SOUND POSITION PUBLIC ACCOUNTS Over proportion.

Evening Post, Volume CXX, Issue 135, 4 December 1935, Page 7

SOUND POSITION

PUBLIC ACCOUNTS

Over proportion.

MR. COATES'S REVIEW

LABOUR'S LEGACY

PROSPECT OF SURPLUS

Prior to handing ..over the control of the public finances to the Labour Administration, the Minister of Finance (the Rt. Hon. J. G. Coates) last evening made a statement setting out the financial position of the country. Budget results/ for the current year, he said,'were1 in accord with his expectations, and Labour would come to office with revenue in a bouyant condition and expenditure-well under control.

"On the eve of relinquishing office as Minister of Finance, I consider it desirable to make a statement.showing the present position of the country's finances," Mr. Coates said. "It will be a source of gratification to the public to note that the finances of the country are in a healthy position, and that the new Government comes into office with a balanced Budget,; with buoyant revenue, and with expenditure well under control. " ~ ■■:'■'.■'

"I do hot desire to traverse the controversies which have been raised during the election campaign, but I wish to place on record the main aspects of the Gpvjernment's policy during the past four years, since it is on these that success in balancing the Budget and in promoting business recovery has largely depended.

"When the National Government took office in 1931, its first task was to restore the economic basis on which prosperity-could be rebuilt., The collapse in overseas prices by 43 per cent, between the years 1928 and 1931 brought the full impact of the world depression to bear on the Dominion. The value of exports fell from £56,000,000 to £35,000,000, the value of farm production fell from £83,000,000 to £50,000,000, and the value of all production- from £114,000,000 to £85,000,000. Unemployment increased from 2504 to 40,335.

method of collecting petrol tax causes a lag of one month, which under the arrangements made will be picked up before the financial year closes. The variation for 'other taxation' is of no significance,-being due to a fluctuation in the amount of land tax received up to November 30. .Interest and other receipts for-the most part come to hand at irregular, intervals, and the variations; "apparent in the table are due entirely to accounting fluctuations; for instance, 'other receipts'for the first eight months o£ last year were swelled by the receipts of £1,364,000 from profits on the sale of gold'coin. -

"-On the other side of the picture the expenditure for the-period compares with the proportionate part of the appropriations: as follows:—

"Debt services appear to be running ahead of the appropriations, but this is due to the fact that nearly the whole of the amount provided for debt repayment for the year has already been utilised. Similarly the variations shown for 'highways,! 'exchange,' and 'other services' are due to accounting fluctuations, and the expenditure *on all,these itemsfor the-year will be in accord with the Estimates. "Under the annual votes.a considerable saving is shown on a proportionate basis. There are some large payments to be made under some of the "votes, so this saving will not be wholly maintained to the end of the year. However, an analysis of the votes in detail shows that the expenditure has .definitely been .held within the'appropriations. ', ' ' "" SURPLUS EXPECTED. "To sum up the position, if the Budget, as arranged, is allowed to run its course, I am satisfied that the net result will be a surplus, probably somewhat iri- excess, 6£' that; provided torn the financial, statement. . . "As at November. 30 Treasury bills to1 the amount of £3,650,000 are outstanding, but: these bills, which are held by Treasury accounts, represent temporary accommodation in anticipation of revenue, and under my Budget proposals they will automatically disappear by March 31, next. ,' "Goncerning the long-term debt it will be recollected that the capital programme'for the:year outlined in the Budget called for £3,750,000 from loan money, augmented from the unemployment fund for certain classes of work and also by'the expenditure on; highways but of revenue. ■'"■ X:' "Allowing for balances carried forward pn-: April i last, the loans money for the capital programme has been raised with the exception of approximately £450,000; In addition the conversion operations dealing with £10,135,000 of our London debt, have been completed, and the charges and expenses provided for, while in terms of legislation passed last session, £260,000 of guaranteed; debt.has been taken over, from the Greymouth Harbour Board. . "' ' "Additions to the' debt during the eight months totalled approximately £2,900,000, but debt repayment'to .the ainountiof £1,800,000 was.i effected, ,£,1,440,000....bejng-provided for;., .pujt- of t,he Consolidated F^ihd uhder'th'e'Public Debt" Repayment Act, and the balance from capital prepayments fjrom other accounts. As a result the longterm debt as at November 30 stood- at £281,677,000,,. a net increase "bf £1,096,000 only since March 31 last. If the programme laid down is adhered to the net increase for the year should not exceed £1,600,000. "As pointed out in the Budget, the .fall in prices automatically increased the burden,jjf all fixed charges.,. In these circumstances one of the'cardinal ppints in the Government's, policy was : .to''lighten;1 ;thai.y : burden' in ,■■. every possible way? Loan* expenditure was" continued on a reasonable scale, but in directions that would increase debt charges payable. out of taxation as little as possible. Less remunerative works riut.iii.-hand;to.increasfremploy? merit were:financed partly1 but'of un'-': employment taxation. An important factor in lightening debt charges was the extensive conversion operations undertaken. The whole of the internal debt was converted, the opportunity being taken to rearrange it on a basis more satisfactory to the market and one that will', facilitate future operations. Gross saving in interest charges amounted to approximately £1,000,000 per annum. ':"■■■'■ '■":■'. DtBT CONVERSION. ■■;■■' ■ :,' "The. task, of arranging for the conversion, of the internal debt of all the local-bodies in New Zealand'was also undertaken and is now virtually completed. As a result there is a saving to local bodies, of over £500,000.per annum, in addition to which these debts have been'placed; upon a. satisfactory basis with adequate sinking fund provisions that generally will obviate any question of renewal. Furthermore, every- opportunity has. been taken to arrange conversions of public debt in London, and operations to. ■ date have meant a saving of £300,000 sterling per annum in debt charges. ■ ."■lri August next the Dominion has the option of repaying a 6 per cent, loan amounting to £5,870,000, and while I was in London; I took the opportunity :of-making tentative arrangements for dealing with it. If the present sound position of the Dominion's finances is maintained there is an: opportunity here of effecting a further substantial saving in debt charges. . , ; "Following the General: Election; I notice that the prices of our stocks on the London market have 'slumped by 1 about four points, but I trust that this is only a temporary phase and that the incoming Government will take steps to maintain the credit of the State both ': at home and abroad. In New Zealand there will be an opportunity in 1937 of ' dealing with'£ 12,436,000 of 4 per cent' ; debt. [ UNEMPLOYMENT FUND. i "As already indicated, a co-ordinated ; programme has been worked out for

