ONLY A SET-BACK.
CURRENT ECONOMIC CONDITIONS. "LAND VALUES MUST RECEDE." (From the "Mercantile Gazette.") On all sides we hear that trade is dull and that money is tight, and a variety of reasons aro assigned for the prevailing conditions.. ' Some maintain that New Zealand is experiencing the beginning of a depression, while others, with a vainglorious optimism, insist that there is absolutely nothing wrong. These, aro extreme views,' and the truth lies' midway between the two. The present conditions reveal a set-back from the previous .expansion rather than a beginning of wholesale'and continued depression. In a young country like New Zealand thero is inevitably a disposition to gc forward too quickly, and a set-back is a necessary; corrective, but-a set-back h n far different thing from a depression.' In 1834-96, New Zealand experienced a severe depression: thero were hundreds of unemployed in all tho centres, and soup-kitchens were the order of the day. But thero is no indication of a repetition of that experience. AVe are suffering from a .-trade set-back, due primarily to the decline in the value of wool, hides, skins, tallow, and a few other products, but this set-back would be of .no consequence if wo wero in a position to regulate imports as promptly as somo other countries. Our traders aro in 'tho unfortunate position of being forced to placo their orders six months in advance, conse-, quently they are unable to regulate imports quite as quickly, as'-'those more' favourablycircumstanced as regards seurces of' siipP I TThe lessened purchasing power of the community, because of the decreased income received from oversea exports of .produce, has brought about a shrinkage in trade, and this has been emphasised -because of the pressing necessity to liquidate cxccss- stocks. Traders, being unablo to: realise as quickly as they would like,' afo' inclined- to take a pessimistic view of the situation. Many of them have been forced; to seek increased bank accommodation, and this pressure on tho banks has compelled the latter to raise their interest-rates, and because of that they have-been blamed for causing a" tightness in money. Then, again, tho wholesale merchants havo found it imperative to exorciso greater caution in their dealings with retailers, and they also-are blamed for contributing to- the stringency. Tho banks havo been rr.ost liberal with their advances, aiid havo lent- out do,( the 'full ; extent of 'their resources. " .'Borrowers on the security of real estate havo had the greatest difficulty in obtaining loans and th'is is easily understood.' The banks aro consistently declining such business, and. rightly so ; '.for, from tho point of view of banking,' it is the worst class of business, and cxperienco has proved that it is a dangerous element in banking. The usual lending institutions that look for mortgage business are not flush of funds, deposits aro not readily procurable, because the pepplo havo not the surplus funds to deposit. The demand for loans on mortgage is far in excess of the supply, and this demand arises because of the great speculation that has been going on in land all over the Dominion. Many people are nursing land speculations, and it will be years before they can realise. Tho one prominent ■'feature' of tlie-'"situa'tion is' ,the fact that land values must recede. Tho inflation of the past , live or six years must be eliminated, but the .process of elimination will be slow, for it will bo resisted at every step. Those who are lending on real estato insist upon a very wide margin, and in course of time values must right themselves. From' qur point of view there is no depression, but a temporary set-baek. ' As soon as', traders realise on their excess imports, business will settle down to its proper level. - Imports for the nest twelve months .will.be on. a smaller scale, and gradually, but surely; things-will work round to more stable conditions. It would be unwise to jump to the conclusion that the set-back we are now experiencing will disappear in a fow weeks or months, it is more likely to last another twelve months, and it is just- probable that tho situation will be worse before it is better. Nothing' however, is to be gained by indulging in pessimism.' It wouldybe better to cultivate a sober recognition of the actual conditions and to encourage the people to exercise economy and 'thrift. The extravagant living of the past cannot be continued; expenditure in this direction must bo curtailed, and economy of this nature will be for tho good, of the nation. The sooner tho position' is faced the Booner may we expect to see a revival.
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Bibliographic details
Dominion, Volume 2, Issue 317, 2 October 1908, Page 4
Word Count
769ONLY A SET-BACK. Dominion, Volume 2, Issue 317, 2 October 1908, Page 4
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