PUBLIC FINANCE (1903-1909).
The Morgan-Kidston Ministry.--Economy in Revenue
Expenditure.--Great Reduction in Loan Outlay.--Equilibrium
Established at the Treasury.--Retrenchment and Taxation.
--Improvement of Finances.--A Record Surplus for Queensland.
--Land Sales Proceeds Act.--Abstention from Borrowing.
--First Loan Floated since 1903.--Sound Position of
Queensland.--Value of State Securities.--Reproductiveness of
Railways Built out of Loan Money.--Public Estate Improvement
Fund.--How Recourse to Money Market has been Avoided.
On the 15th September, 1903, the Speaker's resignation was announced,
and on the 17th Mr. (now Sir) Arthur Morgan announced the formation of
a new Ministry with himself as Premier, his colleagues including the
leader, (the late Mr. W. H. Browne) and another prominent member of
the Labour party (Mr. W. Kidston). The new Ministry came in expressly
to restore the financial equilibrium, the Treasurer being Mr. Kidston.
Retrenchment became the order of the day, although the Estimates of
the late Government were adopted, having regard to the fact that
the first quarter of the financial year had practically expired. The
pruning-knife was applied with vigour, and loan expenditure rapidly
lessened, although existing railway contracts had of course to be
completed.
On 30th June following, revenue showed an increase of L69,000, while
expenditure had been reduced by L110,000, the financial year ending
with a deficit of only L12,424. Loan expenditure had been brought down
to L603,805, a reduction of no less than L418,600 compared with
the previous year. In the middle of the session of 1904 the Premier
advised a dissolution, which was granted; and after the general
election the Ministry returned in such strength as to warrant
Parliament in treating their policy, especially the financial part of
it, as practically a mandate from the constituencies.
In 1904-5 the revenue being within L41 of the amount of the preceding
year, while the expenditure was about L26,000 less, a surplus, the
first for five years, was recorded for the nominal sum of L13,995.
Seeing that loan expenditure had been reduced to less than a quarter
of a million, that general retrenchment had been carried out, and that
a recovery of trade and industry was not yet clearly apparent,
the result must be deemed highly satisfactory; also, the Treasurer
refused, after his first year of office, to continue the practice of
charging to loan fund the amount spent by the Commonwealth Government
on new works and buildings. The amount was not large, but even the
L20,000 to L30,000 per annum so expended would, if transferred to
loan, have improved the appearance of the State revenue account.
In 1904 the obnoxious but necessary Special Retrenchment Act was
re-enacted for the nine months of the financial year still remaining,
the rate of deduction being diminished by one-half, while provision
was made that any surplus revenue for the financial year should
be paid to the public servants. The year closed with a surplus of
L13,995, which was at once distributed _pro rata_ among the retrenched
officers. The continuation of the Act was not popular among public
servants, but it was deemed necessary in the interests of the wider
community; and, as the net result was that a public officer only lost
7s. 6d. for every L1 deducted from his salary during the two previous
years, it can hardly be considered unfair, having regard to the
losses sustained by the general public during the same period. Another
unpopular measure was the Income Tax Amending Act, which exempted
from taxation incomes of L100 and under, but in regard to the larger
incomes somewhat increased the taxation then levied. In 1906 a further
Income Tax Amending Act was passed, adding to the taxation in some
cases, but raising the exemption to L160 and granting an exemption of
L120 on incomes between L160 and L200. In 1907 another amendment of
the Act increased the exemption to L200 on all incomes, and reduced
certain imposts, which had the effect of relinquishing revenue to
the extent of L40,000 to L50,000 for the year. But times had then
improved, and the Treasurer could afford this grateful relief to the
poorer classes of the community.
Early in 1906, owing to the death of Sir Hugh Nelson, Mr. Morgan
retired from the Ministry, Mr. Kidston becoming Chief Secretary in
his stead, while still retaining the Treasurership. Mr. Morgan then
accepted the Presidency of the Legislative Council. In the year
1905-6 the revenue had become buoyant, the increase for the year being
L258,124. The expenditure had also increased by over one-half that
amount, the year closing with the surplus of L127,811. Loan outlay
also showed an increase, totalling nearly L300,000. In 1906-7 there
was a revenue jump of L454,389, with an increase in expenditure
of L186,085, the record Queensland surplus of L396,115 being
realised.[a] For 1907-8 the revenue increase was L180,486, while the
expenditure increase was L461,299, and the surplus only L115,302.
Loan outlay also advanced to L1,033,676. Including the Commonwealth
collections the total revenue for 1907-8 approached 51/2 millions,
or nearly 1 million in excess of the most fruitful year before
federation.
In November, 1906, a brief but important Act was passed providing that
all moneys received in payment for auction sales of town, suburban,
and country lands, or of such lands if subsequently purchased by
selection, should hereafter be paid into the Loan Fund Account. But
proceeds of the land sold under the Special Sales of Land Act of 1901
were not included, those moneys having been already appropriated to
the repayment of sums borrowed upon certain Treasury bills issued
in aid of revenue in former years. It is the policy of the Kidston
Government, however, not to alienate lands under the Special Sales
Act; therefore the deficits of former years which had been liquidated
with the proceeds of Treasury bills, and practically formed a floating
debt, are being gradually compensated for by the transfer of annual
surpluses to the Public Debt Reduction Fund, the total amount of stock
thus cancelled having on 30th June, 1908, reached the respectable
amount of L942,641 since the inception of the fund.
