NO MAJOR SLUMP

Evening Post, Volume CXXV, Issue 28, 3 February 1938, Page 17

NO MAJOR SLUMP

ECONOMIST'S BELIEF

BUILDING UP RESERVES

Economic questions' affecting both New Zealand 'and, Australia were , briefly dealt with by Mr. W. K. McConelL M.A.» general secretary of the Sound Finance League ol Australia, in an address at a Chamber of Commerce luncheon yesterday. Other guests were Mr. W. V. McCail, a member of the Federal Parliament, Mr.-C. B. Critchley, Australian Trade Commissioner, and Mr. J. Menzies, Assistant Australian Trade Commissioner. ' Mr. McConnell said tie had come to New Zealand to learn and not to teach. The problems here were ' fundamentally the same as those of Australia, although there were geographical difficulties. If anything, New Zealand suffered a little less than Australia during the depression years, due mainly to the foolish things Australia did in, pre-depression days, but Australia did tackle the depression in a very efficient manner.l Australia dealt with. the depression very seriously, and> the Premiers' Plan had played a big part. Australia was the first into the depression and the first out. New Zealand did not plan to the same extent, although today it was nearer to a plan than it had been before. The speaker reviewed the work of the Loans Council in Australia, and remarked that that body was representative of both shades of political opinion—Labour and Labour. Strangely enough, there was a majority of Labour representative on the council, but Labour never received the credit for the plan. The assistance which was Deing given to manufacturers in New Zealand was leading to increased costs'and it would be interesting to see how far they were going to get without increasing the guaranteed price and wages. More than that, New Zealand was still dependent on world prices. One New Zealand Minister had talked about insulating New Zealand, but he did not expect to live to see the day when that would' be < possible. It was difficult to be dogmatic on economic questions, ana economists had to bo ver> ' careful about condemning anything in these days. They had to go very warily* 1 about anything that ' was likely in itself to have inflationary results. If a new demand was due to a new stimulus it could not last unless tht stimulus, was maintained, for'- * stimulus was like a drug and its effects wore oft. One way to avoid inflationay processes was to keep taxation pretty high. That was unpopular, ha knew, but it was a question of putting away for a rainy day. Governments always lived from hand to mouth. The public did not like deficits—but they did not'like surpluses either. In his view Governments in these days should show surpluses,'evea from taxation, and the surpluses should be earmarked for' times of recession. Apart from a .vorld war or from in-. credible ■ folly, he did not think that there was a danger of a depression of the magnitude of the-.last, although there would je periods of recession, capitalism was not planless *but it was not centrally controlled and from, time to time the system' must get out of gear. If they "wanted'a centrally-con« trolled system there was only one thing open to them —out-'ahd-oiit ' Socialism. He was certain that they could do a lot to .avoid slumps, and ,there Gpvernments could help witlr a plan.,; If they agreed to higher' taxation on- the Understanding that surpluses would be created for a rainy day he felt that they would all be better off. - Referring to the present-.situation in America Mr,, McConnell said that the troubles of the United States were political rather than basically economic Concluding, he said that the people of Australia would be very;sorry to see New Zealand, in any serious difficulty, political or economic. Australians' regarded New < Zealand as. God's own country. Mr. McCail said he was sure that both he and Mr -McConneU would learn much in New Zealand. He believed that it was necessary; that Australia and New Zealand should cooperate in trade matters Australia at present bad the oest end of the stick and no Australian would object to New Zealand doing her best to improve the position. He, hoped also that New Zealand and Australia would co-operate In defence, and it must have been very disturbing "to New Zealanders to hear the Leadei of the Opposition (Mr Curtin) declare for a policy of isolation'.'- The destiny of the two countries was closely linked in the Pacific, ana It was essential; that the trade routes should be kept open.