MR. NASH ON INFLATION

Evening Post, Volume CXXIII, Issue 117, 19 May 1937, Page 10

MR. NASH ON INFLATION

In New Zealand requests have been made for information respecting the Government's loan and credit operations; but little has been vouchsafed. In London, however, Mr. Nash has told the "Financial News": "There is no prospect of inflation, as over half the expenditure on public works is being met from taxation and the remainder from sayings." He has stated, also, with reference to revenue buoyancy: "There; is no likelihood of internal borrowing at present." The latter statement is puzzling. Either Mr. Nash means external borrowing or internal borrowing on the public market, for the "savings" of which he speaks are certainly ■ internal loans, whether they are subscribed by Government financial departments or directly by the owners of the savings. The more important statement, however, is the denial of inflation. . The Budget proposed pnblic works expenditure aggregating £10,450,000, of which £5,940,000 (more than half) would be from borrowed money. Are we to understand that greater provision has been made from revenue, possibly reducing a surplus which eyen now is much larger than anticipated? But the £5,940,000 was not the only loan authorised. The Finance Act No. 2 authorised £6,000,000 for public works, £2,000,000 for highways, and £5,000,000 for housing. The housing loan was to be new money, a Reserve Bank credit. When Mr. Nash says there is "no prospect of inflation" he should tell us what has been done with these credit proposals; also, whether the credit or loans are creating assets of equal value. The creation of such assets was his own test of inflation; . ■ ;•■:'"..■ ■ There is the further point to which he has made no reference whatever —the prospect of a, deficit arising from the dairy produce marketing operations. Estimates have placed this at a possible £2,000,000. How can that be described? Mr. Nash, himself, when referring to marketing finance in the debates on the Reserve Bank Amendment Bill, supplied the description. He said:

There cannot be any inflation in that [the method of payment] except to the extent that if a certain price is paid out in New Zealand and a less price recovered overseas, then the difference between those two at a later period is, automatically, inflation. . . . If we definitely control, and keep under control, inflation to the point I have just mentioned and pay a sensible price that will give farmers a chance of getting a decent living, nothing more will take, place.