RISING COST OF LIVING

Press, Volume LXXIII, Issue 22082, 3 May 1937, Page 11

RISING COST OF LIVING

MINISTER EXPLAINS REASONS DEFENCE OF LABOUR’S LEGISLATION EFFECTS OF WORLD PRICE MOVEMENTS Reasons for the rising cost of Jiving in New Zealand are given by the Hon. D, G. Sullivan, Minister for Industries and Commerce, in a statement to “The Press." He contends that a considerable proportion of the increase in retail prices is accounted for by world price movements, and that although some of the Government’s legislation has undoubtedly contributed to the general increase other legislative measures have had precisely the opposite effect. The statement reads: The trend of retail prices in New Zealand for some'time past has been upwards; but New Zealand is not alone in this respect, upward movements m prices being recorded in overseas countries practically exception. Retail price movements touch every member of the community; and, consequently, it is not surprising to find statements in the press commenting on the rising tendency of such prices. Much of this comment is illinformed; increases In prices of selected lists of commodities —where the increases have been greatestbeing quoted as typical of the movement in general. Again, comment on price movements is frequently couched In such terms as to leave the impression in the minds of readers that the Government’s legislative programme has been the sole or at least the dominating influence contributing to the increased cost of living. For such increases in retail prices as may be directly attributed to the Government's legislative programme of social amelioration it makes no apology; but there is obviously need for a clearer understanding both of the extent of recent retail price movements, and the causes of such movements. Statistics of retail prices are regularly collected by the Government Statistician; and this data provides a reliable basis from which the extent of price movements may be measured. The following statement analysing the recent course of retail prices may do something towards clearing .up popular misconceptions on this subject. A comparison of the overall Increases in retail prices disclosed by. the most recent index numbers is given below:—

The comparisons shown above based on May, 1936, are interesting for the light they shed on the movement in prices which might possibly be -.tributed to certain Government policy measures, the month of May being selected as before but reasonably proximate to the dates of important legislation,' e,g., the Finance Act restoring wages cuts, which came into operation on July 1. It will be noted that between May, 1936, and March? 1937, retail prices rose by 5.5 per cent. Analysis of the retail price increases in individual groups of commodities makes it clear that many factors other than legislation ameliorating wages and working conditions have oeen operative. Following are the figures:—

Food Prices The greatest Increases are shown in the food groups,- the average index number for the three food groups as a whole having increased by 7.2 per cent, since May, 1936, and by 11.6 per cent, since March, 1936. New Zealand farm produced commodities account for a very large proportion of the items included in the food groups. Government action, in respect of these commodities has aimed at ensuring a fair return to the producer and closing the gap between the return to the producer and the retail price. For example, wheat, flour, and bread prices are controlled at levels, which will ensure a reasonable return to producers and distributors, and at the same time keep the retail price at a reasonable level. Prices of dairy products are stabilised under the Primary Products Marketing Act, while authority is taken under this act to ensure that margins between the return to the producer and the retail price are kept as low as possible. The retail price index for this group shows the highest individual group increase, as a consequence of ensuring to the farmer a fair return for his dairy produce. However, the impact of the recorded increase in prices of dairy products on individual families is greatly lessened by the Government’s scheme for the free distribution of milk to school children—a factor which obviously cannot be reflected in a price index, but which is of. great moment to many families. Iff fact it -would be no exaggeration to say that for many of the larger families the real value at this concession on account of the essential nature of the milk as a food would go a long way towards counteracting the effect of such price increases that have occurred in other commodities. Retail prices .of meat show an increase of 11.3 per cent, over the level ruling a year , ago, a reflection of the increased prices of fat stock, a direct consequence of higher world prices of farm products—notably wool. A factor contributing to the increased cost of food is the increase in overseas prices of imported food commodities. Obviously the Government has no control over the overseas prices of these commodities; but undue increases in these prices or in retail prices of , New Zealand 1 producedcommodities are checked by the operation of the Prevention ‘ of Profiteering Act ‘While there has been an increase of some magnitude in the average level of food prices, partly due to causes quite outside the control of the Government. it must not be assumed that all food commodities have advanced in price to any appreciable extent. In view of the frequent quotation of itfems in which the greatest increases have taken place, the following comparison of price changes in a list of major food commodities is of interest:

