TO CAPITAL REQUIREMENTS 251 
n change of policy. The conclusions to be drawn from any 
speculation concerning the immediate future are matters of 
some consequence in determining Australian financial policy. 
The facts presented in the last two chapters would seem to 
support Copland’s conclusion that ‘our margin from savings 
has been much greater than our policy of foreign borrowing in 
the past would lead us to believe’;! but whether the margin is 
sufficiently large to enable us to proceed in the future without 
recourse to loan issues is a matter that cannot be theoretically 
established. That the resources of the country for the purposes 
of capital provision have been - greatly under-estimated is 
probably true ; but it is scarcely to be thought that a complete 
cessation of capital loans would not involve most, if not all of 
the adjustments predicted here. 
A legitimate objection to such an abrupt reversal of policy is 
that an absolute reliance upon domestic savings for develop- 
mental capital would force interest rates in Australia above the 
rates ruling overseas, and that, so long as foreign capital is 
obtainable, this would be far too costly a policy for a young and 
under-populated country. But it must also be assumed that 
higher rates would attract the investment of private’ capital, 
and that the shortage of supplies would be thus more effectively 
met than by a continuation of public borrowing, even if that 
course of action still remains open. Such a rise in interest rates, 
moreover, would not be without its advantages in compelling 
a more economic use of savings, at the same time that the 
inducement to save was increased. But in any case, if overseas 
borrowing has to be restricted for a period, Australia in common 
with all other countries would be under the necessity of facing 
higher interest rates and rising costs, accompanied, doubtless, 
by higher taxation. It would seem that the wisest policy from 
every point of view would have regard to the need for ruthlessly 
confining the ‘necessities’ of the community within its available 
resources. 
Should an entire renunciation of overseas borrowing not be 
forced on by a world credit shortage, or should it be deemed 
impracticable to reduce our dependence upon foreign capital 
supplies. the anticipated transition period may be indefinitely 
t See Copland, Economic Record, May 1926: ‘Respective Merits of Internal and 
External Borrowing.’