The Pressing Problems.

Auckland Star, Volume LXIII, Issue 161, 9 July 1932, Page 13

The Pressing Problems.

"There is more chance of improving the profitableness of business by fostering enterprise mid by euch measures as public works than by a further pressure on money-wages or a further forcing of exports. " The problems of tho Budget and of ■unemployment are now more pressing than that of tho balance of trade. Tho latest figures plainly indicate that the Australian balance to-day is, as a result of measures already taken, not unsatisfactory in the circumstances. "Lot mo review the proposals before tho Premiers in the light of th(*e general notions. They can be examined, I think, under three main heads: (I) A further reduction of wages; (2) a further depreciation of the exchange; and (3) an extension of bunk credits and loans for relief works and other measures to increase enterprise. "A policy of a further general reduction in money-wnges would bo a doubleedged weapon. It would tend to curtail purchasing power and, consequently, to aggravate rather than assist the problem of the Budget. ... So far as internal production and consumption arc concerned, sale receipts would fall off by just about as much as costs had been cut. Avoiding Wage Reduction. Tho experts recognise that it is impracticable to reduce costs and debts by a further 40 per cent. But I go much farther than this. . I do not believe that unemployment would bo remedied by measures of this kind even if they could be put into force. I was, I think, the first to propose what I have sometimes called the National Treaty, namely, an all-round cut in coste and debts, such as Australia has already had the courage to adopt, and except in New South Wales to apply. But I proposed this as an alternative to exchange depreciation for remedying maladjustment between one country and the rest of the world. It has no efficacy except in improving the trade balance. "Apart from local anomalies, I do not believe that a. further general cut in money -wages could do anything which a further exchange depreciation could not do better. Nor is the fact of an increased real wage for the employed in spito of reduced national wealth a sufficient argument for cutting moneywages. For this is a world-wide phenomenon to-day which is indeed an inevitable accompaniment of the slump.'"' Exchange Rate ana Tariffs. Discussing the proposal for a further depreciation of the- exchange, Mr. Kevnes said he saw nothing wrong in it in principle, but he doubted if he .should alter the rate, "unless either the Australian banks and financial institutions were to tell mo that it would make them feel more comfortable and more willing to expand credit, or the proposal was put forward as a substitute for tariffs. If an alteration of the exchange were accompanied by a corresponding rectification of tariffs, I should support it. For the aggravation of the exist ingtariff by the exchange depreciation being euperimposed on it, is probably the principal cause of those remaining maladjustments which are purely Australian and not just a reflection of world conditions. The tariff should be reduced in proportion to the depreciation of the exchange, '

'■But I hope the Australian authorities will not overlook the fact that what would really suit them is a further depreciation, not of the Australian pound, but of sterling. For this would raise export prices without increasing the burden of the external debt. It is the recent appreciation of sterling by 10 per cent which is the mischief. 1 suggest that the importance of consulting the interests of the Dominions in settling the value of sterling should be a major topic at the Ottawa Conference. ' Loan For Relief Works. "We come finally to a variety of suggestions, put forward by the experts for attacking directly the volume of unemployment. I am in complete agreement with thess, especially with the proposed loan for relief works. They ehould be pushed forward as rapidly as prudence permits. Thus my counsel would be — Reduce the Budget deficits to the figure allowed by tho experts. Satisfy yourselves that the trade balance is adequate to meet pressing requirements. Perhaps depreciate tho Australian pound by 5 to 10 per cent, unless sterling itself is allowed to fall a little. Under cover of this undertake the necessary downward readjustment of tariffs which are crippling efficiency. Above all, expand internal bank credit and stimulate capital expenditure as much as courage and prudence will allow. The substitution of wages for doles needs more credit but not necessarily much more currency." Cheap Money in Prospect. After declaring that Australia's credit is ''higher to-day, in spite of Mr. Lang, than it has been for several years," and that it is "rising rapidly," Mr. Keynos said: "I believe that a period of ultracheap money is in prospect and thnt a day is not far off when respectable borrowers will bo greatly eought after. 1 should not bo surprised if the first recovery from tho slump begins within the British Empire. At any rate, the best contribution towards world recovery which London can make will be the earliest possible resumption of her position as an overseas lender, and the extension of a helping hand to those debtor countries who have shown that they deserve it. And why should not Australia bo one of the iirst of these? It lies within her power."