Mr Walsh On “Serious Decline” In Economy

Press, Volume C, Issue 29444, 21 February 1961, Page 3

Mr Walsh On “Serious Decline” In Economy

(Aiew Zealand Press Association) WELLINGTON, February 20. Failing immediate action by the Government, an uncontrollable position would arise in New Zealand of a lot of money in circulation with little to buy, the president of the Federation of Labour (Mr F. P. Walsh) said in a statement today.

“Tomorrow I will be addressing a meeting of the national council of the Federation,” said Mr Walsh. “I propose to place before it the facts of our country’s state of economic health.

“Tonight the Prime Minister will be making a statement of the position as he sees it. It is to be hoped he will also give some indication of the action he intends to take in connexion with our national finances and overseas trade.

“We would also be interested to know when his Government intends to start governing, for the position has deteriorated seriously since he took office about three months ago. “Each day it becomes more serious, and unless some measures are taken to cut down on trading bank overdrafts and advances by the Reserve Bank to the Government and primary produce marketing authorities the position will become quite uncontrollable. Main Paints “The main points that I will be covering tomorrow are the fall in export prices; the effect of this fall on the terms oi trade; the added effect of excessive importing; the serious run down in our overseas funds; the deficit in the Government accounts: and the effect which all this is likely to have on employment and earnings. “Butter is . fetching £55 a ton less overseas than is being paid to the farmers in the guaranteed price Lamb prices are down, and are still declining. Wool price started the season 11 per cent, below last season “We spent £49.8m more on imports in 1960 than we did in 1959, most of the extra

money being spent at the latter half of 1960. “Nothing has been done to check this drain on our reserves, although it has been emphasised by the fact that lately ships have doublebanked at the wharves to unload their cargoes. ■ State of Funds “Mr Nash made a forecast that our overseas funds would not fall below £Bom. The Treasury and the Reserve Bank estimated £7O to £7sm, but advised the, Prime Minister to put the ring around £7sm. I estimated they would drop to under £som The latest figure published by the Reserve Bank was £52.1m on February 8. and this is still declining. It may, as I forecast, drop below £som. “The amount of money in circulation increased by £som in 1960 to £395m. Government indebtedness to the Reserve Bank rose from £93.4m to £118.6m and credit issued by the trading banks rose from £ 161.7 m to £194 6m “Trading banks advances now exceed £2oom, and, taking into account the amount which will be needed to cover income tax and payments for imports, it can be expected that they will rise to £2SOm at the end of March, making a handsome profit for the banks at no added cost. “Advances to the dairy farmers for marketing their produce are now £3sm (at 1 per cent interest) and will rise to at least £som.” Effect on Prices Mr Walsh said the inflationary effects of all this new money had been stifled by the flood of imported goods, but the imports could not be kept, up. and when they were sold New Zealand would be left with a lot of money and comparatively little to buy with it. That could only mean higher prices and a cut in the value of wa&es and savings. He said the workers were waiting to see what the change of Government and the overseas recession were going to mean to them. It would be helpful if Mr Holyoake vould give some information which would answer the question that would be asked at the federation council meeting concerning future Government actions and their effect on industry, wages, and employment, said Mr Walsh.