REDUCING COSTS.

Press, Volume LXVI, Issue 20028, 9 September 1930, Page 15

REDUCING COSTS.

ROBING PROSPERITY TO XEW ZEALAND. ,01 soRfON FRANCIS'S PROPOSALS. jfc. vr „«uv in This Dominion "The Neeessit) >" * , AP rower Production Costs and Some tions as w P° Mible Meanß t0 X« Thi« Bad," w« the subject of ft. address of the retiring president jf, Norton Francis), at the annual ieetiaf of the Canterbury Chamber of Commerce last night. «Th« fnture prosperity of New Zealand appears t0 d °P cnd on inc ? eaßed .reduction at lower costs," said Mr Francis. "At the present time nearly all r«w and manufactured products are tit ©rwwpply throughout the world nnd it may bo expected that only those e«ntfl« which can sell their produce ,t a V nit a * alnst the keen compoti * tion of their trade rivals can hope to to proiperous. Fortunately we are exceptionally placed in this Dominion be(»ttW we have an equable climate, a fertile «oil, *nd * healthy, virile people, fhli combination with the will to work and e»pable government should enable Bji to maintain the comfortable standard Of living which has long been the «i«y of the world. Income From Land. "In the past the income o£ this country has been earned from the land and industries subsidiary to farming and, whih i'wo may hope eventually to export oor produce as far as possible in the ' ,hape of manufactured products, we ' fflttft for many years depend on the proceeds from the sale to other countries of wool, meat, dair. produce, etc., to tsett the cost of interest on our overMas loans and necessary imports. The more we can supply our Dominion requirements of manufactured goods from • local ladnstries at reasonable prices, the better for all sections of the communIty, because the more labour wc can profitably and permanently absorb in ear primary and secondary industries the mora prosperous every section of tie community becomes on account of I* - ft» increased local consumption of our j (grm and manufactured products. f "The successful continuation of this • procedure,, however, is only possible provided the man on the land is able to pro ' doM at» remunerative price those commodities whieh we must export in suffici--111 tat quantities to meet our overseas comf' tdtments. His land must not be pur- '/ chased or leased at a higher price than U warranted by Us productivity; his GoTenunent and local body taxes must att be « a higher scale than can reatoMolf b* paid, and his employment of Www" and the various goods re-

quired for progressive production must frn™°?" m ,°' e than the « rosa P rofits from his sales warrant. Export Prices. ''Prices received for exports of prii,jary products have, except for a buei period some- eight to ten years ago permuted up to this year the continuation of payments for services and commodities on this scale. Under tnis system the chief sufferers are the primary producers, and that small secion ot the community which is dependent on a fixed annuity, neither of whom can vpass it on. What will result from th© slump in the price of wool coupled with the probability of a world over-supply of all goods exported from New Zealand, and the anticipated further decline in the price level of commodities through the decrease in the annual gold supply and the increased demand for gold ' for currency purposes? These now make ■j nece ? snrv tor New Zealand to consider whether she can continue her presentscale of public and private expenditure. ''Tt is evident that if production costs of our farmers are to be higher than their receipts their credit will rnpidlv he exhausted, and instead of the required increase in production there must speedilv occur a heavy decrease with further unemployment through the abandonment of cultivation. What is the remedy? All will admit that prices for our exports must be finallv regulated bv the world's sup. ply and demand, and that with increased competition we must at least maintain and, if possible, improve the ounlitv nnd quantity of our products, and at the same time produce them at a cost which will return a profit desnite the competition of the markets of the world. Beduclng Production Costs. "It would appear, therefore, that the time has now come to find a means of reducing production costs. How can this be achieved without reducing the standard of living in this country of which most of us are proud, and many other countries envious ¥ Some of the factors of the cost of production of our exports have been already noted. The cost of land is falling in sympathy with reduced prices for produce. Mortgage interest is too high, but there seems little possibility of reduction whilst Government and local bodies continue to be heavy borrowers of investment moneys and the public overlook the advantage of thrift. With falling prices the cost of interest on and repayment of existing debts abroad necessitates an increased export ot produce. This makes it doubly necessary to avoid any fresh loan which rrr>bt he dispersed n-ith. "Increased population and improved economical servico demand some greater expenditure, provided the per capita cost is not increased. There is reason to believe that the taxation now paid, and which continues to increase, is too great for the services rendered, and cannot go on increasing without serious financial hardship to all sections of the community. In 20 years the public debt of New Zealand has increased from under £75,000,000 to over £264,000,000 (of whieh about £71,000,000 is still owing on our war debt, (or from £72 to £179 per head. In addition to this there are debts amounting to over £65,000,000 owing by various local bodies, some considerable portion of which has been spent on utilities, etc., which were not warranted by the population served. We are far too apt to forget that a country which contains 1,500,000 of people cannot afford (prosperous as we have been) public services equal to those countries of similar area, with a population more than 20 times as dense.

