ECONOMIC FAULT-LINE OF TWO PRICE LEVELS

Dominion, Volume 31, Issue 154, 26 March 1938, Page 7 (Supplement)

ECONOMIC FAULT-LINE OF TWO PRICE LEVELS

A grave danger to the economy of New Zealand is what might well be termed “an economic fault-line*” a fault-line that threatens to disrupt the economic foundations of our country. This comes about by the existence of two price-levels. One, based naturally upon the world market, determines the returns for our great primary industries. The other, which determines the costs to be met by these same industries, as all others in the Dominion, is a local or internal price-level, determined artificially and apparently with insuflicient reference to the basic or export one. A sound position obtains only when the two are in conformity. At present they most definitely are not in conformity. To some extent this causes stress to many of the Dominion’s economic activities, even upon those engaged in manufacture for the local market —witness the recent tariff increases. In their case, however, protection was further resorted to and so was “the blast tempered.” The full, compelling force of complications arising from an uneven duality of price-levels falls upon exporting industries, which in New Zealand mean but one group, the primary producers. They are in that position where there can be no passing on of costs. The duality of price-level has slowly evolved over the past 20 years, and" it cannot be considered as something entirely new. Reasonably good prices and the increasing efficiency of primary production did, during the years to 1931, enable our farming industries to enjoy a reasonable measure of prosperity. Then came the depression, a crisis so severe that the Dominion’s whole economy was almost disrupted. During the period of Improving returns the farmer had a very natural feeling of well-being. Over the past 12 months, however, this feeling has been replaced by one of unrest, antagonism, and deep concern. The upward price movement ceased - for most products and, foi a majority actual declines in value were witnessed. Concurrent with these changes in the export or world price-levels, there was a startling rise in the internal costs-level. Costs of goods, services, wages, and taxation rose to unprecedented heights in numerous cases, and overall were quite up to boom-period rates. The economic fault-line now so dangerously widened and still widening, has now been expanded from a minor to a major problem. To disturb the internal economy so built up presents extreme difficulties. An immediate goal to be aimed for would be stabilisation of the present situation, to prevent it from becoming worse. Then the attempt should be made, coolly but determinedly, gradually to restore an eve# relationship between the export price level and the internal costs level. As a fundamental need, the soundness of that aim cannot be questioned. One point that must be realised by the primary producers is this, that much missionary work will be required among other sections of the community, before adjustment can be brought about. So many hundrels of thousands of fellow- citizens, non-farmers, do not yet even realise that a fault-line exists. The ever-increasing cost of living and ever-increasing taxation burden are, however, bringing realisation that all is not as it should, be. A hearing will now be given, where none would have been had a year ago.