MONEY AND THE COST OF LIVING

Auckland Star, Volume LXXII, Issue 168, 18 July 1941, Page 6

MONEY AND THE COST OF LIVING

■J"!!!', \. I . h'ji faces e\orv Government in war-time, the difficulty of resisting <>r controlling the pressure of purchasing power on the prices of a -mr'litr ciunntity of goods, was one of the most important sunjects dealt v,!h by Mr. N'ash in his Budget speech. lie pointed out that, notwithstanding the withdrawal of men for the armed forces, the aggregate of salaries and wages paid last year was £123.300.000. oi 1'10.700.000 more than in the previous year. At the same time the suppl> of many classes of goods for consumption—particularly, of course, imported goods—has grown shorter. This shortage is likely to increase, and with it will increase the pressure of purchasing power on the reduced quantity. The inevitable consequence, as the Government has recognised, is an increase in the prices of goods that can still be bought. To deal with the situation the Government appointed the Price Investigation Tribunal, which is not an institution for holding down prices, but rather for controlling their rise. Mr. Nash evidently sees that some other or additional means will have to be employed to control prices, and he spoke of it as a "very thorny problem" and said different methods would probably have to be adopted for different commodities. The objective, he said, is "protection of the standard of living of the rank and file of the people by stabilising retail prices of essential commodities as well as wages." One method used so far is that of paying subsidies to keep stable the prices of bread, sugar and coal. These subsidies are already costing a year, and it is hardly credible that the Government contemplates adding to their number. But a great many other commodities besides bread, sugar and coal are "essential." and their prices, if possible, should be stabilised.

This problem, it should be enwhasised. is not neculuv t v™ Zealand, nor was its development unforeseeable, or unforeseen. It may be more difficult to deal with in New Zealand because tue Government itself has by its words and actions led the people to think more of the face value of money than of its purchasing power, and the habit of thinking that more purchasing power is automatically obtained by raising wages is ingrained. But if the goods are not available to purchase, no amount of money will produce them, and the prices of those goods that are available must be driven up. The only remedy is to withdraw part of the purchasing power, and so reduce the pressure. This is done, of course, by taxation, and particularly by the .Vational Security Tax. It is also done by inviting the people to invest their money in war savings loans, but the volume of voluntary savings is, in relation to the volume of purchasing power, inconsiderable —Mr. Nash expects only £3.000,000 this year. In Britain, too, until the last Budget, the Government depended upon voluntary savings, but tnc Chancellor- finaHy had- to adopt, in part, the ?chemo long advocated by Mr. J. M. Keynes, involving the principle of compulsory saving. There is no reason to believe that like causes will not produce like results in New Zealand. Fortunately the Dominion, being' a food-producing country, is never likely to experience shortages of foodstuffs, but if the prices of some commodities are stabilised, the pressure of purchasing power on others will increase, and the Budget statement suggests that the Government is doubtful whether the pressure can be successfully resisted. It certainly cannot be successfully resisted if demands on the part of trade unions for wage increases to compensate for every increase in the cost of living are to continu_, and to be conceded. It is the Government's urgent duty to combat this tendency by every means in its power, and unless it has an alternative to some form of compulsory saving it should not hesitate to adopt it. The longer it delays, the more painful will be its adoption later. If all alike spend more—under present conditions —no one benefits.