MEETING THE BLOW

Evening Post, Volume CXVIII, Issue 8, 10 July 1934, Page 11

MEETING THE BLOW

EFFECTS OF DEPRESSION

REMEDIAL MEASURES

MH. FOEBES'S 'BEVIES

(Special to . the-"Evening Post.") CHEVIOT, This Bay. The manner in which the United and Coalition Governments hail

tackled tho problems arising out ut' the economic depression, and tho 'remedial measures taken to counteract the effects -of the world slump were reviewed by the Prime Minister (tho lit. lion, G. W. Forbes) in the course of his address at Cheviot last evening. Mr. Forbes dealt with the catastrophic way in which Fhe effects of the drop in world produce prices was felt in New Zealand, outlined thegravity of the position as.leading to the formation o£ the Coalition Government, and reviewed the legislation which the Government had considered necessary in the

emergency.

Mr. Forbes said that we appeared to be slowly emerging from a depression which, for its length and severity, had not been equalled since the dark days of the late eighties. There was, even now, hq occasion for careless optimism, for there were-factors in the situation giving cause for much thought, anxiety, and for action. But on the other hand, there was. much to reassure one, and it was eminently a time for stock-

taking.

Dealing with criticism against the Government, he said that.the.decisions ,of the Government had-not been-made in the light of facts available today. That was a vital poi t to, be' remembered. -"■■-'lf that knowledge had miraculously been possessed three or four years ago, it might have'minimised the difficulties, though it could:not have disposed of them, because. niost of tho factors t^ere-entiTeiy 'outside: tho control of anyone in the .Dominion.

"To assess fairly: what the Government has done to help its pebple through tho long-continued.Jtinies .of depression, I must recall facts which, have been forgotten by many, so . fast and fiirioua has been the pace of events,, and so unexpected their'character and ■severity," he said. "There was v_a comparatively brief period of .low 'gfices. for our exported products from,-19.25::ti1l .1927, when a fair re'eovery was made till the end of 1928. "But "from 1928-tho drop m prices, the decline in national income, was fast; and continued. There seemed—to: Use a' familiar . business phrase—to be.no bottom in:the mark We all hoped that when,'early in 1930, these prices reached'the, pre-war levi', they could go^ no lower,^^' but the late of decline never lost its pace until the welcome revival :jn wool gave the Dominion its first'relief from, a disastrous condition, of • affairs?'

CABINET INVESXIGATION.

Reviewing the action of the Government during that period, Mr. Forbes said that for the year ended March, 1929, there was a Budget deficit, though the excess of exports ovei imports was £12,048,478. The shrinkage of the na ; tional revenue had been att ntion, and. in December 1930, the Government, of' which he. was-the head, determined to take- more drastic steps than had hitherto been considered necessary. A- special .committee of Cabinet was set up to make an overhaul of all Departments, of State, the committee having the assistance of the head of the Treasury: ;and the Publio Service Commissioner. At-that date there was a general hope and expectation that world prices'nad .reached bottom; but the worst was yet to come; In March, 1931, the.Gbyernment was'^re: luctantly forced to reduce' expenditure, and to make the first cut of 10 per cent, in the salaries of its^employees,; andat the same time an amendrrient:'was ;niade to the I.C. and A. Act to enablo'induatiy to meet the altered conditions.-The Hawke's Bay earthquake added-fur; ther troubles. ' ..'■'." . ;,;

Failing national income through low export prices reflected itself formidably in :: the revenue of tho Consolidated Fund, and it was necessaiy, in addition to retrenchment, to make increases in taxation. The railways Suffered from tailing traffic; and \ the interest deficiency began heavily, to burdeiv the Consolidated Fund. In July, 1930, train milage was curtailed, 'some .unprofitable branch lines closed, and;other, savings effected which, it was-.estiniated, would improve the net: financial position^ to the extent of £'136;000 per ".annum.; Defence services were drastically curtailed, and in, these aud many other ways the Government substantially reduced public expenditure. -It was hoped that the depression would end "at an early'date,.?but.isyprld ,trade : , continued ito -decliue;<and all, sections of pTo'ducers; were selling :theiv. goods at dii; actiial, loss,' conip ai-ed' costs, of production "and handling. ..;: .; '-'We had-a-e'aehedi.thc stage o£ a^a; tiqnal emergency, and I did not hesitate to talko the; action which such a realisation involved,", ho said.. "Parliament was informed-by .me of the position on August 21y 1931, and on the motion ofr'the-Kt. Hon; ff, ,G..Coates, then Leader of-- the. Opposition, the Houße/ with' my thorough- concurrence, I passed a resolution that representatives of the political parties.- be palled together in order to decide what remedial I steps should,.be taken to adjust the na(tional expenditure, and to.provide for equality of sacrifice and proper distribution -of burdens. This important comniittee held,; many meetings, and heard the opinions of public officials, economists, representatives bankers, business ;men,' and' producers. It did not, as a committee, place on record any conclusions,- but the opportunity afforded of' ascertaining* all the factors in the situation led to the decision by the Rt. Hon. j. G. Goates and his supporters in House, to joiu with the Government supporters in: evolving and carrying through Parliament the measures necessary •to promote confidence tind stability, and .bring, about the rehabilitation of: .."tie1" ..Dominion. The view of the Keform Party,.expressed by its leader, was that there was necessity for action without further delay, and that if they failed to take action they would be failing in their duty to the country. " • .' ■ •■ :

