of being self-supporting at a reasonably early stage. We have no 
doubt that the resources of Australia are amply sufficient to support 
a prudent borrowing policy of this character, the adoption of which 
would in itself do much to strengthen Australia’s credit. 
26. Generally, we are so much impressed with the financial and 
sconomic risks surrounding Government borrowing for purposes 
of development that we are moved to suggest that Governments 
should restrict the sphere of their activities in this direction and in 
shat of business undertakings and should leave the field more 
widely open than in the past to private enterprise, possibly adopt- 
ng the method indicated below in paragraph 28. 
27. The sphere of Government activity in Australia must, in 
any case, be large, and things have gone too far for us to discuss 
to-day such matters as the construction of railways or works for 
he conservation and distribution of water by private enterprise. 
But a very wide field remains open which Australian Governments 
have, to a great extent, entered, and here we think that these 
Governments would be wise to go no further. Within this field we 
think that private enterprise, with no public purse to fall back upon 
in the event of failure, exposed to no political pressure to embark 
apon unprofitable courses, and stimulated by the hope to gain to 
the maximum of economy and efficiency, would produce results 
more beneficial to Australia as a whole than the present system is 
calculated to yield. Progress might indeed be slower than in the 
case of successful Government action, but it would be more sure, 
and the risks of loss and failure which entail not progress but re- 
gression would be greatly diminished. 
- 98. A middle course between purely governmental and purely 
private enterprise might be found in appropriate cases if the 
capital for development were found by companies formed for the 
purpose, to the extent of not less than one-half in the shape of 
ordinary shares issued for cash, and the remainder in the shape of 
vreference shares or debentures, the interest on which might be 
yuaranteed by the Government for a limited number of years. The 
risks of loss would then fall primarily on the holders of the ordinary 
shares, while all profits realized after payment of preference or 
lebenture interest would accrue to them. 
99. We realize that a curtailment of loan expenditure by the 
Australian Governments must involve the inevitable concomitants 
of deflation. Deflation nevertheless remains the course of wisdom 
if it be true, as we think it is, that free expenditure on schemes 
very doubtfully remunerative has contributed to produce an inflated 
sosition. The temporary apparent prosperity which such a posi- 
ion creates cannot in any case be lasting. If it is sought to pro- 
‘ong it, it brings with it its own inevitable nemesis. 
Conclusion 30. Our final conclusion in regard to Australia’s finance is that 
230 linn her creditors have no cause whatever for present anxiety, because 
ATO. she is still borrowing well within her actual and potential resources, 
Restriction 
of objects of 
Government 
borrowing, 
Private 
anterprise. 
Possibility of 
sombined 
Government 
and private 
snterprise. 
Conse- 
juences of 
surtailed 
oan 
sxpenditure.