It will be seen that the price in* crease in some individual instances is considerably below the increase in the Statistician's index for foods as a whole; while in other cases, increases are shown above the average. In many cases where the increases are highest, e.g., butter pre-existing prices were definitely below a level which would ensure a reasonable return to the producer in depressed industries, while others represent commodities subject to marked short-period fluctuations. Housing Costs Housing costs rank second only to food in the budget of expenditure of the average household. The Government Statistician’s Dominion index number of the average level of rents shows an increase of 3.9 per cent, over the latest available 12-monthly period (February, 1936, to February, 1937). It Swill be admitted- that this is a moderate increase when the following facts are taken into consideration: 1. House building virtually ceased for a prolonged period during the depression years, 2. The recent increase in employ--1 ment and in wages rates has enabled many pepole who were formerly forced to share houses to afford separate homes., 3. There were 13,740 marriages last year.

Considering the above factors, it cannot be doubted that, but for the Government’s timely action in passing a Fair Rents Act, a marked increase in rents would have taken place. Furthermore, the Fair Rents Act forms a check not only on the rentals of houses in occupancy, but also on reletting values. In times of shortage of dwelling accommodation reletting values tend to rise violently, those seeking dwellings being forced to pay scarcity rentals out of all proportion to the values of the properties. This position is being met for the time being by the Fair Rents Act; and, in the longer view, by the Government’s housing policy in providing decent houses at reasonable rentals. The Government Statistician's index number relates to rents only; it does not measure the movements in the housing costs of those in occupation of their own houses. For the many thousands of people owning houses under mortgage to the State Advances Corporation a substantial reduction in bousing costs has been made. The basic rate of interest charged by the Corporation is 4| per cent.; no increase has been made in this rate, which represents a reduction of 11.8 per cent, from the level ruling up till September. 1935. House owners in difficulties as an aftermath of the stress of the depression years are protected by the Mortgagors and Lessees Rehabilitation Act. In addition to the redqction of mortgages where necessary the usual rate of Interest on mortgages has been reduced; in the case of first mortgages from the pre-existing temporarily reduced level of 5.6 per cent, to a maximum of 41 per cent.— a reduction of at least 15.2 per cent,

Clothing and Footwear The Government Statistician's index number of clothing, drapery, and footwear prices shows an increase of 7.4 per cent, over the latest X2-monthly period (February, 1930, to February, 1937). World prices of textile materials have in recent months shown a very marked upward trend. Prices of New Zealand wool have been from 50 to 70 per cent, higher than a year ago, while considerable though smaller increases have taken place in world prices of other major textile materials. In the circumstances the average increase in retail prices of this group of commodities cannot be regarded as inordinate. There is.of course, a considerable range of varia-. tion in the price movement as between different items coming under this heading. Retail prices of woollen clothing items included in the Government Statistician’s index number for February (the latest available figure) showed increases of from 10 per cent, to 20 per cent. Very little change was recorded in retail prices of artificial silk goods. Cotton goods showed varying movements, prices of .some items being as much as 25 per cent; higher than a year previously; while, in other cases, • there was but little change. Retail prices of footwear in, February showed increases varying generally from 10 to 20 per cent, over prices ruling a, year earlier; largely, no doubt, a reflection of increased world demand for hides and shorter supplies. The latest official index number of retail prices of miscellaneous items has advanced by 5,2 per cent, above the index for a year earlier. A heterogeneous list of commodities and . ser* vices is included under this heading; and, naturally, there have been considerable variations in price movements above and below the average. A factor which has tended to check upward movements in prices in this and other groups of commodities has been the Government’s policy in keeping railway fares, freights, and postal facilities at low cost levels. The recent concession in suburban railway fares is an important price factor affecting many household budgets. The Prevention of Profiteering Act has been effective in holding prices generally, arid this has been’ proved from the many investigations that have been carried out"

