EXPENDITURE ON PUBLIC WORKS

Press, Volume LXXIV, Issue 22465, 28 July 1938, Page 12

EXPENDITURE ON PUBLIC WORKS

The Reserve Bank’s Advice REPLY BY MR SAVAGE An Unacceptable Theory [From Our Parliamentary Reporter.] WELLINGTON, July 27. The advice tendered to the Government by the directors of the Reserve Bank in their annual report to Parliament, with special reference to public works policy, is not likely to be accepted. When the Prime Minister (the Rt. Hon. M. J, Savage) was asked to comment on the report this evening, he said emphatically that he could not agree with the idea of holding up public works in anticipation of a slump. The view put forward in the Reserve Bank report was that the extent of public works should be regulated, as far as practicable, according to the state of employment in other directions. It was suggested that there should be a slowing down when the demand for labour for other purposes was relatively satisfactory, and an acceleration during periods of comparative business inactivity. “I am not finding fault with anybody's opinion,” said Mr Savage, “and Z give credit for the viewpoint taken In the report. It is the orthodox point of view, but it is one which 1 do not hold. It is based on the theory that slumps are inevitable; but I prefer to think that bad times should only arise from famine or from some similar natural cause. "There is no evidence that our production is breaking down,” the Prime Minister continued. “Therefore the only way in which a slump can happen is through people being unable to buy what they are able to produce. With adequate purchasing power spread over the community, and production maintained, there is no earthly reason why any section of the community should suffer distress. Work should not be carried out just for the sake of work, but because it gives new service and creates additional wealth, or greater facilities for the people. That is the only excuse for a public works policy, A Commonsense Balance >- “I know we have a lot of leeway to make up in public works.. That is not our fault, but our misfortune, and it is our bounden duty to correct the faults of our "predecessors. "I admit that we must keep a commonsense balance in our productive and general developmental agencies,” Mr Savage added; "but to set out deliberately to hold up public works in the belief that slumps are inevitable is something to which I, for one, refuse to subscribe. A person who talks about the inevitability of slumps is creating a slump psychology in the minds of the people. That is harmful, and a person taking up such an attitude is rendering a disservice to the country.” Mr Savage was also asked to comment on the suggestion of the Reserve Bank report that all advances made by the bank in financing the Government's marketing policy should be secured on the Consolidated Fund. “I do not think I had better discuss that point,” the Prime Minister said. “It opens up a subject on which you could fill a newspaper. The only thing I have got to say is that the time must come eventually when everything will be secured on the production of the Dominion.”