STABILISATION: WHAT HAS BEEN ACHIEVED

Auckland Star, Volume LXXVI, Issue 39, 15 February 1945, Page 4

STABILISATION: WHAT HAS BEEN ACHIEVED

By A Special Correspondent.

ECONOMIC stabilisation is a big,* somewhat clumsy phrase. Some people dislike its sound. Others dislike it because it connotes "control." Some pooh-pooh it, and like to think that without it "we" should be better off. Usually these do not say whom they mean by "we." Others, again, doubt the claims that are made for it, because they understand that it has something to do with "keeping down prices," and from their personal experience they know that some prices have not been kept down. What, then, has stabilisation achieved? This question, often asked in a challenging tone, is not at all difficult to answer. Because of stabilisation the prices of many absolute essentials have not risen at all. Others have risen very little. Prices of things which are less essential have been kept under control. To gain an idea of how much the consumer's pocket has been saved in this way we can take the experience of the last war, when there were no controls, as an indication of what would almost certainly have happened to prices in this war if there had been no stabilisation. Take such essentials as butter, cheese, milk, meat, bread and flour, oatmeal, sugar, fuel and light. On that group of items, if prices had been left alone to increase as they did between 1914 and the end of 1919, then a man on £6 a week, with a family of between four and five persons, would now be spending 17/ or 18/ a week more than he is at present. Stabilisation is saving him that much every week on those items' alone. Here are the present prices of some foods compared with w r hat they would be if they had risen as they did in the last war:— Price 1914-19 Present pre-war Increase price and now on would i. pre-war be Leg- of mutton (per lb) lOd 40% 1/2 Bread (21b) ... s','jd 50% 8d Flour <251b) 4/3 40% 6/ Oatmeal (51b) 1/9 105% 3/7 Butter (per lb) 1/6 34% 2/ Cheese (per lb) 1/ 50% 1/6 Sugar (per lb) 4d 50% 6d Milk (per quart) 6',id 40% 9d Even on clothing prices consumers have been saved a great deal. Until the stabilisation programme came into force on December 15, 1942, clothing prices were rising very fast. Since then prices of many articles of clothing have not increased at all, and prices of others have increased very little. The prices of some articles have been kept under control with the help of subsidies. The cnoney to pay subsidies comes ultimately from the public, but where subsidies are used

to hold prices down they have the effect of spreading the burden of increased costs more fairly than would result from letting prices rise. People bear the cost of subsidies according to their ability to pay. By keeping prices down .stabilisation has enabled the people to increase their savings. This can be seen in the growth of Post Office Savings Bank deposits by £40,000,000 since December, 1939, and in the achievement of National Savings, with total contributions of £30,000,000 to date. On the wages side, stabilisation has not prevented the adjustment of some anomalies. Special provision was made for dealing with these cases. Nor has stabilisation prevented the workers from increasing their weekly total of wages if they work longer. The rate of wages.is stabilised, not the total earnings.

•> The success of stabilisation is vital j to the worker. Because it provides a sound basis for the nation's econI omy, it protects post-war employI ment prospects. The farmer is a consumer, and he shares with other consumers the benefits of control of prices. As a farmer he receives the following benefits under stabilisation: — (a) The major items of farm costs have been held. Among other very important items, the price of superphosphate has been stabilised since the outbreak of war. But for stabilisation, it would now cost the farmer £8 a ton instead of £4. (b) To compensate for other increases in farm costs, special allowances have been added to guaranteed prices. (c) Because farm costs have been kept low, New Zealand's primary industries will be in a better position to compete on post-war world markets. Many farmers were ruined after the last war when prices fell suddenly from inflationary levels. This time prices have not moved to such heights. Perhaps most important of all, the farm products stabilisation accounts are building up a "cushion" which will assist the farming industry to take the shock of an ultimate fall in overseas prices. The Meat Pool Account, for example, is growing by £1,500,000 a year. In effect, stabilisation has not prevented the farmer from reaping the advantage of higher prices overseas, " but it has placed the money in suspense accounts which will benefit him at the time when he will most need assistance. But why—-it may be asked—is stabilisation necessary? Some indication of the necessity can be given

by comparing the quantity of consumer goods available to the public with the volume of money in circulation in New Zealand. Owing to wartime difficulties, it is not possible to estimate the former figure with reasonable accuracy, but it needs no statistics to demonstrate that the available supply of consumer goods has not increased during the war. On the other hand, the quantity of money in circulation (coin, notes and demand deposits at the banks) has mounted steadily from £54.4 millions in September, 1939, to £139.4 millions last September, or to nearly three times the pre-war figure. Of this latter amount, the Government held £12,000,000 millions on current deposit at the Reserve Bank and £1.2 millions at trading banks, and also a proportion of the coin and notes in active circulation. The balance, amounting to probably more than £121 millions, represented a potential immediate demand in the hands of the general Dublic for locally produced and imported goods and services—a demand three times as strong, for a smaller quantity of goods.

Thanks to various factors, not least among which is the restraining influence of wartime controls, it is estimated that the velocity of circulation of money has steadily fallen during the same period to about two-thirds of the pre-war rate. In otlter words, although there is much more money in circulation, it is not being turned over so rapidly. But it is easy to visualise what would happen to prices if this greatly increased pressure of money upon limited supplies of goods were released. People would soon be asking for stabilisation back again, but they could not have it restored without a level of prices much higher than when they let it go.