COSTS MUST FALL

Evening Post, Volume CX, Issue 112, 8 November 1930, Page 10

COSTS MUST FALL

AUSTRALIA'S NEED

TARIFF'S ARTIFICIAL AID

WORLD COMPETITION

In the course of his lucid and vigorous report upon the financial position of Australia, Sir Otto Niemeyer says: "So long as the sheltered trades of Australia insist on taking so large a share of the national dividend, and even an increasingly large proportion as the national dividend drops, the difficulties of the unsheltered export trades can only increase." Sir Otto (writes a special correspondent in the "Sydney Homing Herald") goes on to point out that the fall ■which has taken place in the general level of prices outside Australia means that primary producers abroad enjoy a competitive advantage over the Australian primary producer so long as the Australian costs of production arc not reduced, and that Australian secondary industry must face a fierce international competition growing in intensity as the price level falls, unless they in their turn are able to reduce their costs. "The secondary producer," he continues, "can attempt to meet this price situation by increased tariff protection, but this simply means that his protection is achieved at the cost of primary production. The primary producer can attempt to meet the situation by a further depreciation in the exchange. Increasing tariffs prejudice the primary producer. Rising exchange rates prejudice the whole fabric of national finance." Sir Otto points out that whilst Australia has so far been able to remain aside from the general trend of world conditions, she has now "to adjust herself to ■ a world economic situation more disadvantageous to herself than in the last decade. . . . There is considerable reason to fear," he adds, "that the prices of those particular products in which Australia as an exporter is primarily interested will fall •more rapidly than the general price level. "MUST EMERGE." "Australia," he insists, "cannot wish to remain for ever under a regime of emergency tariffs and rationed exchange. She has to emerge from that position and to show signs of progressing towards that emergence. To achieve this end she depends inevitably to a large extent on the primary producer, and the power of the primary producer selling in t'he world market to assist depends largely on the question of his costs, and those in turn depend very largely ou general costs in Australia, which govern what he has to pay for his supplies and services." These excerpts from Sir Otto Niemeyer's report are crucial. They restate an argument from the logical force of which there is no escape. That argument should be quite familiar to Australians, for it was embodied in the report on the Australian tariff prepared two years ago for Mr. Bruce by a committee of our leading economists, and it was very clearly stated from the wider view of world economies in the report of the World Economic Conference held in Geneva in 1927. Unfortunately, reports the general tenor of which conflicts with the policies of powerful vested interests are apt to be ignored. Selfishness allied with power is able, for' a time at any rate, to disregard logic. The two reports referred to have been shelved, and have not, so far, been allowed to exercise any influence whatever upon Australian public oninion. SELFISHNESS. Since, however, it is clear, reading between the lines of his report, that Sir Otto Niemeyer feels that selfishness allied with power has largely contributed towards landing this country in its present financial impasse, it is well worth while to recall in brief summary the main conclusions of two reports which must certainly exercise considerable influence in the shaping of our fiscal and industrial policies in the near future. Let us begin' with the report on the Australian tariff furnished to Mr. Bruce by such eminent economists as Professors Brigden and Copland, Mr. L. F. Giblin, and Mr. C. H. Wickens. In the Summary of Conclusions on the Effects of the Tariff, these gentlemen declare that "the principal effect on production and employment has been to divert them from export industries to protected industries. Taking Government assistance into account, costs of production in the export industries are raised 9 per cent by protection. The tariff falls with the greatest weight on the export industries. The value of their land and fixed capital is reduced, and the expansion of their production is retarded. They are limited to the use of land which can carry the eosts imposed. The States which naturally depend more than others upon the export industries feel the burden, not only upon their individuals, but upon the State finances." In view of Sir Otto Niemeyer's figures showing the fall in the prices of wool and wheat, and the unsatisfactory increase of per capita production in Australia, as compared with other countries, together with his warning that "the fortunes of the whole are the fortunes of the parts, and the failure of any of the parts will be the failure of the whole," it seems evident that the conclusions of Mr. Bruce Js committee deserve far more respectful consideration than they have so far received. If, as Sir Otto Niemeyer declares, Australia "depends inevitably to a large extent on the primary producer, "then too much attention cannot be given to the statement of Mr. Bruce's committee, in page 23 of their report, that "tariff protection is normally the protection of higher prices, and these higher prices are made necessary by the higher local costs of production." The whole burden of Sir Otto Niemeyer's advice to this country is that botli prices and costs in Australia have got to fall. WORLD ECONOMISTS. Let us now turn our attention to the much maligned and wholly ignored report of the World Economic Conference, which sat in Geneva in 1927. Since Sir Otto Niemeyer tells us that the time has come when Australia must adjust herself to world economic conditions, we can no longer affect to disregard the considered views of world economists upon matters which affect us in common with the rest of civilised mankind. This very detailed and illuminating report points out that agriculture is the occupaton of the majority of the workers of the world; that its products represent in value the greater part of human labour; and that the exchange of its products against industrial products forms the basis of world trade. The quantity of foodstuffs and raw materials produced is a factor which determines the limit of industrial development. The inter-dependence existing between the nations is no loss close between the main classes of occupations —agriculture, industry, and commerce —and it would bo vain to hope that one class could enjoy lastiug'prospcrity independently of the others. Economic depression in agriculture is due to the disequilibrium between the prices of agricultural and manufactured products, to the difficulty of obtaining agricultural credits, and to heavy fiscal

charges, diminishing the purchasing power of agriculturists. This has reacted ou the industrinl situation, contributing to unemployment and reducing the outlet for agricultural products. "Unless practical measures are taken," the report s.-iirl, "to restore tho price equilibrium, it is to be feared that sooner or later there will be » diminution in agricultural production detrimental fo the welfare of mankind. "