The Press SATURDAY, JULY 30, 1938. Spending and Safety

Press, Volume LXXIV, Issue 22467, 30 July 1938, Page 14

The Press SATURDAY, JULY 30, 1938. Spending and Safety

In his speech on the Budget the Rt. Hon. G. W. Forbes aimed at the Government’s policy of lavish spending a series of hard, straight blows. There is not much doubt that the electorate will see that they went home and that the Government has no effective reply. It is true that expenditure, in rate and nature, has broken from all prudent restraint. It is true that it is exposing the Dominion to grave danger in future, without safeguard. It is true that the Government has defied the recognised principle upon which State expenditure may be used to control the violent seesaw of booms and slumps, and that the folly of this defiance has been pointed out by the State-controlled Reserve Bank. Mr Forbes, who said these things very plainly, was not fanciful when he warned the Government of widespread and deep public uneasiness. But one part of his speech may stand for all the rest. It packs into two or three sentences the practical logic which the Government meets only with pathetic babble. Mr Forbes remarked that New Zealand consumes only a small proportion of its production, that the rest has to be sold on the world’s open markets, and that, when the chief of these markets collapsed, New Zealand producers were badly hit. And through and with the New Zealand producers, of course, all. the rest of the community. There is no escape from this situation; it necessitates, therefore, caution, foresight, and a policy designed to avert or ease the worst consequences rather than to invite and exaggerate them. Mr Savage may be accepted as the voice of-the Government upon this question. His latest utterance preceded Mr Forbes’s by a day or two, when he was replying to the Reserve Bank report. “ There is “ no evidence that our production is breaking “ down,” said the Prime Minister. “ Therefore “the only way in which a slump can happen “ is through people being unable to buy what “ they are able to produce.” If the New Zealand people could consume all the wool they produce, all the meat, all the butter, and all the cheese, the Prime Minister would not be so far out. But this monstrous feat of distribution and consumption is not in question. Most of the wool, meat, and dairy produce is the purchase price for other commodities: machines, clothes, household goods, etc. If these are priced up, relatively, as the Dominion’s produce is priced down—and that is what invariably happens in a slump: primary produce falls first and falls faster than manufactures — then the Dominion will suffer the losses and shortages of a poorer bargain. The cargoes of butter shipped away will not be fewer; but they will buy fewer return cargoes of motorcars. linoleum, crockery, and boots. That is, in an over-simplified description, the genesis of depression in New Zealand: " through people “ being unable to buy ” as much as before with “ what they are able to produce.” Mr Savage’s own words are very nearly adequate. Only a slight addition to them is necessary; but it is a slight addition of the utmost importance. The Prime Minister’s “ adequate “purchasing power spread over the commun- “ ity ” is a mere phrase that does not touch or change the realities and the consequences of New Zealand’s having to make a worse oversea trade bargain, A week or so earlier Mr Savage was lecturing the Opposition on international trade. “They apparently do not ap- “ preciate the fact,” he said, “ that the country’s exports must be used to pay for its im- “ ports.” If he appreciated the fact himself, he would not talk and act and promise as though it were no fact at all.