AN UNFORTUNATE PROPOSAL

Evening Post, Volume CX, Issue 134, 4 December 1930, Page 8

AN UNFORTUNATE PROPOSAL

It is regrettable that die members of the dairy industry deputation which yesterday asked the Government to introduce a moratorium did not consider the proposal more thoroughly before making it. The deputation was not in agreement upon the suggestion, and, indeed, the objections to the proposal were quite plainly and forcefully stated by one member. Yet the request was made, and the suggestion alone is liable to have an adverse effect on the industry. As Sir Apirana Ngata stated, it is possible that other mortgages will be called up in anticipation of a moratorium. The mere mention of a moratorium makes lenders nervous, and the broadcasting of reports of the plight of the industry must tend to lessen confidence. At a time like this, the measures that are needed are such as will strengthen confidence and allay anxiety. A declaration that a state of emergency exists, warranting a moratorium, would have quite the opposite effect. For years attention has been given to means of restoring the confidence of investors in land as security for loans. Rural credit schemes have been established, and Government lending operations have been extended. A moratorium now would result in a setback from which the land would be long in recovering. ' If the supporters of the moratorium had considered this and had considered also the doubtful benefit given by a moratorium they would not have asked for it. One member of the deputation stated that it was the decided opinion of many that the Government should be asked to pass legislation to bring about a moratorium or to effect a general lowering of interest rates. This would convey the idea that a moratorium and a reduction of interest are somehow related. They are not. As Mr. Hunt pointed out, the war-lime moratorium protected only the mortgagor who paid his interest. It did not protect the man whovdid not pay. Nor did it reduce the amount of interest payable, though it limited the right of the mortgagee to demand a higher rate of interest. Before the moratorium was finally raised there were many complaints of abuse of its provisions. It was claimed that some mortgagors, who, receiving war-time prices for their produce, were well able to discharge their mortgages,

took advantage of the shelter of the moratorium, and used the money due to the mortgagee in other investments —or speculations. We do not want to have this experience repeated. To guard against a repetition there would have to he numerous provisions limiting application of any protection. In fact each case would have to he dealt with on its individual merits (as was done with the war-time legislation before it was finally repealed). The Government certainly could not grant a blanket protection which sheltered all borrowers and took no account of the circumstances of-the lenders. It appears to be necessary to remind those who favour a moratorium that lenders also have their difficulties. It has become customary in New Zealand to regard the mortgagor as the person labouring under great difficulties, and the mortgagee as one who has no anxieties and may reasonably be called upon to make concessions. This is far from being the general truth. Most sections of the community are now feeling the pinch to a greater or less extent, and many of those who have reserves invested in mortgages will be serious embarrassed if these reserves are threatened. The Government certainly cannot adopt the view that all investors are fortunate and able to make sacrifices. That is why legislative interference with the rate of interest would be inequitable, besides having the injurious effect of stopping the fIoAV of money for investment. While advancing these arguments as the strongest reasons against any hasty and ill-considered tampering with loans and securities, we are fully sensible of the difficulties confronting primary producers. Every assistance that can be afforded them should be given, but in devising means care must be taken that the remedy will not prove worse than the ill it is designed to cure. The safest and surest measure is that submitted by Mr. Hunt —a lead in reducing the costs of production. But to be effective jhe economy must be real. Mere transference of a burden of taxation from one class to another will not serve. If the Government will give a lead in economy, the effects will be cumulative. It is to assure that the full benefits of economy may reach those in most need of relief that we have urged that a conference of all interests should be held. Hasty slashing at expenditure is not desirable, but care exercised in all directions must prove beneficial to all. The need of the moment is co-operation in adjusting costs to a lower level of prices. At present the primary producer is hardest hit by a price adjustment that is far from equal in its incidence. To afford him relief, the general community must help in reducing costs.