One of the wise determinations of Mr. Kidston as Treasurer was to
keep off the London money market for several years at least after the
rebuff received by his predecessor in 1903. Consequently he abstained
from making any attempt to float a loan till March, 1909, when
L2,000,000 worth of 31/2 per cent. stock was disposed of. The net
proceeds were equal to L94 9s. 61/2d. per cent., a price about
equivalent to that obtained by New South Wales a little earlier in
the year. This, although dearer money than was obtained by issues of
Queensland stock in the closing decade of the last century, compares
not unfavourably with the prices obtained earlier in the financial
year for other gilt-edged securities on the London market.
The net average rate of interest payable on the public debt of
Queensland on 30th June, 1908, was L3 14s. 1d. per cent., but this
rather high rate arose from the fact that more than a moiety of the
total debt was incurred many years ago, when all Australian stocks
bore 4 per cent. interest. The lowest average rate now paid by any
Australian State is L3 8s. 9d. by Western Australia, most of whose
stock was issued during the closing decade of the 19th century, and
bears from 31/4 to 31/2 per cent.
Speaking generally, Queensland stands well on the London money market
at present, as, according to the "Commonwealth Year Book" quotations
from the "Economist" newspaper, the "middle price" of her 31/2 per
cents. quoted on 'Change on the 25th September of last year was L100,
a figure only equalled at the time by Victoria among the Australian
States; and in December following L99, which was on a par with New
South Wales stock on the same date, and only 10s. per cent. below the
quotation for Victorian stock. These prices, however, for comparative
purposes seem to need slight adjustment on account of the interest
respectively due at date of quotation.
Having regard to the fact that the public debt of Queensland is higher
than that of any other Australian State per head of the population,
the policy of abstention from further borrowing from 1903 until 1909
has been vindicated in a most gratifying manner. A pregnant fact is
that more than one-half the entire public debt has been invested in
railways which in 1908-9 returned L883,610[b] in net earnings, all
available for the payment of interest on capital, or equal to about L3
7s. 6d. per cent. per annum, which meant that our railway system was
almost self-supporting, besides being the source of a large indirect
gain to the Treasury by providing facilities for transport over 3,498
miles of line. It is no exaggeration to assert that directly and
indirectly the railways assist the Treasury to the amount of the
annual interest charge on the entire public debt of the State. Instead
of the railways being a burden upon the taxpayer, as in former years,
they have undoubtedly now become the backbone of the public credit.
Seven years ago the interest charge on railway capital falling on the
taxpayer amounted to L513,128. To-day, as shown by official figures,
there is practically no such burden, and the existing state of the
investment not only forms a complete justification for the railway
policy of the past, but also for the vigorous way in which the
construction of new lines is being pushed forward. With a continuance
of good management it is apparent that the time is within measurable
distance when the Railway Commissioner will, unless rates be reduced,
hand to the State Treasurer a large annual surplus which will be
available for lightening the public burdens.
Among other minor financial reforms for which the Morgan and Kidston
Governments have earned credit is the creation of the Public Estate
Improvement Trust Account, to which is charged the cost of roads,
water supply, and other improvements made to Crown lands about to be
thrown open for settlement, such cost being afterwards added to the
selling price of those lands. Up to 30th June, 1908, 11/2 million
acres of Crown land had thus been made available for selection by
a total expenditure of L85,784, the value of which has thus been
enhanced, it is estimated, by more than half a million sterling. This
amount will ultimately find its way into consolidated revenue. And all
this with a debtor balance of the account on 30th June, 1908, of
only L58,287. Allowing that the profit is shown in figures yet to be
realised, the estimated margin is so large that the result cannot be
doubtful.
[Illustration: SCENE ON BARCALDINE DOWNS, CENTRAL QUEENSLAND]
[Illustration: BARCALDINE DOWNS HOMESTEAD, CENTRAL QUEENSLAND]
Loan expenditure on public works, though greatly reduced, was never
entirely stopped by the Morgan and Kidston Governments. In 1903
they inherited from their predecessors a loan cash balance of
11/4 millions. By compelling the local bodies to pay up arrears of
redemption on local loans, by investing about L603,000 of revenue
surpluses in unissued stock, with the help of interest accruing on
public loan cash balances, and the annual instalments paid by the
Queensland National Bank in liquidation of its extended deposit debt,
nearly 31/2 millions sterling was spent on loan account during the
five years ended 30th June, 1909, without placing on the money market
any part of the then unissued balance of the 1902 loan.
[Footnote a: The so-called surplus of L487,333 in 1872
was obtained by the transfer of L350,000 from loan fund to
revenue.]
[Footnote b: These net earnings are Treasury cash figures.
They differ somewhat from the departmental figures, which do
not deal with cash, but with book receipts and expenditure.]