Surplus Civil Servants. "It is stated that the Civil Service cannot be reduced without causing much additional unemployment, but why should the State permanently retain any unnecessary labour more than the factory? Unless production costs, including general taxation, can be reduced, it fs certain that there will be little increase in private enterprise. Some inducement to start new industries in town and country would boob absorb all the surplus Civil servants and all the willing workers now unfortunately suffering from unemployment. "A reduction in public expenditure alone will not sufficiently reduce production costs. The fact that £1 in New Zealand was worth for the purchase of commodities in June last about onethird less than in 1914 is a heavy burden to most people. On no section does this fall more heavily than, despite his increased wages, on the married workers with young families, and the farmers. Some of the latter consider that the remedy lies in free trade with the anticipated benefit of cheaper goods. This cannot be recommended because there would immediately arise a necessity to provide annually, unless there was a simi lar reduction in public expenditure, £4,500,000 obtained through Customs duties now paid on imported goods, and it would throw out of employment many of the 26,000 workers now earning their living at various industries, most of which would gradually be forced out of existence. This would lead to serious financial difficulties, which would mean reduced production generally and increased unemployment and taxation. Surely it is better to try to increase o;:r industries, both primary and secondary. Fixing of Wages. •'Should not the ability to pay have something to do with price fixing of wages, and so long as farm products are"the source of the country's income should not all wajr-s, however assessed. be based ultimately on the farmers' ability to pay for labour? Then the necessary adjustments could be made to allow* for the different conditions in other trades. There is no basic wage fixed by the Arbitration Court in thisDominion, and just how the Court base* its rate for a minimum wage in any trade I have been unable to ascertain. "It is assumed that some allowance must necessarily be provided for the worker's wife and family. Is the al lowanco for children larger than is generally warranted, and in the interests of the employer and the worker is this an opportune time to seek some other avenue to provide for the young families of onr workers f "In a return compiled by the Government Statistician it is estimated that on April Ist of this year the adult malos in New Zealand, excluding Maoris and including those widowed and divorced, numbered 439,413, and of these 134,270 were never married, and 100,000 were married, but without children under 14 Of 181.500 married men with children under 14, there were 65,800 with one child, 51,800 with two children, and 64,900 with three or more children. These figures indicate that considerably less than half of our adult male population have any young children to provide for. With the present high cost of nearly everything required in a household, the married worker with even two children must find it hard enough to make ends meet, but the majority of the 64,900 men with three or more children under fourteen must have an unenviable task in trying to keep clear of debt, and would gladly welcome some alteration in the present

vicious system of passing on from trade to trade increased living costs. Mr Fiddtagton's Proposals. "This is not the place to discuss the advantages or the disadvantages of any system of child endowment, but it is submitted that after a perusal of the proposals made in 1925 by Mr A. aPiddington, K.C., for an Australian family basic income, a means is possible to overcome the temporary diinculty of smaller pay envelopes, until there is an equivalent • increased purchasing power. Under his scheme, or some other more equitable for ., Zealand conditions, it is considered the married worker would suffer ntyc, if any, hardship during the period necessary to make £1 rise ir. value until it purchased as closely as is practicable after the war the same quantity ana quality of goods as in 1914. "I am confident that once sufiiLicntJy low costs for commodities and f DO "J and less taxation were in force to enabl< our exports to meet world competition our primary and secondary industries would rapidly i crease the r production. More labour would be wanted as confidence in our progress was restored, and any necessary reduetions of the staff employed by Government Departments and local bodies would, with the present unemployed, t>e quickly absorbed. I am well aware or the adverse criticism which my proposals will raise in many quarters, ana possibly some of the suggestions are impracticable. My excuse is that, with t present position in Australia as a warning, this country must very soon start to set its house in order, ana should not some real effort bo made r>y the Government, the employers, and the workers to bring about a reduction in production costs before irrecoverable harm has been caused? Proposed Conference. "If a conference representing the labour, farming, commercial, industrial, financial, and economic interests could be held, at which the present economic position could be freely discussed in an unbiased manner, I have little doubt about a successful result, because all have a common interest—the prosperity of the Dominion. Some employers may think a reduction in wages must eventuate shortly through necessity, but surely this would only be achieved after much labour unrest, with its serious losses to employers and workers, from which this country has tortunately been very free for many years. This question received considerable prominence in a recent number (July sth, 1030) of the London 'Economist, when it was shown that between 1910 and 1023 the average days lost through strikes per 1000 of the population were: Great Britain . - - - P* 9 Australia .. • • 411 Canada . • • • !•'* New Zealand .. .. 8* "Statistics for Hie years 1924-28 show a still more favourable position for New Zealand, as the average of days lost per year in these five years is less than hnlf that shown above for 1910-1923. Let us strain every effort to uphold this reputation, and if a conference as proposed could find a solution of our difficulties with an equal sacrifice from all sections of the people there should be little difficulty m carrying it out. I have no doubt that the leaders in each section mentioned would gladly give their time to attend such a conference if satisfied of a real effort to overcome our present difficulties. Present-Day Tendency. "Briefly summarised, my contention is that with the present tendency for lower land values and the cheaper prices

for imported goods, primary production can be successfully carried on and increased in competition with rival countries, provided Government and local body expenditure is kept within limits which this country can afford, and that present rates of 'money' wages are reduced without any reduction in the actual purchasing power of the married worker's pay. It is submitted that a continuation of existing conditions wUh present-day values for our exports will soon result in decreased production and greatly increased unemployment and loss of capital. "For several years this Chamber has taken a keen interest in the economic position of'the Dominion and has been working for a closer co-operation of town and country interests. Is there any subject of more importance to-day to the farming or any other section of the community in this country, where practically all are dependent on the success of the farmer's labours, than the necessity to find a means to lower the present costs of production on which our very existence appears to depend? If such is admitted, what better work could be undertaken by your Council than an effort to induce town and countrj' interests in this province, and through other Chambers in every part of New Zealand, to bring sufficient pressure on the Government and Parliament to ensure its realisation by a reduction of State and local body expenditure and a general lowering of the costs of living?"