N.Z. RECOVERY.

Auckland Star, Volume LXV, Issue 148, 25 June 1934, Page 7

N.Z. RECOVERY.

"ECONOMIST" VIEWS.

Reciprocity Bargaining Lever With Britain. VALUE OF DOMINION MARKET. (United P.A.-Electrlc Telegraph—Copyright) (Received 11.30 ajn.) LONDON - , June 24.

Tho "Economist," commenting on New Zealand's recovery, suggests that in future the Budgetary policy should follow the Australian example of freely using Treasury bills, even if this runs counter to New Zealand's conservatism in banking.

The gap between costs and prices is still considerable. While the producers' income has fallen 40 per cent since 1930, internal costs have been reduced only 20 per cent.

The financial policy must, therefore, aim at a long period of regulated adjustment in order to take full advantage of the world markets, as further overseas borrowing and cuts in expenditure are impossible, narrowing New Zealand's export markets.

This makes it vital that Britain be induced to agree to reciprocal free trade. The value of the New Zealand market to Britain gives her a strong bargaining power.

New Zealand benefited substantially last summer and autumn from the rise in wool values, and, for the year ended March laet, the value of the Dominion's total exports (in New Zealand currency) amounted to £46,400,000, compared with £38,800,000 in tTie previous year, when the exchange, however, wae at the rate of 110 on sterling, except for the last ten weeks. Totals export values are still about 20 per cent below the level of five years ago, but the cost of living has fallen by 20 per cent. According to a bulletin recently issued by the Canterbury Chamber of Commerce, the fall in the cost of production probably has been commensurate with the drop in the cost of living, and the bulletin states that "the wide disparity between costs of production and export prices has been, in the main, removed."

The bulletin also says that "a decided improvement in business activity is under way," and that "in New Zealand, as a whole, the present position and prospects are undoubtedly better than at any time eince the depression began."

Aβ to the policy of financing by the issue of Treasury bills, the Government has ueed this method freely, since the exchange rate was raised, to carry the growing surplus of New Zealand credits in London, as well as to meet the needs of recent budgets. The amounts borrowed from the trading banks for short terms has increased rapidly over the last twelve months, and New Zealand, in proportion to its size, has made fully as much use of Treasury biils as has Australia.