ECONOMIC PROBLEMS

Evening Post, Volume CXIII, Issue 26, 1 February 1932, Page 6

ECONOMIC PROBLEMS

CAUSES AND EFFECTS

INTERNATIONAL ASPECTS

POSITION OF NEW ZEALAND

Opportunity was taken by the chairman of the Equitable Building and' Investment Company (Sir Harold Beauchamp) at the annual meeting to-day to touch upon a few of tho economic problems of to-day. Having commented upon the company's business for the year, Sir Harold pointed to the "very serious economic conditions prevailing in the Dominion at the present time, and, indeed, throughout the wide world."

"Various causes have been held accountable for the slump," he said. "In 1030, and for a considerable period in 1931, gold has been held to be the chief cause, and we have been asked to believe that the shortage of gold, the maldistribution of that metal, and the scramble for it have been held blameworthy, but now eminent economists, bankers, and financiers have reduced the causes of the world slump to three salient factors: Reparations, war debts, and highprotection tariffs.

"Reparations and war debts are interrelated, the one hanging on the other. It is now generally admitted that Germany cannot continue to meet the huge reparations payments. She is on the vc-rge of bankruptcy. That country, principally out of money borrowed from the United States oi! America, England, and France, has already paid a thousand million sterling, and cannot pay much more. If Germany fail to pay reparations the debtor nations will be unable to discharge their debts to the United States, so that any relief given to Germany must be -followed by a reduction of wa.r debts. The adjustment of tariffs will follow as a consequence of the adjustment of reparations oci war debts. DOMINION'S INCOME. "These are problems that must be solved by the leading nations .of Europe, with the co-operation of the United States, but whatever is accomplished, we may be assured that it wiil be many years before we again, see our wool, butter, cheese, and frozen meat up to the level of tho 1928, or even 1929 prices—that is to say, we must make up our minds that our income from the sale of our produce overseas will not come up to tho level of past years, consequently we must adjust our expenditure to conform with tho reduced income." ._"'".. At this stage Sir Harold showed howNew Zealand export prices had fallen since 1915 from 1186 to 880 .in 1931, starting in 1914 with a unit of 1000. The peak, 1702, was reached in 1925, and thereafter prices receded steadily. In 1926 they fell to 1377, and in 1931 to 880. The figure given for 1931 was not official, but was based upon what he considered reliable information, and therefore it would not differ To any great extent from the figure for the whole year. : Nominal wages followed closely the ascension of export prices. Starting again .with tho unit of 1000 in 1914, they climbed to 1304 in. 1919, and to 1665 in 1930, -but declined to 1515 in 1931. The figure 1515, however, was not. official. '' You will note that in respect of nominal wages there has been a distinct and significant - : lag as compared- with export prices, and this, unquestionably, calls for early adjustment," Sir Harold continued. "The adjustment of expenditure, the recasting of our views of values, of commodities and services is no doubt very distasteful, nevertheless it has to be faced with stoicism. Thero would be immediate relief if our Government could raise a loan in London, but it is understood that, in the near future, is quite out of the question, and so we shall b.e obliged to rely upon our own resources, and from our own. reduced income, to meet, overhead and other expenses. That appears to be tho position of New Zealand to-day. If commodity prices rise, that will bring us some relief, and we .are encouraged to believe there is some possibility of that. Wool, for instance, on which wo depend so much, is once more tending upwards. LAND VALUES TOO HIGH. But we must place our chief reliance on the adjustment of values^of securities and services, and the process of adjustment is proceeding. A new view of the value of land of.all grades must gain currency. No longer can we assess the value of dairying land at £100 per acre, as has been the case, and two-sheep country at £30 and £40 per acre, the prices paid in boom times.Ideas with respect to land values have undergone a radical change, and shrewd farmers are now basing values on the returns per cow and per sheep. What New Zealand needs to-day more than cheap money is cheap land, and incidental items such as' goods and services must also be recast to meet the altered conditions. In the inevitable adjustment; mortgagees and landlords must suffer, indeed, many havo already made adjustments. Mortgagees have made concessions to mortgagors, both in respect to principal and interest, and landlords in a great many cases, have Teduced rentals. Both mortgagees and landlords are subject to legislative restrictions which, happily, owing to the reasonableness of mortgagees and land-' lords, has, so far, not been availed of to any extent. '"I am afraid that the State Advances Office has contributed to the inflation of land values by making too liberal advances on farm lands and other securities. That policy induced competition for building sections, and under the stress of this competition prices were inflated, and by accelerating building operations the cost of buildings was forced up. It is, therefore, not surprising that the office is being burdened with abandoned homes. Had building operations been allowed to take their normal course under the conduct of private enterprise, the position to-day may have turned out less severe. REVISED LABOUR 'LEGISLATION. "The costs of services have been regulated to a large extent by the Arbitration Court, and while tho country was prosperous under the fertilising effects of a continued stream of loan money, its decrees and arbitrary conditions, were not critically under review, except by a few, but under the conditions now obtaining it is generally conceded that, in its present form, it has outlived its sphere of usefulness. It is understood that this Act is to be amended, and, according to rumour, it is to be amended on the lines of the recommendation of the i 928 Committee. The year 1928 witnessed the peak of inflation, and recommendations made then are not applicable to 1932, the peak year of the depression. The whole matter requires reconsideration in the light of present conditions, and tho Apprentice Act, also, requires to be considered in conjunction with it. Among other things, the Court should be deprived of the power of ordering preference to unionists. The effect of this preference has been to raise a great army of union secretaries.

"It is quite impossible to indicate when there will bo anjr abatement in

the world-wide economic blizzard, but I venture to think it is now at its height, and that a change may be looked for towards the close of this year. Much will . depend upon the result of the Conference to be held shortly, in Geneva, to consider tho question of reparations due by Germany and international indebtedness, and if a satisfactory conclusion be arrived at in respect to these matters there ought to be a-renewal of confidence which is so conspicuous bjr its absenoo to-dajVl