COSTS AND PRICES

Dominion, Volume 29, Issue 195, 15 May 1936, Page 10

COSTS AND PRICES

The Prime Minister says it will be no use increasing wages and salaries if the workers are to be called upon to pay more for the goods they need as part of their everyday economy. The Government, he says, aims at increased buying power, and. that cannot be achieved if costs rise proportionately at the same time. Hence it may be “necessary” to invoke the powers of the Board of Trade Act to safeguard the position. If Mr. Savage declines to admit — and he says so—that the talk of increased costs as a result of legislation is justified, then it is plain that he does not understand how a business is run. Against the revenue of a business are various charges—wages and salaries, administrative expenses, replenishments of plant or fittings due to depreciation, taxation, dividends, appropriations to reserves, and so on. In budgeting ahead, estimated revenue and expenditure are based upon certain conditions, such as wages rates, hours of work, overtime rates, and taxation. If these conditions are altered, it is obvious that corresponding adjustments must be made in order that equilibrium may be maintained,'all charges met, loss avoided, and provision made for expansion, which means progress. It follows therefore that prices must have a proportionate relationship to costs. If it costs sixpence to produce an article that is sold for .sevenpence, and the cost of production rises to eightpence, then clearly the sel’ing price must be raised too. To avoid loss, followed by stagnation and possible bankruptcy, the equilibrium of cost and price must be restored. Somebody must pay. In the routine order of business, equilibrium is restored by raising the price. The purchaser pays. The Prime Minister surely must realise that such drastic changes in the conditions under which business is to be conducted in the future —as a result of the Government’s legislation—must necessarily involve higher prices; otherwise business will be crippled. His statement to-day implies that, if costs rise, prices should remain as they are. Does he not see what that would mean to the many thousands of workers who depend on industry for their livelihood?