Commonwealth Economy: Improvement Surveyed

Press, Volume XC, Issue 27443, 1 September 1954, Page 6

Commonwealth Economy: Improvement Surveyed

(New Zealand Press Association)

WELLINGTON, August 31. Improvements in the balance of payments, the rise in the gold and dollar reserves, the increasing development throughout the Commonwealth, and the maintenance of confidence in sterling during 1953 could all be traced to the policies decided upon at the Commonwealth Finance Ministers’ conference in January, 1952, said the annual report of the Department of Industries and Commerce, which was tabled in the House of Representatives this afternoon. The report added that although there was improvement, recovery was by no means complete. Reserves increased only slowly, and this growth was caused more by restriction on imports than by expansion of exports. In 1953 the sterling area had a provisional balance of payments surplus of £320,000,000 with the rest of the world. This compared favourably with a surplus, of £50,000,000 in 1952. (The 1952 surplus was quoted as £77,000,000 in the 1953 annual report, but this provisional figure was subsequently amended to a final figure of £50,000,000.) The 1953 surplus could not, however, be regarded as arising only from earnings in trade and services. It included £102,000,000 in “defence aid” and drawings from the International Monetary Fund, loans from the International Bank of Reconstruction and Development, and receipts from the sale of newly-mined gold also contributed.

Current Earnings “If these very considerable receipts are excluded it is found that in current earnings the sterling area is doing little more than pay its own way,” the report said. “Of course, this is preferable to the position in previous years, when it was unable to balance payments by means of current earnings, but it is as well that the nature of the payments balance should not be lost sight of, as defence aid receipts from the United States are being sharply reduced and drawings and loans from the International Monetary Fund and International Bank cannot be regarded as a Continuing substitute for earnings from trade. In fact, it must be remembered that these borrowings must be repaid.’’

It was against this background that the Commonwealth Finance Ministers’ conference was held in Sydney in January last, the report said.

Referring to the decision made then to increase exports in areas other than dollar areas, the report said that an increase in the volume of exports could be based only on increased production. This in turn must depend on increased capital investment Dealing with New Zealand’s balance of payments, the report said that in 1953 New Zealand had a surplus of £26,200,000 in overseas exchange transactions. This was made up of a deficit of £8,600,000 with the sterling area, surpluses of £2,900,000 with the dollar area, £26,300,000 with O.E.E.C. countries, and £6,500,000 with other non-sterling countries. *niese were round figures.

“To move from the 1952 deficit of £23,400,000 to a surplus of £26,200,000 —a change of £49,600,000 in a year—was a spectacular achievement,” the report said. Detailed Figures

The various items which composed the balance of payments for 1953 were as follows when compared with 1952:

Butter, plus £2,600,000; cheese, plus £4,600,000; meat, plus £10,000,000; wool, plus £13,200,000; other exports, minus £3,000,000; total exports, plus £27,400,000; other receipts, minus, £6.500,000; total receipts (rounded), plus £21,000,000. Payments compared with 1952 were:—private imports, minus £29,600,000; other payments (including Government imports), plus £1,000,000; total payments, minus £28,600,000.

The reports added that the improved terms of trade in 1953 were attributable to the more favourable trading conditions prevailing overseas. It was impossible to say whether this improvement would last.

Dealing with future prospects, the report said that rising individual incomes will result in a higher expenditure on imports. If a change in national income was caused by a rise in export receipts, additional overseas funds would be received with which to finance higher imports, but if the rise in national income was caused by an expanision in the rate of capital expenditure and no increase in export income was available, the balance of payments would be adversely affected.

“This points to the necessity for some machinery whereby the volume of imports may be adjusted,” the report said.