POSSIBILITY OF A SLUMP

Press, Volume LXXIV, Issue 22466, 29 July 1938, Page 12

POSSIBILITY OF A SLUMP

+ MR FORBES ON STATE SPENDING GRAVE CONSEQUENCES FORESEEN RAILWAY CONSTRUCTION . POLICY CRITICISED I tFrom Our Parliamentary Reporter.] WELLINGTON, July 28. "The Prime Minister says that there is no reason why there should be a general slump." said the Rt. Hon. G. W. Forbes (National, HurunuO during the debate in the House oi Representatives lu-day on the Budget. "No matter whether there is reason or not. there have been slumps in the past and there will be slumps again." Mr Forbes referred to the statement of tile Prime Minister on the report of the directors of the Reserve Bank, in which he said that it was the policy of the Government to continue with public works. That was all very well; but in the last slump the Government did not have the extra £35,000,000 of income that the present Government had, and could not finance public woi'ks from taxation. The Government also found it impracticable to raise loans in New Zealand, where the people needed all their resources to carry themselves on. No money was obtainable irom London. If the last Government hau had the bouyant revenue that this one enjoyed it would have lelt it its duty to put some aside to maite provision lor bad times to come. New Zealand, said Mr Forbes, consumed only a very small proportion of its production, riic rest had to be sold on tlie open mantels oi tne world, the bulk of it in Great Britain. Consequently, when the British market fell away during the last siump, producers in New Zealand were not able to recover tnelr of production. Mr C. A. Barrell (Government, Hamilton;: What caused the slump? j Mr Forbes: it does not matter what caused it. What does matter, is tliat we are unable to rectify the markets in Great Britain. An Opposition member: You don't believe in insulation, then? Mr Forbes: To use tne Prime Minister's term, I think it is all bunk. The League's Warning The economic experts of the League of Nations, in which the Labour Party! Bo strongly believed, had recently predicted a serious slump, Mr Forbes j continued. He did not want to see another slump, and hoped thai j the prediction would be wrong; but in the face of this and other warnings the Government went along at a pace that would eventually land the country in greater difficulties than it had ever known before. The Government was so busy at present spending money that it had recently sent round the Minister for Mines to ask members if there was any work in their districts that needed doing. The Government was obviously in the unfortunate position of having too many xnon available for the work in hand. Mr Forbes criticised much of the expenditure on the railways. The last election, he said, might have been taken as an indication that the country wanted the railways completed: but it was certain that they had not stopped to consider the cost. One example, of completely uneconomic railway construction was- the Fordell deviation, which had been declared unnecessary 20 years ago. when locomotives were much less powerful than the present ones. On this work, the Minister for. Public Works had stated that £500.000 would be spent. It had also been shown that savings in operating costs would be £4IOO a year. Tor this saving the country had been committed to an annual interest bill of at least £15,000. The whole question of economic value had been pushed on one side by this Government The Minister for Education, said Mr (Forbes, addressing a gathering of ■women in Wellington yesterday, said that the Government was going to prevent another slump. That assertion was received in stony silence, because they were intelligent women, who could not be misled by the Minister. No country in the world, said Mr Forbes, had been able to insulate itself against the last slump. America had proved recently that lavish spending was not a remedy. None of the 52 countries represented at the world economic conference had been able to do so. "To-day'we have the future of the country at stake," said Mr Forbes. "The Government has had the warning of its own Reserve Bank; but it knows better, apparently, than any reserve bank or any other country or any economist. "I don't know whether the Ministers realise that they can't mislead the public," said Mr Forbes. "Perhaps it would be a surprise to them to know the amount of criticism there is of public works. People are able to judge lor themselves. London Money Market "Another indication of how the Government is viewed is the value of New Zealand stocks in London. One Minister, I think it was the Minister for Finance, said t.iat there was some evil group undermining New Zealand's credit. That is a usual stunt—to blame every criticism on a 'whispering campaign.' The 'Financial News' summed it up very well when it said that though London investors accepted the Government's assurance that- it had no intention of defaulting on any of its obligations, there was still the fear that excessive expenditure would prevent the Government carrying out its intentions. "If -they are worried in England," Mr Forbes concluded "we on the spot are more so. I don't doubt the honesty of the Government. I don't believe for one moment that they will repudiate; but will they be able to avoid it? That is what is worrying the people of this country, and the holders of New Zealand stocks in London."