THE PRIME MINISTER

Ellesmere Guardian, Volume LVI, Issue 89, 26 November 1935, Page 5

THE PRIME MINISTER

POLITICAL ADDRESS AT LEESTON.

GOVERNMENT'S ACHIEVEMENT

DESCRIBED

GUIDING THE STATE THROUGH

THE DEPRESSION

The nature of the task which the Government faced in 1931, the problems grappled with and overcome in guiding the State during the period of the depression from out of the shadow into the sunshine, were described by the Rt. Hon. G. W. Forbes, Prime Minister, in the course of a political address which he delivered at the Leeston Town Hall yesterday afternoon. There was a very large attendance, the hall being full, many women being present. The Prime Minister, who was escorted to the stage by the chairman of the Ellesmere County Council (Mr J. Heslop), received a hearty reception. There were associated with him on the platform, among others, the Hon. Sir R. Heaton Rhodes, M.L.C., Mr James Carr, the National candidate for the Mid-Canterbury seat, Mrs Forbes, to whom Mrs F. Rowell presented a bouquet. Mr Heslop presided.

Mr Forbes said that the' end of the election campaign was approaching. He had had the opportunity of speaking in a good many parts of New Zealand and he had felt the greatest encouragement so far as the position of the Government was concerned. He had just finished a tour of the southern part of the South Island, where he had found the greatest appreciation of all that the Government had done on behalf of the people to overcome the effects of the depression. While there were people who said that the various parties were likely to nave so many seats, he said that they were likely to be disappointed. The people were now seriously studying tne position, sitting down and considering carefully all that depended on the welfare and progress of New Zealand. When people thought carefully of what the Government had done for the welfare of the people and considered the alternatives offered, if they considered carefully the position they would come to the conclusion that the Government had followed the only right and logical course. It was of the greatest importance that there should be a government in office which would inspire the confidence of the citizens. Loss of confidence would have disastrous effects ort the pro- 3 gress of the nation, in business, manufacturing, or in any of the other activities which do so much towards employment. The position was much better in Great Britain and other dominions of the Empire than in any other part of the world. THE TASK TO BE FACED. In the 1931 elections, the Government asked for the support of the people of this country to meet a position of appalling seriousness, and one which had never before been experienced in this country. The position of the public accounts was most serious, the deficit being estimated at between £8,000,000 and £9,000,000. No New Zealand Government had ever had to face such a problemrevenue falling down rapidly and with heavy fixed charges to meet. The Government, on the eve of the election, did not know what measures would be necessary to deal with the situation, how drastic they would be or what it would be necessary to face in the future. So it asked for a free hand to deal with this great problem. It was returned with a substantial majority and then it set to work to tackle the big job to the best of its ability. It cut d^wn all free expenditure, made reductions in salaries and wages, and did what it could to reduce expenditure. The Government recognised that the people were feeling the effects of the depression and that before it could ask them to submit to further taxation it was up to the Government to reduce its costs as much as possible. A thorough examination of the accounts was made and reductions totalling nearly £10,000,000 were made. To the public servants the Government said that it was necessary to cut their salaries and wages, that they should bear their part of the burden if they wished their monthly pay cheques to be met, and that later on when the economic position and the finances improved, the cuts would be restored. The Government last year had been able to restore 5 per cent., and this year 11 per cent., and it was hoped that if the buoyancy of the revenue continued, to wipe the slate clean as at the end of the year. So effective were the Government's economies that the expected deficit of between eight and nine millions was reduced to £1,600,000. The Government called largely upon its resources to do soi but these reserves were made from surpluses in times

of plenty and it was right that they should be used in this emergency, and not call upon the citizens to contribute more than absolutely necessary.

An enquiry was also made into the economic position of the people, the Government calling into service a committee of economists and the assistance of Professor Copeland. This committee found that prices for primary produce had fallen by 40 per cent, and other prices up to 15

per cent

BRIDGING THE GAP,

The Government had therefore to endeavour to bridge the gap between prices and the cost of production. It endeavoured to lower costs by reducing rents 20 per cent, and interest 20 I per cent. It converted an internal loan from 5 per cent, to 4 per cent, and also enabled local bodies to convert their loans to 4J per cent. There was bound to be a certain amount of complaint and criticism over these reductions, but it was only right that all classes of the community should contribute their share, and" the Go- | vernment felt that it was doing the | right thing in the interests of the country. That its efforts resulted in | a restoration of confidence was shown in the fact that, even though the interest on Government bonds had been reduced, the market value of the securities steadily increased until in July of this year 4 per cent, bonds were being sold at £107. This i showed the great part which confidence " played in financial matters. The Government was determined, if it was satisfied that its measures would be for the welfare of the. country, to act no matter how unpopular it might become, realising that sound and stable finance was of more value1 than popularity. RIVAL PARTIES. It was decided in 1931 to form a National Government. The Labour Party was invited to join, but refused except on condition that its programme was adopted. This the Prime Minister refused, pointing out that it was not so much a question of policies, but that in face of the critical position of the country and that united action was necessary to do what was required, it would be better to drop parties and platforms until the country was on firm ground again. The Coalition was formed with the Reform Party, and Labour since then continually criticised the Government and had never tried to help.

