WORLD ECONOMIC TRENDS

Press, Volume XC, Issue 27407, 21 July 1954, Page 9

WORLD ECONOMIC TRENDS

Rising Production, Stable Prices demand reduced IN 1953-54 (From Our Parliamentary Reporter) . WELLINGTON, July 20. wising production, more stable Prices, and a better balance in international trade were the most notable ieatures of economic trends in most countries in the last year, according • lu' Economic Survey, tabled m the House of Representatives this afternoon by the Prime Minister and Minister of Finance (Mr Holland). Inflationary and excessive demands for goods were reduced in many countries, the survey says. There was some anxiety about a decline in industrial production in the United States, but this trend appears to have ceased. Confidence in sterling continued to grow and there was an improvement in the competitive position of United Kingdom exporters in world markets. “Tn the New Zealand economy also there is evidence of closer balance between the demand for goods and services and the supplies available,” the survey says. “The demand for imports is no longer excessive in relation to earnings of overseas exchange. Receipts of overseas exchange continue to exceed payments. Retail shops are well stocked. Business activity is at a high level, but with more competitive conditions in some sections. Employment Position “Although there has been an increase in recent months, vacancies for labour during the last two years have been fewer than for many years,” the survey says. “The capital market has been more stable in spite of a very high proportion of national expenditure on capital formation. Wholesale prices fell slightly during the year ended March, 1954, although consumer prices, as measured by the consumers’ price index, were nearly 6 per cent, higher in the second quarter of 1954 than a year earlier.

“Unless some unforeseen change occurs in any of the many factors which can influence the economy, we can look forward in the coming yea? to a supply of goods almost balancing the general level of demand for goods and services. In the absence of major increases in export prices, import prices or wages, any rise which may occur in prices in the coming year is likely to be less than during the last year.” The increase in consumers’ prices in the year ended June, 1954, was 5.9 per cent., compared with 4.1 per cent, in 1952-53 and 8.6 per cent, in the previous year, says the survey. The main influences on prices last year were changes in export and import prices and an increase in costs after the general wage increase from September, 1953.

“The influence of overseas prices on local prices is very great in New Zealand because so many consumers’ goods are imported or contain imported raw materials or components, and because prices for local consumption of export commodities are influenced by export prices,” the survey says. "It is estimated that about one-third of consumers’ expenditure is incurred on goods and services whose prices are determined by marked conditions existing outside New Zealand.”

Import prices have been falling, although latest figures suggest that this falling tendency may be ending, says the survey. Cheaper imports checked rises in the prices of some goods, particularly durable household goods, which increased by only 1£ per cent, in the last two years. “The general wage increase which operated from September, 1953, was probably the most important cause of the price rises which have occurred in the last nine months. A wage in-

crease unavoidably raises costs of those goods and services whose production involves a substantial proportion of New Zealand labour. . . . “As far as the recent wage increase is concerned, it has been estimated that, within one year from when it was granted, it will have caused an increase in the consumers’ prices index of between 3 per cent, and 5 per cent.” Overseas Assets Net overseas assets of the banking system rose by £27,000,000 during'the year ended March, 1954, to a record March figure of £129,000,000, the survey says. “Overseas reserves are at a nigh level, but it has to be remembered that, in the event of a recession and a drop in world prices for our exports, raw materials for industry, capital goods needed for economic development, and consumers’ goods could not be imported in sufficient quantities unless we could call on reserves of overseas exchange.” The end of the bulk purchase agreements for dairy produce and meat will result in a change in the method of payment for. those exports, says the survey. “The. initial effect of the change will be a time lag when no receipts are recorded, which, depending ‘on the methods of. payment adopted, would reduce our holdings of overseas exchange by up to £25,000,000 at the lowest seasonal point in the year,” says the survey.

NX’S CAPITAL SPENDING HIGH RATE “VERY NECESSARY” (From Our Parliamentary Reporter) WELLINGTON, July 20. Capital expenditure by the New Zealand Government, local authorities and business firms and individuals, excluding changes in stocks, amounted to £185,000,000 in the year ended March 31, 1954. “At 23 per cent, of gross national expenditure, about the same proportion of resources was devoted to capital formation as last year,” says the 1954 Economic Survey. “This is a high proportion of resources to use for the building up of capital assets, but the rate of population growth in New Zealand is such that a high rate of capital formation is very necessary.” Since March, the generating capacity of hydro-electric stations increased by more than 100,000 kilowatts; more than 60,000 acres of previously unimproved land was grassed; 845 new classrooms were built for primary and post-primary pupils; 4150 houses were completed for sale, letting, or for departmental use (compared with 3430 in the previous year); the Post and Telegraph Department connected 36,155 new subscribers as 35 new automatic telephone exchanges were installed; large sums were spent on improving the railways and highways; and the development of the Murupara project was pushed ahead. Capital expenditure by local authorities was expected to be about the same in the year ended March 31, 1954, as the £19,000,000 spent in the previous year, says the survey. High repayments of debt from revenue kept the increase in local body debt to a very moderate level. Private capital expenditure, at £107,000,000, remained at 13 per cent, of gross national expenditure, the survey says. Total expenditure on building and construction was estimated at £50,000,000, compared with £42,000,000 in the previous year. This indicates that the proportion of resources used for building increased. Private capital expenditure during 1953-54 other than on buildings was £57,000,000, compared with £59,000,000 in the previous year;