COALITION FORMED,

f There can be no doubt ' ttiat tho sinking.of party differences by the Keform and United Imembera of tho House which • rendered, the; Coalition Government possible, was welcomed with relief by. the'v.ast majority of tho people, because they saw that it would make possible the' drafting and passing of measures for which thoro existed no precedent. Tho ideal put forward of financial reconstruction was endorsed by the community generally. However, one must admit .that tho course on which the two parties embarked, could not; be regarded as politically favourable, if tho emergency of the country was ignored, and the position viewed f'om the anglo of party advantage. From the outset of the crisis, the Labonv Party declined to share-the burdens or the risks. It had alternative ideas, tha most important of which T will deal with in greater detail later. It is sufficient at this point to say that those responsible for the country's -welfare'and

credit were quite convinced that "we could not borrow.-our ; way, ouf, of the depression. : ■:

"NO ATTRACTIVE PROMISES."

"The present Government came into office on September 22, 1931, and at the earliest practicable moment Parliament was dissolved, -and an appeal made to the electors, the dato being December 2, 1031. The election campaign of the joint parties-was. unique in Kew Zealand experience. Wo had no attractive promises to make, but frankly look up the stand that as the country waa in serious danger,, and .there appeared no early hope of economic relief, Uie'sitiintion should be thoroughly but iju'icUiy examined, and measures fraincii to plac/j finances on a ..sounder, basis .by further severe economies, and,-- if ueeussary, higher taxation. "Neither I nor my colleague, the Rt. Hon. Mr." Coatcs, ventured, during that election campaign, to forecast in detail,what would bo the programme of the Government if attain placed iv power. Wo preferred to mako it clear that difficult things wcuM have to be dou'e, calling for general sacrifices, and, as can be depended on in a British community the ujectora disregarded any easy, but uueertain roads to stability, aud gave- the Government an emphatic maudato to proceed with its objective." ■■■•.'"

PUBLIC WORKS EXPENDITURE.

The Prime Minister pointed out that aa tho national resources began to decline," loan expenditure by the Public Works Department had to.bo curtailed. Polio wing the return 'of ' tho Coalition Government, Mr. Coatcs, who then held the Public AYorks portfolio, took firmly in hand the loan, money operations, and as a result, allocations for,public works, which' "for the year ended' March 31, 1932, had totalled. £6,082,000, were curtailed for the ensuing' year .to £1,234,000. So.great and sudden a reduction'in expenditure could only be brought into effect by planning special measures for absorption of men displaced from normal public works operations... and that was done. ' '■ "

, Mr. Forb.es; p referred' to .the ■ setting up of the National Expenditure ■.Commission, and said that in 'April, 1932, the Government was able-to submit its first large instalment of financial adjustment and provision of relief in the way of compulsory reduction of 20 per cent, in ratesof interest'and rents/and iimportant extension- of the i-elief measures already in operation for the protection of ittqftgagors. There was a 'fui:ther graduated, reduction of public ,servants' salaries^ and I'eduetions' in nearly all classes of pensions were "'proposed. In September, 1931, Britain was forced off; the ; . gold; standard, and ; another sliock was* given 'to world 4 confidence with inevitable results on the volume of trade and .world: pricelevel.' '"' '""" ''' '' X' '-•■-■

At the end of 1932, legislation was passed increasing^ tp.\Ap per cent, the former 20c:perl;e.enjL.. reduction ~; i n.jtbo New Zealand Interest paymeiits''On'local body securities'; |ield:,in New Zealand. "This was part -of an all-round movement for reduction in: interest' rates," '" he ''■ s.aid. .:"Tho successful! conversiori"..' of Government securities; domiciled in New, Zealand to the low basis of 3* and 4 per, cent, was followed by similar legislar tion enabling localbodies to .make favourable conversions of their, indebtedness on the basis of .4-J per cent. Loan conversion legislation' will be of permanent benefit to both the State and local authorities,/aind ..the; pi-esent de; mand for these securities at a premium shows that the Government inflicted no hardship on investors, but; simply-.by; its legislation" anticipated the era" of low interest rates iipon which we have entered. .-, -...■.! • ■---,/ ■■ :■

A LONG FIGHT,

"Iv submitting its retrenchment -and, interest reduction measure to: Parliament, the Government visualised a long uphill fight to regain normal conditions,' for at that time there appeared:'"ibj r'ajr of "hope -for. our producers.. Taiiable; resources had .been strained- to _ the limit, and we deemed it 6ur. : duty to bring the national expenditure more ; into line .with''the constantly -falling income; not to .impose'stilliheavier.;burctens .on those; who-had accepted 'previous incfeasßS in. taxation,in' a. patriotic spirit.' ;:Uheniploym'ent, which had'been' extending; at an" alarming rate as' the; national income diminished, constituted j another vgrave responsibility .on X the;" Government. It was. :an unpleasant, but I a- necessary duty to ■ submit. -this; ; National Expenditure Adjustment Billto Parliament;• and ask that1 it be; adopted. But the majority of members of the .House held the same view as members of the Government: that party or personal interests must be thrust' aside for'the larger issue (of : the good of the State, and that measure was passed without alteration."