W.E.A.

Press, Volume LIX, Issue 17808, 6 July 1923, Page 3

W.E.A.

ADDRESS BY MR A. H. TOCKER. At tha meeting of the W.E.A. economics class on Wednesday night, Mr A. H. Tockei delivered a lecture entitled "The Effects ot War Finance in New Zealand." Mr Tocker said that the Government, during tho war, introduced legialation to allow tho Banks to further increase the limit of note issue to the extent of their advances to the publio for investing in war loans, and to make these notes legal tender for ftve years after the war. The etepa tnjten to allow the banks full freedom were the abandonment of gold, the revision of the reserve necessary for the note issuo, and tha guarantee of the note issue. Tho progress of inflation was rovealed in' the Bank of New Zealand figures. The note circulation jumped from one million in 19H to 4.5 millions in 1323, deposits from 18 millions to SO millions, and advances from 10 milliore to 19 millions. In the same period retail prices in the index number rose from 107 to 146, and wholesale prices from 106 to 170. The effect of the rise in prices was as a concealed tar on the whole community, because purchasing power was abstracted from all persons. But aa prices moved unevenly some persons benefited by the change, such as farmers' and traders. What these persons gained others lo6t, such aa those with fixed incomes, wage workers, professional men and investors. This the boom in business and in land. Import* were checked and thus became progressiva. _. dear. Manufacturers extended their businesses, owing to the increased demnnd for home products. There was a double protcction for N.Z. industries by war and Customs duties. The boom in land was brought about by the facts that the costs of farmin? ro3e far less than the prices of farm ,v>reducts; thus the higTi profits of fanning. These profits, capitalised, explained the rise in land values, which was caused also by speculation, competition and land hun?er. The movement was helped by the ease with which were arranged. Mortgages rose from 18 millions sterling to 67 millions in 1921, but dropped to 35 millions in 1922. The total outstanding in 1922 was 231 millions. These mortgages were provided largely by the mercantile and loan companies for fs.rmers' credit for long terms, but a good amount was artificial, being part-payment for the land, and no doubt some of it would bo written off aa a lobs, such aa soldiers' loans. From March, 1920, overseas prices fell, there. by causing the slump, but prices continued to rise in New Zealand until October, 1920, which explained the lar?e amount of imports a'that time. The annual average of surplus pxportfl uo to 1914 was about £3,000,000, but the following figures explained! the depression of 1921:

The Bank of New Zealand's figures for the same period were:

In 1921 the premium for exchange onLondon was as high as 8 per cent. Imports wore thus checked and the banko increased the interest rate to 7 per cent. The necessity for calling in credits meant bankruptcy to many largo firms so the Government introduced the Moratorium, which allowed debtoro with deposit money until June, 1928, and mortgages until' December, 1924. The result was frozen credit and alow velocity of circulation of the other forms of money, with 4 eonso uent fall in prices, depression and unemployment. The need at present was for credit to be liquidated and to flow : freely where required. The high rates charged tended to force repayment, and presently the banks would accept lower rates. With lower rates of interest industries would recover and prosperity return to the country.

Imports. Exports. Balance. 1919 .. £30,oro.ooo £54,000,000 £24,000,000 1920 .. £62,000,000 £46,000,000 £16,000.000 1921 .. £43,000,000 £45,000,000 £2,000,000

London Deposits. Advances. Balance. 1919 ., £32,00(1,000 £17,000,000 £13,000,000 1920 .. £38,000,000 £18,000,000 £20,000,000 1921 .. £34 000,000 £23,000,000 £8,000,000 1922 .. £29,000,000 £23,000,000 £7,000,000