Economic Difficulties Are Predicted By Mr Walsh

Press, Volume XCVI, Issue 28435, 15 November 1957, Page 12

Economic Difficulties Are Predicted By Mr Walsh

(New Zealand Press Association)

WELLINGTON. November 14. If New Zealand continued to spend her overseas funds as she hacL spent them recently she could soon face a balance-of-payments crisis, said the president of the Federation of Labour (Mr F. P. Walsh) today. Whatever government was elected at the end of | this month, would face serious difficulties. Mr Walsh said that the actions of the present Government indicated that either it did not realise this or it was deliberately concealing it. “A most significant aspect of the election campaign is the way in which the Prime Minister 'Mr Holyoake) is carefully avoiding any mention of the economic difficulties which New Zealand will shortly have to face,” said Mr Walsh. “New Zealand has been seriously overspending its overseas funds, and if present trends continue will soon be involved in a serious crisis over its balance of payments. “Squandering Policies” “It is a crisis that will reveal the squandering and partisan fin-! ancial policies of the Nationalist Government. “It will reveal the policy which has been followed of over-import-ing. particularly luxury goods, and also the policy of using Reserve Bank credit to cover up the real crisis which has overtaken the dairy industry. “The Monetary Commission said that we needed to have enough overseas funds in hand to meet six months’ imports,” Mr Walsh said. “At our present rate of expenditure—£24,ooo,ooo a month — this moans that we would need £150,000.000 in reserve, but we probably have less than half of that just now, and by the end of the year I estimate that we will be down to only £ 60.000,000—a reserve which would be gone in present trend continues. “Since the present Government t\yo months and a half if the has been in office, 1950-51 to 1 OSSST. our overseas transactions on current account have shown a deficit of £67.500.000. This means that the country has' spent £67.500,000 more than wc earned.

“Part of this deficit was made up by borrowing from overseas and the rest came out of our savings—the overseas reserves, “Last season the subsidy paid to dairy farmers on the produce of that season which had been sold amounted to £13,000,000, the money coming from the £28,000.000 which was in the Dairy Industry Reserve Account. This Season’s Subsidy “This season, if butter continues. as at present, to sell at a loss of £B2 a ton and cheese at a loss of £B4 a ton, it will be necessary to pay out another £18.500,000—£3,500.000 in excess of the amount in the reserve fund. Mr Walsh said. “If production of butterfat increases at its present rate of 11 per cent, the loss will be greater. It is a paradox that the more dairy production increases the more money will have to be drained out of the reserve funds. “Will Mr Holyoake take the extra millions from others in extra taxation or will he draw it from the Reserve Bank, which | had on October 23, 1957, already advanced £50,000.000 to the Government and nearly £25,000.000 to the dairy farmers’ marketing organisations? “It seems reasonable to suppose that the Government just docs not expect to be returned at the election, and intends to go out leaving the locker empty for the incoming government,” said Mr Walsh.