NATIONAL ASSETS OF N.Z.

Press, Volume LXXXIX, Issue 27096, 20 July 1953, Page 13

NATIONAL ASSETS OF N.Z.

VITAL PLACE OF THE LAND RESERVE BANK’S VIEWS ON DEVELOPMENT For a country such as New Zealand, the basic asset is the land, says an article in the latest Beserve Bank Bulletin discussing the Dominion’s capital assets. The land provides about 95 per cent, of exfiorts, says the article, and thus permits he Dominion to buy imported goods, which constitute between 35 and 40 per cent, of the goods available for consumption and investment. The first claim on New Zealand’s capital resources must therefore be the land —to maintain its fertility, extend the occupied area and raise its production. This requires clearing of scrub covered land, drainage, irrigation, fencing, farm buildings, water supply, machinery, tractors and livestock. The investment required is heavy, and includes not only investment on the farms, but also investment in the supplementary industries and services.

Even though there has been extensive development in farming in the last 100 years, less than half the total amount of occupied farm land in New Zealand is "improved.’’ The process of development was unavoidably retarded by the Second World War, but the immediate post-war period witnessed a speeding-up. Of special note are the increases which have taken place in the use of agricultural tractors, electric motors, and milking and threshing machines. Between 1939 and 1950, the number of tractors on farms rose by 360 per cent., milking machines by more than 25 per cent., and threshing machines by 170 per cent. By 1949, traciors were located on 28 per cent, of all arm holdings, and milking machines on more than 50 per cent, of dairy farms, against 41 per cent, in 1939.

Secondary Industry's Growth Another major type of capital assets consists of the buildings, machinery and equipment of secondary or manufacturing industries. Considerable expansion has taken place here since the 1930 s, stimulated by rising incomes and by the protection afforded by the exigencies of war and by import licensing.

Some idea of the growth of capital assets in secondary industries may be derived from the fact that imports of producers’ materials (working capital) and producers' equipment (fixed capital) rose from 36 and 14 per cent, respectively of total imports ,in 1938 to 45 and 17 per cent, in 1948.' In the same period, the number of persons engaged in manufacturing Industries rose from 102,535 to 142,500, and the value of manufacturers’ fixed capital assets (land, buildings, plant and machinery) from £75,600,000 in 193839 to £162,300,000 for 1949-50.

For the tertiary or servicing industries also, capital assets are a major factor. Transport alone is a heavy user of capital—roads, vehicles, railways, ships, harbours, planes, airports, petrol tanks and so on. Communications —radio, telephone, telegraph, and some day, television-wnust all have expensive equipment and must keep up with rapid technical changes. The commercial world requires shops, offices, banks, warehouses, and equipment to go in them. Public authorities, too, have their own forms of capital expenditure—administrative buildings, sewerage, water supply, hydro-electric works, power reticulation, libraries, schools, universities, playing fields, swimming pools, hospitals. Plunket rooms, and so on. Such a list of the community’s capital assets is an incomplete indication of the need for expenditure of money and for the allocation of physical resources to capital formation. The potential and actual demand is enormous, the resources are limited.

Allocation of Resources When all demands for resources cannot be met, some system of allocation must be devised. One method is the use of direct controls, such as building permits, controls on the use of materials, control of capital issues and import controls. The alternative is to allow the price mechanism to work—to let competition for capital goods push up the price so that effective demand is reduced. Competition for capital funds pushes up the rate of interest. An adequate level of savings is a prerequisite to the financing of capital expenditure without recourse to inflationary methods. The greater the need for capital, the greater the need for savings. Any country which wants to expand its production and raise its living standards must therefore become not only capitalconscious but also savings-conscious and thia requires appropriate financial policies. 4 * If internal savings are insufficient to finance the desired capital programme, the solution is not to obtain bank credit to fill the gap. but to borrow externally, that is to use another country’s savings. BANK OF ENGLAND RETURN (N.Z. Press Association—Copyright) LONDON. July 16. Latest returns from the Bank of England are:— x x Issue Department—Notes In circulation, £1,567,000,000; notes in banking department, £33,400,000; other Government securities, £1,585,700.000; other securities, £800,000; silver coin, £2,500,000. Banking Department.—Rest, £3,700,000; public deposits, £10,000,000; bankers’ deposits, £279,000,000; other accounts, £66,600,000; Treasury special account, £38,400,000; Government securities, £350,800,000; discounts and advances, £13,000,000; other securities, £12,500,000 notes and coin, £35,900,000. Ratio of reserve to liabilities, 9.10 per cent. Bank of England discount rate, 4 per cent. LONDON METALS MARKET (N.Z. Press Association—Copyright) LONDON, July 16.

Latest Londoh metal prices ■ Buyer are:— Seller Tin- £ Sa d. £ d. Spot .. .. 582 10 0 585 0 0 Forward .. 502 10 0 585 0 0 LeadSpot .. .. 92 15 0 93 0 0 Forward .. 90 0 0 90 10 0 ZincSpot .. 74 15 0 74 17 6 Forward •• 74 17 6 75 0 0