Conclusions Drawn ’ The object in making this statement is to indicate how difficult it is to generalise about increases in prices, unless particular rises are shown in their proper perspective and relationship to other items affecting household expenditure. The following conclusions may be legitimately drawn from the analysis of price movements presented in the foregoing paragraphs:— 1. A considerable proportion of the increase' in retail prices is accounted for by world price movements—over which the New Zealand Government has no control. .2. While some of the legislation enacted by , the Government for the benefit of the community has undoubtedly contributed to increased retail' prices, it has been clearly shown that other legislative measures have acted in pane- . cisely the opposite direction. 3. The Prevention of Profiteering Act has been -generally effective in preventing any undue increases in prices. In countries where no* such : Goyemment control exists speculators are finding in recent price changes a happy hunting ground. The dangerous and violent fluctuations in prices caused by speculative activities "have already been commented on oiiifiai Even such a sober and conservative journal as . the London “Economist* has been moved to decry in no uncer- - tain terms the evils already caused by recent dealings in basic materials (vide issue of February 27). Such 'a position could not arise in New Zeeland:' - Finally, it should be clear that the increase in retail prices (which ' baa been shown to be largely due to toetors outside the control of the Government) forms but a very minor set-off against the benefits conferred on the community by the Governments legislative programme. To the worker higher wages, shorter working hours, and better working conditions bare - been assured: to the farmer a much- f improved price for his products. The ; - roanufacturer must benefit from the increased turnover due to greatlyheightened prosperity, and this, is evl- ‘ denced by the fact that mills and toe-'. Tories are working to full capacity. ' Spending power, savings, and business , activity., generally are reaching ’ lugh' levels, and it is clear that New Zealand is enjoying a period -of png-' perlty. *- .ri-jWr.:, ■ i . - ri > r

Period. Increases in retail prices all groups combined. Per cent. March, 1936, to March, 1937 (12 months) 7.6 May, 1936, to March, 1937 (nine months) 6.5 May. 1936, to August, 1036 (three months) 1.8 May, 1936 to Nov., 1936 (six months) .. 3.3

Increases in Retail Prices, May, Mar., 1936, to 1936, to Mar., 1037. Mar., 1937. Group (9 mths.) (12 mths). Groceries .. 5.1 6.2 Dairy produce .. 6.3 Meats .. 9.5 1B.9 11.3 Three food groups 7.2 11.6 Fuel and lighting 6.2 6.3 Rent ., 2.5 3.9 Clothing, drapery. and footwear 6.8 7.4 Miscellaneous items 4.5 5.2 All groups .. 5.5 7.6

? Average retail prices (four chief centres) March March Unit of 15. 15, quan1936. 1937. crease Item. tity. a. d. s. d. p.c. Rice Hb 0 23 0 23 — Coffee (average 11b U 11 1.0 quality) 2 2 Potatoes 141b 1 13 1 2 1.8 Tea (average 11b 33 2.8 quality) 2 2 4 Flour (bag) .. 251b 4 li 4 3 3.0 Sausages (pork) lib 0 72 0 8 3.2 Raisins lib 0 63 0 7 3.7 Tinned salmon 11 2 3.7 (2nd grade) lib I 1 Bread (cash. deliv ered) 6 4.3 (loaf) 21b 0 52 6 Mutton chops 11b 0 72 0 81 6.5 Sugar Rump steak .. lib lib 0 0 iol 0 34 0 111 7.7 9.3 Beef, surloin .. Hb 0 8 0 P 9.4 Sausages (beef) Mutton (loin) lib lib 0 0 41 7 0 0 51 73 10.5 10.7 Honey (carton) 21b 1 31 1 53 11.3 Jam (1st grade lib 81 91 11.8 N.Z.) 0 0 Mutton (leg) 11b 0 72 0 82 12.9 Oatmeal (bag) 51b 1 21 1 41 13.8 Fresh eggs ,. doz. 1 83 1 113. 14.S Bacon (roll) .. 11b 1 11 1 31 14.8 Cheese 11b 0 81 0 gi 15.2 Butter 11b 1 03 1 3 17.6 Milk (deliv.) qrt. 0 41 0 62 27.8 Onions lib 0 13 0 21 28.6