•1 ■ "A crisis: of this magnitude was not •■! amenable to the policies and methods I appropriate to normal times, and new policies and methods had to be deHjsed. . These were planned with care :: and put into operation with resolution. The basic problem in the economic field • was the adjustment of costs and prices to enable' increasing numbers to be : employed at, a profit. .'',..' { ThE EXCHANGE POSITION. , • "The exchange was raised to assist •;■■: in restoring profits in farming, manuV' facture,-and trade, sustain the national i income and benefit the Budget by mvv creasing taxable capacity. It succeeded ;' in. these>.objects, but there still ;re■i maineda gap to be bridged if prodtic- ;. tion and trade were >to expand. So >: the Government introduced various ;■ measures which effected substantial ■\ reductions in. costs of production. .'.-> "Meanwhile the position of the un- ■ employed received the earnest.atteri- : tion-of the Government: By-public ■. activities of various sorts and by as: ; ; sistance to private 'enterprise, unem- ;■*. plbyment was substantially reduced. •;' Relief on a scale not'surpassed in any • other country was given to those for whom work could not ; :be found. In addition,- plans have already been preparedi. many of them already under • way, designed to encourage-business. '. expansion and improve the welfare of the community. : ■"; ■■■- ; ■• "I need only mention the planning of public works, the co-ordination of State enterprise and business development, housing, national superannuation, and health insurance and milk distribution to schools by way of example. MORTGAGE LEGISLATION. "An essential aspect of., the Government's programme has been the estab- , lishment of important,, facilities for action. Wisely directed; these should be invaluable; as instruments of future polic y. To co-ordinate, consolidate, and control the banking system the Reserve Bank' was established; Next, to restore mortgage finance and place it generally on a sound basis the machinery under the Rural; .Mortgagors ' Final Adjustment Act and the Mortgage Corporation were -created.;, The former,, is intended to induce ,;as-< far 'as possible :-ori; a' voluntary basis a -settlement of immediate difficulties, while the Mortgage Corporation is designed to introduce a sounder method of mortgage finance and stabilise mortgage rates of interest at a lower level. The initial lending rate ,o? the Corporation- is ; 4 1-8 per cent., and. the mortgagors under all mortgages transferred to the Corporation have the right to have their, interest .-. rate.■.: reduced. ,-to this figure:, The. Corporation: "commenced lending .■:6peratibris::dii'-September 19 last,; and since; then; new loans granted arnbunt to £810,850, of which £544,155 was ;dn. rural, securities and £266,695 on town: property. ■ XrALUE OF EXPORTS. "The general improvement in economic conditions during the past three years is shown.by a'feduction \ in unemployed on the register from about 5G.0Q0 to under; 40,000, the increase in the; value •of total i.production. froro £83;6p0 > 000 in; 1931-32 to! £98,800,000 inil933-34; and; in farm production from £.49,000,000 to £63,000,000. . "Since ,1932 the annual value of exports 'has, increased from £34,700.000 to - £ 43,000,000, ■■: and of • imports from £24,700,0J)0 to £34,300,000. "Wages and salaries paid have .increased from £59,000,000 in 1933 to about £65,000,000 in -1935. These improvements have naturally been reflected in the national Budget.. From 1931 onward, when the full force, of the storm" Kit New Zealand, -the- Government was faced with deficits of alarming proportions, but by last financial year Budget stability had been restored and a potential danger to the whole financial fabric was thereby removed. BUDGETARY! POINTS. "As to the current year's Budget, I am pleased to say that the results to: date are in accord \vith my expectations. The Consolidated Fund revenue for the eight months ended November 30' last amounted to £13,250,881, and the relative position of the principal items is clearly set out in the following table:-- '

