163

29th November, 1928

PERSONAL AND CONFIDENTIAL

(Due to arrive Canberra 28.12.28)

My dear P.M.,

Sir Hugh Clifford [1] called in at this office this morning before going back to Singapore tomorrow. He had seen Sir Eric Geddes [2], who had discussed with him the question of a subsidy for the England-Australia air route that would traverse the Malay States.

Clifford told me confidentially that Geddes suggested a Malayan subsidy of 50,000 a year, which Clifford told me he thought was out of the question. However, Clifford is anxious that Malaya (and Singapore in particular) should not be left out; the chain, as a fast mail service from England, was worth something to them. He is evidently anxious that they should not antagonise Imperial Airways to the extent of their hopping over Malaya.

You may be able to frame some idea from the above as to the amount of subsidy that Geddes will approach you about for the Singapore- Australian link. From the tone of what he said to me, I gathered that he was anxious to ascertain if you would consider the question of a subsidy at all, so that you should find yourself in a fairly good bargaining position.

I send particulars in another letter of the heavy subsidising of American merchant shipping that is proceeding under the terms of the Jones-White Act. [3] This came to my notice through an announcement about new ships being constructed for the Matson Line from America to Australia.

I write in another letter about the employment of interdepartmental meetings as a regular part of the machinery of government business. [4] This letter is really an extension of my letter on Liaison of six months ago. If the system of regular and ad hoc meetings between representatives of various departments is not in use to any extent in Australia, the question of the adoption of the system might be worth your consideration.

I enclose copy of an extract from a recently published book, 'Canada and the Empire', which I think you may be interested to read. I send the book itself by this mail.

Henry Ford is to invade England in the shape of the Ford Motor Company Ltd., with a capital of 7 millions, 2 1/2 millions of which is to be raised in England in early December. The company will serve the whole of the British Isles, Europe and Africa. Such a gigantic proposition is sure to make quite a flutter amongst the motor manufacturers.

The directors of the Bank of England have announced that they propose to recommend to shareholders in April next that Montagu Norman be reelected for another term-which will make his tenth year as Governor. Harvey [5] from being Comptroller is to become Deputy Governor. I am on good terms with both Montagu Norman and Sir Otto Niemeyer [6] and can always approach them confidentially if you wish it.

Three weeks ago Sir Josiah Stamp [7] made people's flesh creep by stating in a public speech that'...the changes in the price levels in the last three years have increased the burden of the National Debt by 1,000 millions, or added an invisible shilling to the income tax. ...'. He followed this up by a letter to the 'Times' on 14th November, in which he explained more fully what he meant.

He points out that whereas the United States is rich enough to be able to prosper even with continually falling price levels, he does not think we are. The British National Debt in fixed gold terms is a higher proportion of our total production than is the case with America or other nations-so that as price levels fall (or as gold becomes more valuable), so our debt becomes more onerous. So that, he argues, falling price levels affect this country more than any other.

I discussed this with Professor Gregory [8] of the London School of Economics. He admits that what Stamp says cannot be controverted, but he thinks that the falling price levels of the last few years is but part of a swing, and that it is most probable that there will be a rebound.

I believe it is now decided that Trenchard [9] leaves the Air Ministry at the end of 1929. His successor is not yet decided on.

The notification of his retirement will be made on the last day of this session of Parliament.

I am, Yours sincerely, R.G. CASEY

1 Governor of the Straits Settlements (Singapore).

2 See Letters 161 and 162.

3 This act of 1928 provided for construction and operation subsidies for American merchant shipping. Overall it had little effect on the American merchant marine but it did allow the Matson line to wrest dominance of the trans-Pacific trade from older and slower British ships.

4 An unsigned carbon of this letter (dated 29 November 1928) may be seen in the Officer Papers in the National Library of Australia (MS 2629/8/5).

5 Sir Ernest Harvey.

6 Formerly Controller of Finance at the Treasury (1922-27) and now with the Bank of England.

7 A Director of the Bank of England.

8 Theodor Gregory, Professor of Banking in the University of London and Governor of the London School of Economics.

9 Marshal of the Royal Air Force Sir Hugh Trenchard, Chief of the Air Staff, was succeeded late in 1929 by Air Chief Marshal Sir John Salmond.