Budget’s Impact On The Farmer

Press, Volume XCVII, Issue 28630, 5 July 1958, Page 9

Budget’s Impact On The Farmer

Specially written for this page by H. E. Garrett, of Canterbury Agricultural College.)

In this Budget year of 1958-59 i the country finds itself in a difficult position. There is a prospect of a fall in overseas revenue of at least £som, for next year. In the dairy industry low prices have persisted for some time. The surplus in the Dairy Industry Account amounting to £l7m odd two years ago has been converted into a loss estimated by the Minister of Finance to approximate £l2m at the end of the current selling season. This indicates the surprisingly high level of subsidisation of dairy farmers' incomes to the tune of £29m odd over about two years, or about £360 a dairy farmer a year. The present situation is that the marketing organisation has been paying out to farmers on the basis of a guaranteed price at about 3s per lb butterfat while receiving something below 2s per lb from overseas sales. Much interest has centred on what level is to be fixed for the guaranteed price for the coming season. To date no figure has been announced, but the Minister of Finance indicated that a sum of £sm has been allocated to the Dairy Commission as a loan for the coming year to tide the industry over a difficult period. Reading between the lines, and assuming prices in Britain do improve slightly as a result of anti-dumping legislation following the visit to England by the Minister of Agriculture, and

I the obvious reason that it has been a good selling poiht, and so was somewhat inflationary. Nothing was gained by the farmer in the long run, but the legislation did assist new farmers in their struggle to establish themselves financially by postponing a portion of their income tax for a few years. The decision to cease the special depreciation allowance on housing for workers is unfortunate. The amount of money gained in extra income tax will be very small, and the provision was promoting good housing and so good workers and higher production. This brings us to thoughts of over-all production and the situation generally. Apart from some references to new markets and overseas trade commissions in parts of Asia and the Pacific and the local increase in the price of wheat, the Minister gave no indication that he was greatly impressed by possibilities of farm production closing the gap of 20 to 25 per cent, between export receipts and overseas payments. The solution in the minds of the Government appeared to be one of reducing imports by licensing, raising loans to cover any remaining gaps, while at the same time proceeding with a full programme of Government expenditure in the name of a full-employment policy financed by an appreciable , increase in taxation.

assuming that the guaranteed price will be adjusted to this level plus < £sm, the guaranteed price for 1 the coming season appears likely i to be in the region of 2s 2d to 2s 3d. This is a drop of about 25 per cent, on last year's price and there is no doubt that a fall of this dimension will be felt really seriously by the dairy farmers. Much Different The situation with sheep farmers differs a good deal. Wool prices ; held up were well until the final l series of sales. In general lamb > sales have been fairly satisfactory. . although for a time low prices ! at Smithfield caused schedule falls . of considerable magnitude. Smithfield and the level of the lamb ' schedules have since recovered" i fairly well. The present appear- ' ance of the meat and wool marI kets suggests that a fall of 20 to 25 per cent, in over-all gross receipts of sheep farmers may well ' prevail in 1958-59. The bright ’ spot is the beef market and in * particular certain classes of beef. ’ Apart from about £2m worth of

A Danger The danger from this situation would appear to be a rising internal price level. Mr Nordmeyer’s remarks on bank overdrafts and inflationary pressures show that he is well aware of this situation, although his hints of different and more stringent control of bank overdrafts make dismal reading to farmers faced with a 25 per cent, drop in revenue. The special danger to farmers arises if costs do advance to any extent because they are the only members of the community selling their products outside the New Zealand system. It does not take a great brain to appreciate the fact that if prices overseas remain stable and internal costs increase, farmers will be a great deal worse off. No doubt both the Minister • of Finance and the leaders in the farmers’ organisations will be watching this situation closely. Whether or not anything effective can be done about the situation inside the existing framework re-

mains to be seen. It seems most improbable that farmers can increase output by more than 3 or 4 per cent, a year on a national level, although it may be done on a few individual farms. Faced with a 20 to 25 per cent, fall in revenue the average farmer will reduce expenditure for the year 1958-59. There seems a strong possibility that lime and fertilisers will figure prominently among the items of reduced expenditure. While there is an appreciable carry-over effect in both lime and fertiliser it would not surprise to see the national output of livestock products remain static instead of increasing by the customary 2 per cent, a year. A fall in output could even result, especially if the situation continues for several years. :

purchases the whole of the reserve funds of the wool and meat industries—some £72m—remain intact. The far-reaching decisions regarding the floor prices of meat and wool for the coming year have yet to be made but sheep farmers can take comfort from the fact that some £1 15s a sheep remains unused in the reserve funds. Against this dairy farmers are likely to finish the coming season with a deficit of some £8 10s a milking cow. It is within this framework, as far as the farming community is concerned, that Mr Nordmeyer has made out his Budget. As far as the general items of taxation are concerned —the cigarettes and

tobacco, the beer and spirits, the income and petrol taxes —the farmer can do his share of complaining. In a sense the petrol tax does affect farmers and farm workers more than other sections of the community. This applies specially io those who live in the more remote areas. The tax on petrol will also have ' important economic affects on agriculture, even though it does not apply to farm tractors and similar vehicles. There can be no • doubt that cartage costs must go I up and so increase costs over a • number of items to farmers and > particularly to those farming land I remote from main centres. In the L circumstances with the gross rei ceipts to farmers likely to fall t 20 to 25 per cent, and net re- / turns much more, increases in s farming costs of this kind are all the more serious. i The legislation allowing special i depreciation on _ new farm machinery has been suspended for