WAGE ORDER

Press, Volume LXXXVI, Issue 26121, 25 May 1950, Page 6

WAGE ORDER

Court Hears Two Witnesses RISE IN LIVING COSTS (New Zealand Press Association) WELLINGTON, May 24. The withdrawal or reduction of subsidies is expected by the Government Statistician (Mr G. E. F. Wood) to cause an immediate rise of 25 points in the consumer price index. Indirect effects of increased rail freights, coal and coke prices, and meal prices will bring the increase up to 37 points, witii other delayed results bringing the total to 40 points. This represents an increase in the cost of living of a shade less than 4 per cent. These figures were given to the Court of Arbitration to-day in evidence by Mr Wood. Mr Wood was one of three witnesses called by the Court this morning to give evidence before the Court decides whether to issue an interim general wage order. The others were Mr L. C. Webb, Director cf Stabilisation and Marketing, and Mr M. J. Moriarty, secretary to the Economic Stabilisation Commission. Mr Justice Tyndall is presiding. The cross-examination of the witnesses by workers' and employers’ representatives ■will take place tomorrow afternoon. The hearing of evidence was planned to finish tomorrow, but may now extend to Friday. A decision on when the workers’ and employers’ representatives are to present their submissions to the Court will be made on Friday. Mr F. P. Walsh, vice-president of the New Zealand Federation of Labour, and Mr P. E. Warner, representing three unions, were recognised by the Court as workers’ representatives. Mr Walsh had with him Messrs L. A. Hadley, a member of the national executive of the Federation of Labour, and W. N. Pharazyn. of the Clerical Workers' Union. The employers' representatives were Messrs W. E. Anderson (Auckland) and H. F. Butland (Christchurch). In his evidence Mr Wood explained that his estimate was to some extent tentative, but he had done the best he could with the material available. Detailed increases in the consumer price index figure directly caused by price rises after the reduction of subsidies were given by Mr Wood as follows: 11b of butter. 5.5 points: 11b of tea. 4.99 points: 251 b of flour. 1.95 points; one dozen eggs, 1.5 points; one quart of milk. 4.53 points; quarter-ton of coal, 3.04 points; one hundredweight of coke, .55 points; 1000 cubic feet of gas. 4.15 points; three-course meal. 2.41 points; lib of cake. 1.28 points: 11b of biscuits. .52 points; one mile of rail fare. .32 points. Total, 37.58 points. Mr Wood said that in these figures only direct effects of dearer coal were taken into account. There would be widespread indirect effects again involved. but rail freights had not been allowed for. Adjustments of wage rates by the Court or other tribunal would also have ultimate repercussions in retail prices. . His Honour: Would voluntary wage increases by a number of employers have any effect on these indices? Mr Wood replied that there might be some effect to the extent that the commodities concerned were recontrolled. It did not follow that such increases would be passed on. He had, as a check, undertaken another computation, said Mr Wood. It was based on the maximum effect the withdrawal of £ 10.370.000 in subsidies would have on the price index. He listed the amounts of subsidy removals with the consequent effect on the price index as follows:—flour and bread. £1.800.000. 7.66 points; milk. £1.100.000. 4.53 points; tea. £ 1.230.000. 4.99 points; butter. £1.360,000. 5.5 points: eggs. £280.000. 1.45 points. With the addition of the effects of the increase in coal and rail fares and the price of coke and gas. the index figure showed an increase of 37 points, compared with 37.58 points as assessed by his former computation. Mr Wood said that the applicable proportion of coal, rail fares, and gas increases would take the figures to 40 points.

“Correlation Fairly Rough’’ corre l at i°n of the amounts of subsidy withdrawals with the consumer’s price index is fairly rough,” he added. The index would reflect other current movements. For instance, further increases in the price of restaurant meals might follow the decontrol of meat prices. On the other hand, competition might counteract such increases.

