NATIONAL ASSETS.

Auckland Star, Volume LXXI, Issue 71, 25 March 1940, Page 4

NATIONAL ASSETS.

CENTENNIAL REVIEW. THE ACCOUNTANTS' STANDPOINT. MEETING THE DEBT BURDEN. Is it not' fitting in this, our Centennial year, asks the "'Accountants' Journal," that we (should take st .ok oi' our national asset's, examine the weakness of our national policies, and if possible endeavour to lay down a policy for the future which will avoid main oi the |ut:rtlls which trapped ns during the first bundled yean* of the Dominion's histoiy?

This is the position in which the Dominion found ilsell mi the ivrt'mvak of war in September, and on the eve of the Dominion-wide celeluatious of the Centenary or N'mv Zealand. Lack of funds in Loudon, the import control regulation* and the increase of State advances by the Reserve Hank are only t'he logical elicits of many and varied causes operating over a number of years. Stated biictly, tin- most important of these causes aie (iovernineiit borrowing policies increasing the annual oversea-; interest bill; the dealing of an extensive and expensive national udmiiiist'ration; higher wages and i coiTOsoondinirly higher cost of livinc ai. ambitious public works programme; social service legislation. Inflationary Factors. All these fat-torn and many others lead to inflation. All costs rise, the quality, volume and value of imports increase, and what, were once luxuries come t'o be regarded as uec.-.-aLies. More increased internal trading demand, and this in its turn has the effect of further stimulating the process of inflation. Mild inflation is t'he word sometimes used in this connection. Why the word "mild" it is difficult to discover, as experience has shown that like the thin edge of the wedge, once started it is difficult to control, and ite cumulative effect in the long run may be just as dangerous as that of a deliberatelyplanned inflationary policy. On the other hand the Dominion's produce is sold in the world's markets at prices which pay no regard to the high costs of production operating in New Zealand, or the lar«e amount necessary to meet the costf of our internal economic policy. The position finally arrives, as it has done, when in order to gain a sufficient margin of income over expenditure, so as to be in a position to meet our obligations, some restrictions are necessary. In fact, we, as a nation, if we cannot earn more, must spend less, and in this instance the remedy applied has been import control and restrictions—the effect of many and varied national extravagances. How Debts Increase. Although no portion of the public estate is pledged for the payment of either principal or interest, the whole of the public revenues are security for the amount borrowed. It follows, therefore, that so long as t'he public revenues are buoyant the weight of the overseas debt is comparatively light. The public revenues are derived mainly from Customs duty, death duties, income tax, social security tax, etc., and are dependent almost entirely «m the profit earning capacity of private enterprise. During 9 ', the laet 25 years the external loan indebtedness has increased from £78,000,000 to £157,000,000, while internal loans have increased from £17,400,000 to £132,000,000. It will therefore be readily graoped that the total loans have almost trebled in amount in one quarter of the country's history. The increase in the las* 25 years has been from £95,000,000 to £289,000,000. Several obvious channels of expenditure reveal themselves when discussing this rapid increase in the Dominion's national debt. The cost to the Dominion of financing itw 1014-18 war effort added directly approximately £80,000,000 to the national debt, but this baa been reduced, and now stands at £62,987,443. The completion of railway systems, and the providing of modern roads mutable for motor transport, and (he equipping of the Dominion with a national hydro-electric power system must have increased the national debt by many millions. This expense, however, although heavy, cannot be severely criticised, as it Jg generally agreed that the first essential to national efficiency is to provide first-class means of transportation, whether it.be rail, road or water, and to provide industry with the necessary ■ power for its enterprises. What of the Future? Thus the stage was set in 1930 for what must be the greafeet world depression in history. Every countVy was affected and retrenchment in all spheres of national life became necessary. ' This system of general restriction was aided and abetted by currency depreciation, both natural and deliberate, by barter agreement* and by the introduction of quotas. Certainly, ns we are learning to our coat to-day, the Great War created for more problems than it settled, and the new world our men fought to establish was, in the minds of many, a worse one than its predecessors. Nevertheless, the strain on industry, both town and country, to maintain the added interest on this phenomenal increase in the national debt, has been a severe one on the finances of the Dominion. Some ■Moment of the pressure is necessary, but eare must be taken to ensure that the return to sound methods will be gradual, so as to avoid unnecessary disturbance to the economic balance of the country. There can be no short cut, but when a just peace has been attained a commencement should be made towards the gradual elimination of our overseas indebtedness. There, is a growing conviction in the minds of the more prudent members of the community that the time has arrived when sound finance should launch an attack against debt, -both public and private.