IN LINE WITH ESTIMATES. — ~ "As the revenue is riot evenly spread making'the, best ..use of the revenues of over the year, the best guide to the tl?e Unemployment Fund, firstly., from position is the percentages • shown in the point of view of providing :or the last two columns.' These indicate stimulating full-time employment at that Customs, beer duty, sales tax, and standard wages, and, secondly, from stamp duties are all closely in accord tne point of view of obtaining the with the estimates. Highways revenue maximum of benefit to the Dominion appears to be behind-hand, but this is in the form of useful works, not the case, as an alteration in the "Concerning the financial position of

the Unemployment Fund, I may say that the balance carried forward on April 1 last was £1,333,000, while the receipts to November 30 amounted to £2,498,000, making a total of £3,831,000 available. Expenditure authorised to November 30 totalled £3,159,000, so the : balance available on December 1 was £672,000. Revenue for the balance of the financial year is estimated at £1,328,000, and on this basis the amount available for the four .months December to March inclusive is £2,000,000. At the present time, however, the expenditure is at the rate of £425,000 for each four-weekly period. In addition £60,000 will be absorbed in payment of a bonus at Christmas. On this basis it is estimated that by March 31 next the unemployed will have had the benefit of practically the whole of the available resources, and the year will close with a small balance in the fund.

"To repeat the statement made in the Budget I consider the Government can justly .claim to have piloted the Dominion successfully through the worst economic storm in its history! The foundations of recovery have been well anil truly laid, and it is no small satisfaction to the Government in relinquishing the Treasury benches to know that the Budget is healthy, and the financial position of the Dominion sound and secure; that the work of reconstruction has met with a, considerable measure of success; that recovery is well under way, and business confidence substantially restored.

"Naturally the Government regrets that it has not the opportunity of putting into • effect the policy of development and humanitarian legislation which it placed before the electors; but it accepts the will of the people with the intention to fulfil its duties in opposition, as sincerely and resolutely as when in power."

o o || '. |~ § £ - Debt services 6.293,066 HlEhwa.vn . 1,360,067 Exchange .. 1,090,667 Other. services 423,925 . In 6,533,939 1.107.S72 1,111,114 251,263 S I" 239,a73* "23,44V* 172,662 ... - . ■£9,160,225 .£9,OO7,1SS £162,037 Annual Appropriations: . Social services 5,107.569 4,S96,41fi 111.133 Other votes . '2,948,S31, ' 2,566,747 3S2.084 £17,225,625, £16,570,351 £655,274

Customs Beer duty .... Sales tax .... Highways Stamps ...... Other taxation Total taxation ' Interest Other receipts -. Total revenue. Revenue tor . Kevenue for, 8month3to 8nonttisto 30/11/34. 30/11/35. ' a Increase. . £ ■ £ . ■ £ 4,753,541 . 0,065,495 . 311,954 409,500 419,138 9,638 1,319,923 1,499,478 179,555 1,275,391 l,26fi.300 ■ 9,091* 2,112.993 • 1,677,282 " 435,711'' 1,318,128 1,290,770 27,358' 11.189.47S 11.218,483 29.007 1,175.723 999,640 178,053* ,.2,291,950 •1,042,758 ■. 1,249,192* £14,657,149 -; £13,260,881 £1,396,208* .♦Decreases. Percentage of receipts to 30/11/34 to total revenue for year. 1934-1935. 64.03 61.02 60.81 66.75 60.01 29.41 55.45 40.12 73.93 3<U0 Percentage receipts to 30/11/35 to estimated revenue for year, - 1035-1936. .61.12 62.09 60.58* 62.07* ' 61.89 26.23* 54.14* 38.24* 43.30* 5L51*