THE POSITION OF NEW ZEALAND

Dominion, Volume 2, Issue 314, 29 September 1908, Page 8

THE POSITION OF NEW ZEALAND

AN AUSTRALIAN OPINION. After a run of almost unexampled prosperity (says the "Sydney Morning Herald" editorially) New Zealand will probably experience no little . discomfort in - accommodating herself to the. comparatijjeJj straitened circumstances in/which' she' now unfortunately finds herself. When any country arrives at tho stage of having to .get more out of its local banks than its people put into those banks in the shape of deposits, it cannot bo said to be in' a very healthy condition. And this, as has been shown-in .our financial columns, is'the case with the Dominion now, the banks., having /advanced upwards of £1,000,000 in excess of the deposits held, and as this apparently represents about the limit, ..there .must, be an all-round slowing down of the pace. New Zealand, however,' is only .suffering from,the recoil which seems to' be the Nemesis, of unusual prosperity in every country. .That it was.staved off for so-long in the Dominion's case was due to a singular succession of fortuitous circumstances. The fat times began with the South African war, when'the country was able to. take the fullest advantage of the abnormal demand for fodder, and.also for meats. The ..war was followed by . the Australian drought, during which : large quantities of New Zealand produce found a .market here at extremely remunerative prices. Under ordinary circumstances a rebound might, have been anticipated when that extraordinary demand was satisfied.. But fortune, again favoured New Zealand, and. this,time along with Australia, for the. world's demands suddenly began to strengthen, and prices for the staples,we had to sell touched,le.vels such as had not been reached for over half a century. ; But . although New Zealand participated equally with' the Commonwealth in the high prices which were receivable up to the time of the general collapse, and although : she had the accumulations to her-credit of. tho profitable years before, when the Commonwealth was prostrate, the turn of the tide is obviously affecting her adversely more quickly and seriously than it does this country. This is strikingly apparent, even if wo confine the comparison to this State, and ap-. ply the' same banking test. At' first sight it may seem-a little hard to understand why this should be so. Although New Zealand is hit severely by the fall in wool—wool being with her, as'with us, the principal staple— her butter, mutton and 'lamb, two great items of export, have not fallen very much in price, notwithstanding the world depression. So that really New Zealand should not be in so bad a way as her banking position may 'suggest. Nor is she. What is actually the matter is an artificial deadlock resulting from . the inflation of land values. The wave of prosperity carried selling values very much -beyond the permanent producing values, and the extraordinary prices for wool and some other commodities havo receded; those who bought land on the basis of the greater return are left financially to readjust. Another factor in the great rise in Dominion land values which should, however, be mentioned, was the presence in the market of the Government a,s a largo buyer for subdivision purposes. Several millions of pounds of good monoy was expended on land purchases, until , the process became so expensive that it had to be discontinued. In New South Wales much'the same have been,' and, nv a measure, still are, operative, and with a not dissimilar effect. Only in a few of our rural districts are wo entitled to say that values havo reached a point beyond which it is not , safe for them to go; but we know that the way the valuo of. country lands generally has advanced within the past three years or so is astonishing. Broadly speaking, when country lands are marketable-at prices beyond what they can bo made to earn, trouble is not far off. ..•.