlay, the 10 millions were exhausted soon after their
retirement from office, and a further loan had to be authorised to
finish their uncompleted works. While such railways as the "Via Recta"
(Ipswich to Warwick) and the Cloncurry to the Gulf lines were both
on the 1884 loan schedule--the amount set down for each being
L500,000--they have never been even commenced to this day, a quarter
of a century since they were passed by the Assembly. Other lines then
authorised absorbed more than the amount voted, and necessarily had
afterwards to be completed to make them reproductive.
The revenue not proving as expansive as the necessities of the
Treasury required, an Act passed in 1885 imposed 5 per cent. ad
valorem duties upon most kinds of industrial machinery, increased the
spirit duties to 12s. per gallon, and levied upon log and undressed
timber a duty of 1s. per 100 feet superficial and upon dressed timber
of 1s. 6d. per 100 feet. In the following year the ad valorem duties
were increased to 71/2 per cent., except as to machinery, which
remained at 5 per cent.; but small levies like these were as drops in
the bucket by comparison with the constantly expanding needs of the
Treasurer.
The 10-million loan schedule did not exhaust the list of what were
deemed necessary works. In 1886 a special Act was passed appropriating
L123,000, to be raised by Treasury bills having a term of five
years, for the duplication of the Brisbane-Ipswich railway, and the
completion of the lines from Mackay to Eton and Hamilton, and from
Ravenswood Junction to Ravenswood, respectively. In the year following
an Act was passed authorising the issue of further Treasury bills
amounting to L349,834 for the construction of eight small lines, and
the extension of the Brisbane and Southport line, with a branch to
Beaudesert, thus bringing the railways and works loan schedule of the
Griffith Ministry up to L10,452,834.
By the advent of the financial year 1888-9, most intelligent public
men felt gravely disturbed. The bank deposits, which had been trebled
in a decade, had to earn interest on the additional 7 millions of
money held and advanced. When the Griffith Ministry retired from
office in June, 1888, they had recorded four successive annual
deficits aggregating L968,313, although between 1884-5 and 1887-8 the
revenue had increased by L456,861, and there had been spent over 13/4
millions of loan money per annum in addition. During the year 1888-9,
after Sir Thomas McIlwraith assumed office, the expenditure increased
by L128,922, but he obtained a revenue increase of about L437,000.
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 L483,979, for the
drop of L402,857 in revenue and the increase of L197,969 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 11/2
millions passed 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 33/4 millions
sterling. This money was needed to retire debentures maturing on 1st
July, 1891, amounting to L1,170,950, and no less than L422,850
deficiency loss on the loans of 1882, 1884, and 1889, thus leaving
little more than 2 millions for railway and harbour works. This 33/4
million Loan Act did not receive the Royal assent 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
L16,706,834, bringing the funded public debt up to L28,105,684--nearly
L70 per head of the population--while railway net earnings were
steadily dwindling.
[Illustration: BARRON GORGE, BELOW THE FALLS, CAIRNS RAILWAY]
The cable soon flashed the unwelcome news that only L1,554,834 was
subscribed. After some difficulty a Stock Exchange syndicate was
formed to underwrite L1,182,400 of the balance, the price realised for
the whole amount taken up averaging L87 6s. 1d. per L100 of 31/2 per
cent. stock. Thus the net proceeds of the loan of L3,704,800 were only
L3,234,376, a depreciation loss of L470,424. The interest charge on
this new loan was L129,668; so that the interest, while nominally
31/2 per cent., was really just 4 per cent. on the money received,
and, in addition, at due date (1930), L470,424 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 31/2 per cent.
stock had brought L96 0s. 11d. per L100, and in 1894--three years
after the forced sale at L87 6s. 1d. in 1891--an issue of our stock
of the same denomination brought L98 14s. 01/4d. per L100. 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 passed--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 passed to avoid the evil of placing large amounts of
borrowed money at the uncontrolled disposal of the Ministry of the
day.