FINANCING GUARANTEED PRICES

Press, Volume LXXII, Issue 21775, 6 May 1936, Page 8

FINANCING GUARANTEED PRICES

TO THB tUIXOU Or TU» rB»38. Sir,— The proposal of the Government to purchase all dairy produce ;<\ a price at "resent in excess of its export value can very possibly involve i< pay-out of what amounts to a bonus of £5,000,000 to the dairy industry. This sum it is proposed to chalk up as a debt owing by the dairy industry to the State Bank. Let us suppose the market did not move, and a. similar debt were to be put on the slate for„several years in succession. Would j theiTposition then be that the accumulated sum would ultimately need liquidating by taxation, or would it be held that it was a debt owing by Ihe people to the people, and therefore no debt at all? Take the case of liquidation. The important question is, who is the guarantor? Mr Savage, in his speech, claimed that certain sections of the community, the civil service for one, had teed wages, and that the producer of the country was in that case the guarantor. He went on to claim that if the farmer then gave his guarantee it was absurd to hold that his own living could not be guaranteed. The absurdity is not so apparent as Mr Savage claims, if, as he puts it, the ultimate rirantor of all our State activities the producer. Such guarantees and their effects have been one factor in his costs of production. Who, then, is the guarantor of the dairy prices? Is it the balance of the farming community and the dairy farmer himself, or does that portion of the community with fixed wages guaranteed by the producer in bis turn, shoulder the

fS!S n R mn&S' some one may be com P 6!led q by law to shouder a possible extremely heavy 1 abiity In plain words, a large sum in that case will be taken from one section of the people to hand to another. However, let us presume that the money is to be a StateJJank issue of fresh currency not to be repaid, and that in addition there is to be a large issue of a similar character for payment for public works Will the position of the country then be better or worse? This is a question far above party politics and their often bitter unreasonings. It is a question of the true value of our currency, Will the dairy farmer, with his bonus, as well as every sheep farmer without it all workers, and all investors have to accept payment in a currency of reduced buying power, or will they When it is remembered that the Government has converted the Reserve Bank to a State bank with every asset of the country as joint and several guarantee behind it, and controls all foreign exchange, this is a big question for the country to make up their • minds on. Since perhaps five years ago, when the dairy farmer's position was reported on by the Royal Commission as 50 per cent, bankrupt, there has been a change. . There has been much reorganisation; that sideline, the pig industry, has developed, cows have improved, prices have moved up 2d or 3d, interest is lower, and there have been many mortgage adjustments. These things have meant a steady improvement in the position. Dairy farming in any case was a branch of farming to which men of small capital turned to earn wages as their own master, in place of taking a job. In boom times money came in so freely that land values were forced to a figure not justified by after events, and it takes time for the necessary adjustment. Would it not be wiser, however, to rely on the internal reorganisation of the industry already steadily going forward in place of a vast artificial purchase measure such as this? It would be less risk to the general public, and probably of more benefit to those of the dairy community in trouble, if i large sum is to be paid to them, to apply it to a reduction of the mortgages of those over-mortgaged, than to shoulder such responsibilities as proposed. Should reaction follow this scheme, it must be remembered it is not the politician who pavs, but the rank and file of the community.—Yours, etc., JET May 5, 1936.