FALLING EXPORT INCOME

Press, Volume LXXIV, Issue 22419, 4 June 1938, Page 24

FALLING EXPORT INCOME

♦ REDUCTION IN OVERSEAS FUNDS LOWER SPENDING POWER PREDICTED A decline in New Zealand’s overseas funds, as a necessary consequence of falling export values, is discussed in the latest economic bulletin of the Canterbury Chamber of Commerce, prepared in consultation with the economics department at Canterbury University College. “If the excess of exports continues to contract, as appears inevitable,” the bulletin states, “then both overseas funds and deposits in New Zealand are likely to decline further, and bank advances to increase. “The high export income of the last year, combined with heavy Government expenditure, has increased income and demand in New Zealand, and imports have consequently continued to-expand. The excess of exports reached £16,000,000 in 1934, in 1936 it was £12,600.000; and in 1937 £10,500,000. For the year ended March, 1938, it was reduced to .£6,900,000, and it appears likely to be further reduced for the year ending next June. “Normally an excess of about £10,000,000 is needed to pay interest on debt due overseas, etc. If exports do not exceed imports by at least this amount, then the difference must be paid by a reduction in bank deposits or an increase of bank advances in New Zealand, and the payments will reduce the amounts held in bank funds overseas. There is much evidence that this is happening already. Comparing March returns for 1937 and 1938, trading bank- deposits have fallen slightly, and trading bank advances have increased by more than £8,000,000.” ' “Normal Processes” The bulletin states that the decline in income caused by the fall in export receipts, together with some monetary stringency through reduced deposits and increased advances, will in itself rectify the balance of trade. These conditions will • necessarily decrease spending power in New Zealand. “These are the necessary effects of falling export values accompanied by rising imports, and they are the nor-

mal processes in the adjustment of the balance of trade. How far they need go depends on conditions, particularly on the trend of prices for New Zealand exports in overseas markets, but the season is already far enough advanced to reveal the effects of the price changes that have already occurred. “Comparing the first three .months of IS3B with the same period in 1937, the value of butter, and cheese experts increased by £1.25 millions, but that of wool fell by £3.1 millions. . The net result of these and other price changes is a decline of £1.7 millions in the quarter’s export values. Since export prices are now at lower levels, the whole- season’s exports are affected, and the decline in the years’ total must continue 'till the end of the season. “Imports for the first quarter of 1938 were nearly £2,000,000 higher than for the same quarter of 1937 and it appears unlikely that the year’s total will show any decline before the end of June. Over the. year to March, .1938, imports' have increased by £10.4 millions, and they have now-reached levels -higher than can be paid for : from, present export income. .• • As the •contraction -ofincome, which as yet is slight,'becomes felt, demand for imports should con-' tract somewhat, and the level of imports be adjusted to whatever is :Warranted by export receipts..”. " All the figures given .are for New Zealand currency.