Evening Post. FRIDAY, JUNE 19, 1936. GUARANTEE PROBLEMS

Evening Post, Volume CXXI, Issue 144, 19 June 1936, Page 8

Evening Post. FRIDAY, JUNE 19, 1936. GUARANTEE PROBLEMS

The guaranteed price to be paid after August 1 for exported dairy produce was not disclosed by the Minister of Marketing in his address to the National Dairy Conference. All that Mr. Nash would say was that the Government would give effect to the promise it made and the price would be based on the average over the last eight or ten years and there would be the maximum generous interpretation of that condition. There is a price formula here to guide the curious, but unfortunately it is not a formula which I can be made the basis of a calculation. The method of ascertaining the average is not disclosed and obviously different results would be given by a straight arithmetical average based on the whole period and by a mean of yearly averages. What may be deduced from the Minister's statement is that the method of calculation which will give the farmer the greatest benefit is to be adopted. Nevertheless, the uncertainty illustrates one of the difficulties attendant on guaranteed price planning. The price calculation to be made this season is simple when compared with the formula for succeeding years. Then account will have to be taken of several factors: costs of produc-

tion (and these cannot be fixed), standards of living (which are constantly changing), end numerous other considerations. Nor does the Act lay down in what measure each factor shall influence the price. In the end we fear that the settlement will be by long haggling between the Government and the industry. This, as we have previously pointed out, contains the element of danger, j The door is open for bargaining and political bidding. The reluctance to reveal the price in advance further illustrates the difficultiesl of price-fixing. The Government does not wish to make an early disclosure lest advantage should be taken of the information. That is what will happen each year, if not in New Zealand then in the external markets to which the New Zealand Government cannot extend its control. Speculation will certainly hot continue in New Zealand throughout the year; but it cannot be eliminated from the overseas market There the Government must

face the market risks. The Govern-1 ment, having guaranteed the price for the season, will have the 4f fear of price falls and the , ecstasy of price rises." This is avoidable only if the guaranteed price is a true stabilised price operating over a term of years. But the Government's intention to

introduce thie is not definite. Any loss will fall on the Government, and any profit will be reserved for the producers. Unless the guarantee is always based on a safe calculation of probable market realisations we cannot see now, under this system, Government losses can be avoided in some years. If they are not avoided the stabilised price becomes a subsidised price—subsidised at the expense of the community. And if there is a subsidy other producers, manufacturers, and traders are entitled to claim similar and equal benefits from the public purse. Carried to its logical conclusion the system will mean that the whole community subsidises itself. This, however, is not the greatest immediate difficulty. More troublesome, we anticipate, will be the prevention of speculation in land. The Minister of Marketing proclaimed at Hastings (as he has proclaimed before) the Government's determination to prevent a higher price being reflected in rising land values, but he added that adjustment of mortgages was one of the most difficult tasks the Government had before it. There is, however, no hint of how the Government proposes to prevent speculation. Mr. Nash said:

The Government was not proposing in the slightest degree to help any farmer to sell his land. If the farmer got more than he ought to get, he would take every penny off him that he could, but once the farmer had paid for his land the Government would see to it that he got a living off it.

This is ambiguous. It may mean that, if the Government is unable to prevent sales of land at inflated values, it will try to tax the vender, but will still see that the buyer of overpriced land can make a living from it. This is not a remedy. It

demonstrates that a guaranteed price (especially a publicly subsidised price) ■ should not be introduced before the Government lias the means of effectually preventing dissipation of the benefit in speculation. We cannot see how that prevention can be applied without interfering with the farmer's title to his land. The community certainly should not be called upon to provide a subsidy which is cither to pay for past speculative mistakes or be the basis for future profit-taking sales. We have said that such a subsidy cannot be avoided unless the system is one of stabilised prices over a period of years, with the producers themselves making good any losses. We admit, however, that losses may be minimised if the United Kingdom ran be

induced to negotiate a bilateral trade agreement such as Mr. Nash has in mind. New Zealand a? a whole will wish him well in his efforts, but it must not be forgotten that any special inducement offered for the conclusion of such a treaty will not be without its price to the Dominion. Mr. Nash instanced an undertaking to take all cotton goods from Britain. This would please United Kingdom manufacturers, and it would not affect New Zealand secondary industries, as cotton piece goods are not made here. But it would affect the consumer. We are not anticipating that the consumer would complain or that the price to be paid would be more than the Dominion should be prepared to pay to assist British trade. At the same time a tariff which has for many years been made as favourable as possible for the British manufacturer does not afford wide scope for additional benefits which can be given without unduly increasing the cost of commodities or making inroads on domestic secondary industries.