COSTS MUST FALL.

Press, Volume LXVI, Issue 20083, 12 November 1930, Page 12

COSTS MUST FALL.

AUSTRALIA'S NEED.

PROBLEMS OF PRIMARY PRODUCTION.

In ike course of Lis lucid and vigorous report upon the financial position cf Australia, Sir Otto Niemoyer says:

"So long as the sheltered trades of Australia insist on taking so large a {•hare of tha national dividend, and even an increasingly large proportion as the national dividend drops, the difficulties of the unsheltered export trades can only increase." Sir Otto (writes a special correspondent in the "Sydney Morning Herald") gntrs on to point ' out that tho fall which has taken place in the general level of prices outside Australia meuns .that primary producers abroad enjoy a competitive advantage over the Australian primary producer so long as the Australian costs of production are not reduced, and that Australian secondary industry must face a fierce international competition growing in intensity as the price level falls, unless they in their turn are able to reduce their costs.

"The secondary producer," he continues. "can attempt 'to meet this price situation by increased tariff protection, but this f-imply means that his protection is achieved at the cost of primary production. The primary producer can attempt to meet the situation by a further depreciation in the exchange. Increasing tariffs prejudice the primary producer. Rising exchange rates prejudice the whole fabric of national finance."

Sir Qtto points out that whilst Australia has so far been able to remain aside from tho general trend of world conditions, the has now "to adjust herself to a world economic situation more disadvantageous to herself than in the last decade. . . . There is considerable reason to fear," he adds, "that the prices of those particular products in which Australia as an exporter is primarily interested will fall more rapidly than the general price level. Tariffs and Exchange. ."Australia," he insists. "cannot wish to remain for ever under a regime of emergency tariffs and rationed exchange. She has to emerge from that position and to ehoxv signs of progressing towards that emergence. To achieve this end sh* depends inevitably to a large extent on the primary producer, and thp power of the primary producer selling in the world market to assist depends on the question of his costs, and thos« in turn depend very largely on fteneral coste in Australia, which govern what he has to pay for hie sui>piies and services " These excerpts from Sir Otto Ni«meyer's report are crucial. They restate an argument from the logical force of which there is no escape. That nrgument should be quite familiar to Australians, for it was embodied in the report on the Australian tariff prepared two years ago for Mr Bruce by a committee of our leading economists, and it was very clearly stated from the wider view of world economics in the report of the World Economic Conference held in Geneva in 1927. Unfortunately, reports the general tenor of which conflicts with the policies of powerful vested interests are apt to be ignored. Selfishness allied with power is able, for a time at any rate, to disregard logic. Tho two reports referred to have been shelved, and have not, bo far, b<fen r.llowed to exercise any influence whator -upon Australian public opinion. BeportsßecaUcd. Since, however, it is clear, reading between the lines of his report, that Sir Otto Niemeyer feels that selfishness [ allied with power has largely contri- | buted towards landing this country in j its preyerst financial impasse, it is well worth while to recall in brief summary the main conclusions Of two reports j vrhich must certainly oxercise conaideri able influence in tlie shaping of our fiscal and industrial policies in the near : future. 1 Let us begin with the report on the ; Australian tariff furnished to Mr j Bruee by such eminent economists as Professors Brigden and Copland, Mr i L. F. Giblin, and Mr C. H. WicKens. ; In the "Summary of Conclusions on the Effects of the Tariff," these gentlemen declare that "the principal effect on production and employment has been to divert them from export industries to protected industries. Taking Government assistance into aocount, costs of production in the export industries are raised 9 per cent, by protection. The tariff falls with the greatest weight on the export industries. The value of their land and fixed capital is reduced, and the expansion or their production is retarded. They are limited to tho us© of land which can carry the costs imposed. The States which naturally depend more than others upon the export industries feel the burden, not only upon their individuals. but upon the State finances." In view of Sir Otto Niemeyer'3 figures showing the fall in the price of wool and wheat, and the unsatisfactory increase of per capita production in Australia, as compared with other countries, together with his warning that "the fortunes of the whole are the fortunes of the parts, and the failure of any of' the parts will be tho failure of the whole," it seem 3 evident that the conclusions of Mr Bruce'3 committee deserve far more respectful consideration than they hare so far received. If, as Sir Otto N iemever declares, Australia "depends inevitably to a large extent on the primary producer," then too much attention cannot be given to the statement of Mr Bruce's committee, in page 23 of their report,- that "tariff protection is normally the protection of higher prices, and these higher prices are made necessary by the higher local costs of production." The whole burden of Sir '•Otto Niemeyer's advice to this country is that both prices and costs in Australia have got to fall. World Economists. Let us now turn our attention to the much maligned and wholly ignored report of the World Economic Conference, which sat in Geneva in 1927. Since Sir Otto Niemeyer tells us that the time has come when Australia must adjust herself to world economic conditions, we can no longer disregard the considered views of world economists upon matters which affect us in common with the rest of civilised mankind. This very detailed and illuminating report points out that agriculture is the occupation of the majority of the workers of the world; that its products represent in value the greater part of human labour; and that the exchange of its products against industrial products forms the baaia of world trade. The quantity of foodstuffs and raw materials produced is a factor which determines the limit of industrial development. The inter-dependence existing between the nations is no less close between the main classes of occupations —agriculture. industry, _ and commerce —and it would be vain to hope that one class could enjoy lasting prosperity independently of the others. Economic depression in agriculture is due to the disequilibrium between the prices of agricultural and manufactured products, to the difficulty of obtaining agricultural credits, and to heavr fiscal charges, diminishing the purchasing power of agriculturists. This has reacted on the industrial situation. contributing to unemployment and reducing the outlet for agricultural products. I

"Unless practical measures are taken," the report eaidj "to restore the price equilibrium, it 13 to b® feared