AUSTERITY EXPECTED

Press, Volume CI, Issue 29858, 26 June 1962, Page 11

AUSTERITY EXPECTED

(N.Z.P A.-Reuter—Copyright) OTTAWA, June 25. Canadians are in for a period of unfamiliar austerity as a result of emergency measures to stop a heavy drain of investment capital. Non-essential imports will cost more, borrowing will be

difficult and expensive, and Government spending will be out as a result of decisions announced yesterday by the Prime Minister (Mr Diefenbaker). Mr Diefenbaker, who was returned to office without an over-all majority in Parliament in a general election last Monday, revealed in his statement that Canada’s reserves of gold and American dollars had dwindled to 1100 million dollars by the week-end

This was a loss of nearly 400 million dollars in three weeks. Heavy losses of foreign exchange earlier in the year had forced devaluation of the Canadian dollar at the beginning of May. Money Moved Financial experts in Ottawa said the crisis was due to Canada’s overspending on international accounts for nearly 10 years. During most of that period, foreign investment had covered Canada's international trading deficit. In recent months foreign and Canadian investors alike have been moving their money elsewhere. “Canada's immediate difficulties have been precipitated by a drying-up of the net capital inflow and very recently by a net capital outflow,’’ Mr Diefenbaker said yesterday.

Some commentators said that a series of high budgetary deficits incurred by the Diefenbaker Government had aggravated the situation Since the Conservatives won power in 1957. the Canadian Budget has not been balanced in any single year. The indecisive result of last week’s general election is not expected to increase the confidence of foreign investors. Results of the armed services’ vote released yesterday took another two seats away from the Conservatives and gave them to the Liberals. Mr Diefenbaker now has a margin of 17 seats in Parliament over the Liberals; but the difference between the two parties in popular vote is only a little over 10,000 in a poll of about 7,500,000. The expectation is that the Liberals will support . the Government through the present financial emergency; but that another general election will have to be held in 1963 at the latest. Liberal Comment The Liberal leader (Mr Lester Pearson) commented: "The Prime Minister's statement now recognises that the country is facing serious financial problems. “The proposals now made

public and any others thait may later be made by the Government will be considered by the Liberal Party solely from the point of view of what is best in the public interest."

The National leader of the New Democratic Party (Mr T. C. Douglas) said: “No-one doubts the need for farreaching measures at this time. The real tragedy is that ■hey have been so long delayed and that the Government has persisted in adopting an ostrich-like approach to a crisis that has been apparent for some considerable time." In Washington, the U.S Treasury Department expressed satisfaction with what it said was the Canadian Government's determination to maintain the value of its dollar at its current level.

Slippers Cost Life.—A 71-year-old man got his wife to safety when fire broke out at their home in Eastham yesterday, then went back for his slippers and was burned to death.—Eastham (Cheshire). June 25.