SOME EFFECTS OF PRICE CHANGES

Press, Volume LXXIII, Issue 21990, 14 January 1937, Page 11

SOME EFFECTS OF PRICE CHANGES

RESTRICTION OF BUYING POWER CHAMBER OF COMMERCE BULLETIN Changes in New Zealand’s' export prices have always been associated with changes between prosperity and depression in the Dominion, states the latest economic bulletin of the Canterbury Chamber of Commerce. Rising export prices increase income, expand purchasing power and stimulate business activity and employment. Falling export prices have the opposite effect arid diminish all of these. But the relative movements of internal prices are equally important. Between 1929 and 1933, when export prices fell much more heavily than internal prices the receipts from , a given quantity of ex- . ports, such as a bale of wool or a hundredweight of butter, would buy much less of internally produced goods and services than before. In consequence the production of these goods and services for the local market was seriously contracted . and depression and unemployment resulted. Since 1933 export prices' and receipts have risen piore than internal prices, the country’s income and its power to purchase its home consumed products has expanded, and both production and employment have increased. , A comparison of index numbers of production and wholesale prices shows, roughly the relative quaritities of the Dominion’s production that could have been purchased in. each year from the total value of production. If the purchasing power of total production over wholesale gbdds in 1928 and 1929 be taken as 100, then it was 75 in 1932-33, 87 in 1933-34, 83 in .1934-35, and about_9l in 1935-36. When production fell more than prices, its pur r chasing power declined. When production rose more than prices, as it did after 1932-33, its purchasing power increased. This general comparison is itself sufficient - to, account broadly for, the decline that occurred in the volume of production, in employment, and in the average standard .of living during the degression years. ■ Increased Exports The price declines were .most severe in the -casg pf exports, /where production increased, and less severe in the case of goods and services for homo consumption where production decreased! For exports as a whole, the 192829 price levels represented very close- . Ty the average levels' of the eight.or ‘lO pre-depression years and therefore the levelsto which exporters and the country generally had become accustomed. Frojtri 1928-29 to 1932-33, export prices, felltftS per cent.; the decline was about 35 per cent. _in 1934 - and -1935, and about 23 per cent, in September, 1936,, The-severest fall was in the case of wooL' For the seven years, 1922-29, wool‘averaged £2l 12s 6d a bale. For the ’three years, 1930-33, it averaged £70«13s 6d a bale, little more than its pre-depression price. Its prime'a bale'was £l6 3s 8d in 1933-’ 34, £9 6s 8d in 1934t35, £l3 6s lod in 1935-36, and present indications are that it may average about £l9 a bale in 1936-37, or about 10 per cent, less, in New Zealand currency, than in the seven years to 1929. The hides, skins, and: tallow group suffered nearly as severely as wool. Dairy produce prices fell from 100 in 1928-29 to 60 in 193233. SSL in ,1934. 62 in 1935, -and 83 i in I September, 1936. Moat, assisted by the Ottawa agreements, Jared better, the index falling from 100 jn 1928-29 to 62, in 1932-33, and ranging from 83 to 87 since then. • Compared with such changes as thesejvthe movements of internal and import prices in 1929-36, were slight. From 'the highest to the lowest points, wholesale prices fell by 121 per cent., import prices by 14 per cent., retail prices by 19£ per cent., and wages by 17J per cent. For September, 1936, conlpared with 1928-29, wholesale: prices are still 5 per cent, lower, retail prices 13* per cent, lower, and wages are back at the pre-depression level, L Restricted Purchasing It js such differences as these that haves>meant that much less imports ■ and of home-consumed goods and services .could be bought with the receipts from the sale of a given : quantity of exports. Taking the purchasing power of a fixed quantity of exports as 100 for 1928-29, its purchas- : ing power over imports fell to 60 in 1932-33, and increased to 741 in 1935, ■ Over; wholesale goods, this purchasing power fell to 59 in 1932-33, and, with : some variations, rose to 81 by Sep- • tember, 1936. - Over retail goods, it fell ‘ to 64 in 1932-33 and rose to 89 in • September, 1936. Oyer wages it fell to - 62 in the worst years of depression, ‘ and has since risen to 77. , These comparisons reveal an important cause of, depression, of re- 1 duced production, and of - unemploy- ' ment in New Zealand, in the fact that receipts from exports, whose prices fell ffeavily, would, buy much less of internal goods and services, whose prices fell much less, and-whose .pro-■ auction therefore had to be contracted. Recovery has developed and production and employment have increased U }, c * p . ort P ri ces-has been gi eater than that ni internal prices. | PRICE OF GOLD ' ' LONDON, January 12. Gold is quoted at £7 Is 6|d a fine , ounce. . ■