The Press TUESDAY, AUGUST 7, 1934. The Coming Budget

Press, Volume LXX, Issue 21236, 7 August 1934, Page 10

The Press TUESDAY, AUGUST 7, 1934. The Coming Budget

One of the latest issues of the " Economist" to reach Mew Zealand throws a little light on the curious cablegram, received to-

wards the end of June, in winch that journal was said to suggest, in an article on Nev, Zealand's recovery, that financial policy should " follow " the Australian example of freely

" using Treasury Bills." Two things appear: first, that the article was not editorial, but contributed by "a correspondent"; second, that the correspondent was recommending the use of Treasury Bills to cover budgetary deficits, in preference to throwing in reserves. But if we may assume—and it is not, a wild assumption—that, the period of deficit finance is over, then this is irrelevant advice. The Government will use Treasury Bills, of course, in the normal, way, to provide current funds in anticipation of revenue. But if, on the other hand, any further setback were to result in a deficit once again, the Government would have no alternative to the use of bills, on the exhaustion of reserves; and on this supposition the advice is snore obvious than useful. Tt is true that. the ''Economist's" contributor passed on to say that, though New Zealand banking conservatism might dislike Treasury Bill finance, "at "the same time . . . there is no "other means in sight for the rnain- " tenance of the public works pro-

"gramme which has so far been "used with moderate success for ''the relief of unemployment." But whether this is the afterthought that, it appears In be or, after all, the real bearing of the writer's advice, the answer is that it is not correct.. The Government, would have no difficulty in raising an internal low-rated loan, to meet, as might be necessary, any part of the public works programme. If this procedure had no other advantage, it would have that of confirming the low rates of interest. f hat the Government desires to establish. But the "Economist's" contributor, though his argument in this and other connexions is uncerlain. raises a. point of considerable interest at a time when taxpayers are looking forward with unusual interest to the introduction of me budget. It. will not be a new one to readers of "The Press," for vshave repeatedly drawn attention in 'he- unreality of all estimates < f the budgetary position in which it wa ; overlooked, first, that millions had been thrown into credit. Pi in reserves, and second, that, millions were being levied and spent, outs-ide Vna budget, in unemployment t ;..:•. a- , tion. The writer quotes . Ir 'L. W. Holt's remark that, the use <f ieserves to bring about budgetary equilibrium must lie at the expense of future equilibrium, by which, no doubt, he ts to be under" >od P. mean that, when the use of ns; tv.. ceases, this particular item <. n the credit, side must, be made -.'end. In plain 'erms, this means thai, the taxpayer''; cha. ee of a remission nt taxation is £2,000,01)0 less 'ban he fancies it is—l f he has forgotten about the reserves item in the last budget. The new estimates of receipts and expenditure will have to absorb and dissolve this amount, as well as the ostensible deficit oi £700,000, before Mr Coates can offer taxpayers some relief and at the

same time the pleasure of seeing tin budget balanced. Still, this doe. not mean that hope is to be abandoned; only that it. should be tempered by the facts. If the Unemployment Fund continues to shov. anything like the recent excess oi

revenue over expenditure, ' there should .in this direction be a sharp reduction; and it will be bitterly disappointing if the Minister for Finance, relieved of his heavy obligations to the Associated Bank.., on account of the London sterling transactions, declines to share his relief with the payers, for example, of sales tax and of income tax.