NEW ZEALAND FINANCE

Auckland Star, Volume LII, Issue 157, 4 July 1921, Page 5

NEW ZEALAND FINANCE

SERIOUS LEEWAY BY STATE. ERRORS OF JUDGMENT. STARTLING DEPARTMENTAL EXPENDITURE. COMMENT BY HON. ARTHUR MYERS The financial situation and outlook were discussed with some candour by the Hon. Arthur Myers, M.P., this morning in an interview with a representative of this paper. Mr. Myers explained that he had retrained from making any comment on the financial situation of the country until such time as the five million loan had been negotiated in London. Recent utterances by the president of the Wellington Chamber of Commerce and other prominent commercial men, however, had been some indication that the general public was now alive to the financial leeway being made by the State. This regrettable state of affairs was due partly to the adverse economic conditions prevailing, and partly to the general policy of drift indulged in by the Government.

"Take the position as disclosed at the end of the National Government regime," remarked Mr. Myers. "Whilst that Ministry was in office, surpluses amounting to some 17i millions were accumulated and mostly invested in London at high rates of interest, with the object of retaining large credits at the world's banking centre during the period of depression that all students of finance foresaw to be inevitable as a result of the war. In this respect New Zealand was particularly fortunate at the time, for no other country had built up reserves in London against the reaction contingent upon the dislocation of the financial and industrial world. The subsequent withdrawal of our accumulations of capital from London and their application, to a great extent, as ready cash for repatriation purposes, thus causinar them to participate in the responsibility for the abnormal land boom which was brought about in full view of the coming slump with its corresrjbnding tightness of money, was, I venture to say, a most serious error of judgment. Our soldiers were, and still are! entitled to our first consideration. T am inclined to think, however, that we could better have served their interests by spending fewer millions on purchases of improved land and more upon the building of roads and railways with the object of opening up untouched Crown and native lands, thus providing employment and increasing the productive capacity of the country at one and the same time."

THOSE MUCH-NEEDED WAR RESERVES.

''I am not holding up the National Govvernment as an example in respect of economy."' said Mr. Myers, "even after making full allowance for the heavy burden of war for which it had to provide and for the big increases in many branches of expenditure consequent thereon. As a matter of fact, at the time tils National Government came out of office it was quite apparent that it would be only during a period of boom prices such as was then in existence that industry and enterprise in this country could continue to bear the load of taxation cheerfully acquiesced in during the war. Many industries were already then looking eag-erly for reductions in taxation, upon the cessation of the war drain, in order that normal growth and expension might be resumed. The very fact that New Zealand had accumulated large reserves in London for the express object of enabling the Government to lighten post-war taxes and to facilitate an effort to maintain normal industrial and commercial conditions, together with the anticipation that the State would immediately put into force a I policy of economy and retrenchment, j augured well for the financial future of the country, even though the full stress of the economic storm had yet to be experienced. Careful study of the Government's statistics, however, doB3 not disclose any such course having been followed during the past two years. I need only quote the following figures to contrast the war period with that of the present party in power:

War Period, Reform fSovt., 191-1-19. 1919-20. 3 h fc jj ,2 *> £2 I a .__.!. s_a "" h •< a h -5 g .Departmental 'Expenditure 2r>% f>% 67% 33% Total ,Rev 52% lfi% 53% :16% Total Tax. .. 183% 26% G2% :!1% Customs liutics 11% 2% 120% 60% Hallways Dept.— Hey. Gross. i"9o 4% 3n% 10% Expenditure. 13% "»% Hl% 40% ; Kev. Net... 02% 10% *TA% *-~t% P. ana T. Dept— Key. dross. 33% Jl% 34% 17% Expenditure. +3% n% r>2% 28% Key. >>;. ..203% 41% *52% »41% Interest ami Sink. Fund. 110% 22% 28% 14% "Decrease. GLOOMY REVENUE OUTLOOK.

These figures are given without fractions, for the sake of additional clearness. Commenting upon them, Mr. Myers pointed out that if the pressnt lack of strong financial policy for Xew Zealand were persisted in t:ie outlook would remain by no means bright. "Certainly our revenue has increased by 2(i per cent per annum during the past' two yoars,'" he remarked. But the fact nf the matter is that taxation provided l>2 per cent of the total revenue in 1920 and 05 per cent in 1921; and, again, of such taxation Customs and Excise have contributed nearly fourteen millions in the two years under review. This year's collection of Customs dues has been largely anticipated already, owing to the sudden inrush of imporU that recently took place. With the present falling-oiT in trade and consequent drop in income tax results, together with a return to normal for even below normal) Customs duties, it is difficult to se<- how our revenue is to be maintained at ils present level. The higher rates of taxation which came into forte this year will be payable towards the end of the present and ear'.y next year, but other factors that will more than counteract this further rise in taxation are increasing State expenditure on every hand, accompanied by provision to ho made for interest and* sinking fund upon any additions to the National Debt, including o\er to be sent to, London each year in payment of interest, j etc., upon the rive million loan just I floated. That strong and unremitting I control of our finances should be exercised without delay is therefore more than apparent. SOARING DEPARTMENTAL COST*, j ■'Tlie <rriat decrease in net revenue' in the Departments of Post and Telegraphs uud of Railways respectively is very noticeable," further stated Mr. Myers. "The actual total in each case liavin™

fallen below the 1014 figure, naturally the Departments in question have had to meet higher costs in. regard to both equipment and wages. At the same time, however, they have both imposed increases in rates charged. Their startling rises in expenditure as against revenue are so considerable that they must require serious attention. Permanent appropriations, under which head are included such increases in expenditure as those in respect of interest and sinking fund and widows' and war pensions, have increased by 32 per cent during the past two years. This comparatively modest increase is no doubt partly accounted for by the fact that several Departments coming under the head of permanent appropriations actually show a decrease in expenditure siniv 1010 ? notably endowments (territorial, old age pensions, and Maori war pensions. Since 1016 New Zealand taxation has increased by 20<f per ;-i!nt, her exports by ii!) per cent, her population by U per cent, and the area of ber occupied lands by .") per cent. Our total State expenditure during the life of the National Government increased by iiS per cent (five years), as against an increase of expenditure during the past two years of 50 per cent. It is plainly apparent that the great responsibility for the alarming increase in expenditure which has taken place since 101!) lies with the disbursements made under the head of annual appropriations, generally referred to comprehensively as Departmental expenditure. It is here that one must search for some means of inducing economy and retrenchment, the increase having been G7 per cent during the past two years, against 25 per cent for the whole five, years of the war period, as stated in the figures I have already quoted. It must be remembered, further, that the causes of expansion of expenditure in the years 1020 and 1021, viz., rising costs of material and labour, as well as swollen staffs for war purposes, etc., were in existence during the period covered by National Government i administration.

IMMEDIATE ECOXOMY NECESSARY.

"In view of all the circumstances, including diminished values for most of our staple products in consequence of falling markets, and also having regard to the adverse trade balance of 38 millions that existed at the end of last year in respect of excess of imports as against excess of exports during the previous twelve months, the whole situation discloses the necessity not only for immediate economy, but also for a strong and sustained effort on the part of the general community to increase production and so add to the real wealth of the country."