The Press TUESDAY, AUGUST 28, 1951. Wool Marketing

Press, Volume LXXXVII, Issue 26511, 28 August 1951, Page 6

The Press TUESDAY, AUGUST 28, 1951. Wool Marketing

| The Australian woolgrowers’ rejecj tion of the proposed British Com--1 monwealth marketing organisation ’ means the end of this concerted I attempt to prevent violent changes ! in wool prices. The New Zealand i Government and New Zealand wooli growers are now to Consider • whether they can do Something on • a smaller scale to achieve the same • end. As the Minister of Marketing l (Mr Holyoake) has explained, the [ possibility of Australia’s decision, i had been foreseen, and an alterna1 tive proposhi will now be studied. No doubt this will be Something on the lines of the proposed organisation, which was to follow the methods of the Joint Organisation when it successfully disposed of the war-time surplus of the Dominions 1 wool. The method of the Joint Organisation was to sell wool when the auction price seemed to be going too high, and to buy wool when the price fell below its floor price. If a similar system is decided on for wool sold in New Zealand funds are available to establish it. The Government made £ 18,000,000 profit on the disposal of the war-time surplus, and both Mt Nash and Mr Holyoake have agreed that this should be given to any marketing concern succeeding the Joint Organisation. Failing agreement among the wool-producing Dominions and the United Kingdom on such an organisation, it was agreed that this money should be used for the benefit of the woolgrowing industry in a manner to be de>termined by agreement between the Government and the Wool Board. In addition, the Wool Board has a surplus of £6,000,000 from the contributory charge that was levied to meet the expenses of disposing of the war-time surplus wool. This gives a total of £24,000,000 to finance a New Zealand price stabilisation scheme. There are obvious difficulties about the adoption of such a scheme, including all those that would have faced a Commonwealth organisation, plus additional difficulties inevitable if one country acts alone. But the two main difficulties of a scheme limited to one country more or less cancel each Opier out. One is that £24,000,000 is not large enough to buy in large quantities of wool at a fairly high price. The other is that buyers might be prejudiced against buying New Zealand wool ( if they thought the price was being , forced up against them. The very 1 limit on the capital available would ; prevent the marketing organisation 1 from setting its floor price so high j as to risk exhausting its funds without achieving its object, or so high * as to discourage buyers. A price * support scheme might, in fact, be i helpful to buyers if it smoothed out I

violent fluctuations either up or down and tended to produce greate? stability. The purpose of the Commonwealth scheme was once stated to be “a plan to cushion short-term downwards fluctuations in wool “prices not in line with general “ commodity movements ", A similar system could also be used to check “heavy short-term upward “ fluctuations ’’ of the same sort. The success of the Joint Organisation may encourage the Government and the Wool Board to make the experiment. In the first two seasons after the war the Joint Organisation functioned well at a time when there was a surplus of wool and when prices were at a comparatively low level. If the £24,000,000 is used in this way it Will not have the Inflationary effect feared in Australia, where the Government has £46.000,000 to dispose of. On the contrary, use of the New Zealand funds for a price Stabilisation system might have a useful effect in countering deflation in a time of falling prices. This will probably weigh heavily with whatever Government is in power when a decision has to be made.