Shift In Distribution Of N.Z. National Income

Press, Volume XCIV, Issue 28160, 26 December 1956, Page 9

Shift In Distribution Of N.Z. National Income

A shift of the distribution of the national income of New Zealand in favour of wage and salary earners and against the farming interests is the most striking aspect of the national ecenomy over the last few years, says W. R., writing m the latest economic bulletin of the Canterbury Chamber of Commerce. “From 1951-52 onwards—when the wool boom had been absorbed in the economy—the share of salaries ana wages in the national total has continuously increased,” the article says. “Compared with the last year under the previous administration (1949-50) the share of wages and salaries in private income has risen by almost exactly 10 per cent. On the other hand, social security benefits—as percentages—have continued their downward movement.

“Taxation, hitting the bigger income brackets more than the smaller ones, tends to redistribute income in favour of the smaller incomes, i.e., wages and salaries. In 1946-47, wages before taxation were 49 per cent, oi private income, after taxation they were 53.1 per cent. That is, they improve their position by 8.3 per cent.

“By 1955-56 wages before taxation had risen to 53.2 per cent, of private income, and after taxation to 58.7 per cent. That is, progressive taxation raised the share of wages in 1955-56 by 10.3 per cent. In other words, the redistribution effect ot taxation is more pronounced under the present than under the previous administration.

“The policy of decontrol of prices and wages which went hand in hand with a maintenance of full employment under the present administration has led to a rapid rise in ‘takehome pay’ of workers. The pressure on consumption which was caused by this rise was taken up by large scale imports and the comparative stabilisation in the overseas price level during the last three years has led to a rise in the real share oi wages.

“The other side of the medal is that the policy of wage stabilisation and import controls in force under the previous administration led to an international payments position characterised by regular—if enforced —surpluses. The position since 1950-51 has been one of repeated severe drains on our foreign reserves. “The origins of national income in 1952-53 show that farming is still, from the point of view of income. New Zealand’s most important industry. While only about 17J per cent, of New Zealand’s working force works in farming, over 22 per cent of income accrues to that sector. “Incomes ascertained by regard to origin amounted to £689.5 million in 1952-53. The official estimates ol national income, on the other hand, give the total of all incomes as £656.2 million. The difference of £33.3 million is due to the fact that the official estimates are based on taxation returns, whereas the sector accounts are estimated by different means.

“The suspicion is that this £33.3 million is partly represented by the under-statements of taxpayers to the tax authorities. The statistician’s report subdivides these shortfalls as having arisen to the extent of £l2 million in primary industries, of £7.3 million in secondary industries and of £l4 million elsewhere.

“An account like the above gives important insights into the working or our economy. It has, for instance, frequently been said that the prosperity of our manufacturing industries is intimately connected with prosperity in the farming industries. Such a statement can now be quantitatively illustrated. Farming purchases from manufacturing industries amounted to £34.5 million in 1953-54, which is—if we exclude internal transactions—lo.B per cent, ol all sales by the manufacturing sector. This is for farm business purposes only. But if we add to this 22 per cent, of all household purchases (this being the proportion of farm incomes to all incomes) we can see that -New Zealand manufacturers do indeed require a prosperous farming industry for their own prosperity,” the article says.