As the farmers were feeling the depression most of all, it naturally followed that the Government should endeavour to help them by bringing down the costs of production. Although interest rates had been reduced and relief given in other directions, there still remained a big gap ,to bridge. It had been charged against the Government that it was a farmers' government, that the majority of members of Cabinet were farmers. This last was true, but in addition they had a long experience in public affairs. The Government realised that something must be done to give the farmers relief, for the farming industry was the foundation of New Zealand's industrial life and upon the condition of that industry depended that of all others. Prices for farmers' produce had fallen by 40 per cent, and other prices by 15 per cent. The Mortgagors' Relief Act gave relief to some of the hardI pressed farmers. Applications to the | number of 11,250 were considered and adjustments made to the value of £2,800,000. Had not something been done there would have been wholesale bankruptcies and the Government was determined to prevent this, for it would have had serious effects by reducing the volume of production, while the repercussions in other classes of the community, the loss of confidence, would have been dis- j astrous. RATE OF EXCHANGE. Another way in which the Government decided to help was in raising the rate of exchange. Professor Copeland and other economists pointed out that further cuts in interest and salaries and wages would help to destroy confidence and would have serious consequences. A more effective, better and quicker way of achieving what was wanted was to raise the level of prices, which was then below that of 1914. Tt. could be lifted up by 15 per cent, by raising the rate of exchange. The proposal was submitted to Parliament, but before being adopted enquiries were made in Australia, where the rate was then 25 per cent, against New Zealand's 10 per cent. It was found that the increase had been beneficial to the country, had enabled the farming industry to carry on, and all sections of the community benefited. It was recognised that there were disadvantages, but there was no complaint from the people, who recognised that the move had been helpful and had resulted in better prices. Mr Forbes said that the Government

knew that in the long run prices would adjust themselves, but in the meantime serious consequences would ensue. The formation of the Democrat Party was to put the Government out of office because it had raised the rate of exchange. The party was formed by a section of importers who were not prepared to bear their share of the burden to assist the rest of the community. The Government was faced with the collapse of the farming industry if it did not act, and he was confident that the Government did the right and wise thing which saved the farmers from greater disaster. By doing so it had enabled them to have a little more money with which to pay off some of their accounts. The country tradespeople had loyally assisted the farmers. There was no question that the business men in the country towns and townships had felt the iepression very severely, yet they assisted the farming community all through, and he (Mr Forbes), on behalf of the Government, would thank them for the assistance they had given, which had played a big part in helping the farmers in their troubles. RESULTS OF POLICY. In explaining why the extra year had been added to the life of Parliament, Mr Forbes said that when the Government started out on its job it did not know what was before it or how long it would take to put its policy into effect. He said at the time that it might take longer than three years, and that the Government should have the time to finish its work. Last session some of the most important legislation was put through, and results were now beginning to be seen. From an estimated deficit of £10,000,000, Government finances had improved until last year there was a surplus of £1,500,000, which was a worth-while result. The Labour Party did nothing but criticise and put sand in the bearings. The results could only have been achieved by the solid support of the people. He saw all round the evidence of improving business and prices which had enabled a little of the leeway to be picked up. The Government's policy received its endorsement by the manner in which its conversion loan was over-subscribed on the London market, although interest rates had dropped from 5 per cent, to 3| per cent. This was the surest test of the Government's policy. Throughout the depression the Government had not increased the public debt, but had reduced it by £2,000,000. There was no other country in the world which could show such a splendid achievement. PLANS FOR THE FUTURE. The country was now getting out of the shadow into the sunshine. In a reference to unemployment, the Prime Minister said that when the Government took the number was normal, between 3000 and 4000. Then the numbers shot up later, but with the improvement in prices the total had gone down until now it was just on 40,000. He did not think that any other country in the world could show such a reduction. No country had solved the unemployment problem, but the results achieved in New Zealand were good. It was necessary to stimulate industry to enable the country to provide further avenues of employment. A careful examination of the country's resources was being made, such as gold and oil, while assistance had been given to kauri gum, steel and flax industries. The Government aimed to continue its policy of steady, progressive development; it did not say it would work miracles—it left that to the other parties—but wherever it sa.w that it could do something which would give a real benefit to the community it would endeavour to do so. It would also gradually deal with the functions of the State. These during the past four years had been more or less neglected, but they would be steadily brought up-to-date. The Government had in mind an overhaul of the education system, housing, also superannuation and national health service. If the Government could find some scheme which would confer the greatest benefits to the people without an undue burden, it would be done if at all possible. THE ALTERNATIVES. . Discussing the Labour Party's scheme for guaranteed prices, not only for primary products, but also for all other goods, wages and salaries, Mr Forbes characterised it as absurd, for it fixed the prices at a level irrespective of what were the world parities. The producer would get his price irrespective of quality, and this would not encourage high quality. The cost would be between £20,000,000 and £30,000,000 per annum, and he considered that the scheme would break down after the first payments had been made. The currency and credit proposals had not been adopted by any other country and everyone knew what disas-

trous results had happened in Germany over the note issue. The prospects were dangerous. The PrimeMinister also referred to the Labour speakers' complaint of insufficient publicity in the daily press, saying that previous to the election the Labour leader had been touring the country and his addresses had been well reported. On the other hand, it was impossible to obtain publicity in Labour's own newspaper of any views other than Labour. He also spoke regarding the position in New South Wales regarding savings under Labour's rule. In New Zealand the amount of savings in the Post Office Savings Bank had increased until it was now £50,000,000, the largest it had ever been. The New Zealand pound had more purchasing power than in 1931. In concluding, the Prime Minister pointed out that the Government's policy had resulted in a steady improvement in the country's finances which justified a continuation of the Government in office in order that it could continue its work of restoration in a sound, progressive way.

On the motion of Mr A. Anderson, seconded by Mr W. O. Rennie, a hearty vote of thanks was accorded to Mr Forbes. A vote of thanks was also passed to the chairman.