Because it was averaged over the previous three months instead of the period after the effect of the subsidy withdrawals became apparent the June consumer s price index would not show the full effect of the withdrawals. He considered the present price index to be 1057.8 points. To Mr F. C. Allerby, the workers’ representative on the Court, the witness said that his calculations had not taken clothing into account but only the specific items from which subsidies had been removed. Mr Justice Tyndall quoted previous submissions by workers’ representatives alleging that the Government Statistician s figures were invalid, and Mr Wood opinion of this. Mr Wood: There is no accounting for the human mind and the wild statements people make on occasions. His Honour: You don’t think their statements are justifiable 9 Mr Wood: Most definitely not. At his Honour's request Mr Wood will bring to the Court to-morrow an estimate of the present number of salary and wage earners in New Zealand and the numbers of their dependants. “We are trying to get the total number of consumers who dra<- their sustenance from salaries and wages.’’ said his Honour. He added that he would also like to know what proportion of the burden on consumers, consequent on the changes in the subsidy system, would be carried by salary and wage earners.

Mr Wood said that, failing a definition of “relative economic position,” < he could not say whether workers today enjoyed the same relative economic ■ position as they did in 1938-39. Effective wage rates to-day were definitely higher than at that time Mr Walsh asked whether the witness had taken into account the effect of the lifting of controls on property sales and other items which contributed to the cost of living. Mr Wood: The effect of property prices was not taken into account. The effects of the decontrol of other items on the consumer’s price index will have an important effect on the index. Mr Webb’s Evidence Leicester Chisholm Webb. Director of Stabilisafion from 1944 and Director of Marketing from 1948. was the next witness. He was asked by his Honour to give evidence whether, if the Court made an interim general wage order, the economic stability of the Dominion would be promoted or not. He was also asked to say what would be the effect of such an order or the lack of one on primary industries and the disposal of their products overseas. The witness said that because New Zealand was dependent more than any other country on overseas markets the country’s economic stability could not be regarded merely as a matter of internal equilibrium between incomes and living costs. “If wages and prices rise steeply in New Zealand there may be generated a demand for imports which is in excess of the available overseas funds,” Mr Webb said. “Similarly, if costs in New Zealand’s exporting industries rise steeply, exports may decline because we are being undersold by our competitors. •A ftirther complication is introduced by the fact that certain export industries are guaranteed by the State a pay-out to their producers ! based on costs of production. If costs in these industries rise to a point at which the payment in New Zealand is in excess of the revenue from exports, there is an immediate effect on the country’s internal finances.” Mr Webb said that the effect of a

wage increase in the dairy industry would be to increase the labour reward in the guaranteed price, to increase the cost of farm maintenance and working, and to increase the costs, mainly in wages, of the butter and cheese factories. Rail freight increases would increase farm and factory costs, and the removal of coal subsidies would further increase dairy factory costs.

The witness calculated that a wage increase of 5 per cent, would reduce the rate of accretion to the Dairy Reserve Fund to £550.000 a year, but taking into consideration increased coal costs in factories, the net accretion might be only £300.000. A 10 per cent, wage increase would put the labour reward in the dairy industry up by £2,725.000 annually, and all costs up by £3,277.000 a year. Wita added coal costs included, this would involve drawing on reserves at the rate of £1.200.000 a year. “I would draw a broad conclusion that a wage increase of 6 per cent., taking into account other cost trends, would put the guaranteed price beyond the export price unless the export price is increased as a result of the current negotiations,” said Mr Webb.

The meat industry was in a better position to meet cost increases, he continued. Its financial reserves were larger, and there was a wider margin between the export price and the pay-out in New Zealand. “The total cost to meat producers and freezing companies of a 5 per cent, wage increase and the recent rail freight increases would be about £1.059.000. This would still leave the rate of accretion into the Meat Stabilisation and Meat Pool Accounts at about £3.880,000 a year. Assuming a 10 per cent, wage increase, the- net rate of accretion into the accounts would be about £3.030.000 a year.” This calculation, said the witness, did not take into account the possibility of an increase in overseas prices nor cost increases since the fixing of the last meat export schedule. “It must also be remembered that the present high rate of accretion to the meat accounts is due. in the main, not to the exnort price for our meat, but to the high export prices ruling for such items as tallow, pelts, and hides. These products are not covered by the long-term contracts and are subject to sudden market fluctuations.”

On carcase meat and some offals, which were covered by the long-term contracts, there was virtually no margin between export prices and the New Zealand pay-out, concluded the witness. The last witness called by the Court was Michael James Moriarty, secretarv to th? Economic Stabilisation Commission after which the Court adjourned until to-morrow afternoon.