Evening Post THURSDAY, APRIL 20, 1939. WHAT OF INSULATION?

Evening Post, Volume CXXVII, Issue 92, 20 April 1939, Page 8

Evening Post THURSDAY, APRIL 20, 1939. WHAT OF INSULATION?

•No more important—or more candid—statement of New Zealand's economic position has come from Government sources since the election than that in which the Minister of Finance yesterday asked the dairy farmers to call a halt in the priceraising process. He asked for a year or two of economic stability—in other words, for a stop in the upward movement of everything, and he declared that he had made the same request to the Federation of Labour and, in effect, to the ship owners. Of the necessity for this halt he supplied a convincing argument:

They were building up sterling funds and could not bring in a lot of things which previously had been brought in, and if purchasing power were extended in any way by paying higher prices to dairy farmers or higher wages to other workers, and particularly to those engaged on what was called nonproductive work —if the impact of that higher purchasing power were given to a smaller quantity of goods, then inevitably a price rise took place. If everybody determined to build up his income on a price-rising basis, a spiral would eventuate and a point be reached on which only one person would be sitting.

This, read with the Minister's statement in December, when he announced the imposition of sterling and trade control, reveals the failure of the Government's "more spending power" plan as a cure for all economic ills. The December statement revealed part of that failure, which was to be corrected by what Mr. Savage called "insulation." Mr. Nash's latest statement shows that "insulation" is a failure too.

How does this agree with the Government's claims during the election campaign only six months ago? It is a flat contradiction of them. Then everything was prosperous, the future was assured, the Government could go onward and upward to new heights. All that was necessary was to return Labour again as the Government. Opposition speakers and newspapers who found flaws in the policy and its results were misleading the public, misrepresenting the position for political purposes, carrying on a campaign of vilification, damaging New Zealand's reputation so as to injure the Government. Labour continues to make charges of misrepresentation and misleading. Such charges are answered fully and finally by the statements of December and yesterday. What is now! revealed confirms the truth of the warnings given by critics of the Government in October, confirms also the warnings issued by impartial and well-informed authorities such as the Reserve Bank and leaders in banking and commerce. It is the Government itself that must now answer a charge that its rosy pictures of prosperity, its assurances that all was well, were gravely misleading. Why were the facts not disclosed before? Did the Government not know, or did it conceal? It cannot be said that the difficulties have arisen only, since the election. Certainly the position has become worse, calling for drastic action; but the deterioration set in long before. The signs were all there, plainly to be seen by any who were not obstinately refusing to look at them, refusing to i admit a state of affairs which would have damaged the Government's prospects of success in the election, and proved beyond question the imprudence of the extravagant spending plans which were Labour's bid for public support.

The Government has a grave case to answer for its failure to acquaint the public with the facts. Equally grave is its failure to take corrective action while there was still a pros-

pect of milder measures proving effective. If a check had been applied last year, the problem would have been much simpler of solution; there would have been more time for gradual application of remedies, and there would not now be the necessity to rush corrective action with inadequate preparation and at the risk of hardship. Most of all, there would not have been the additional and weighty burdens which the Government itself has imposed. It cannot be forgotten that, while the Minister of Finance is calling a halt to increases, only three weeks ago his Government, with much trumpeting, inaugurated a scheme of social security of which the cost cannot yet be foreseen. And this burden was being shaped and prepared at a time when the Government must have known —-or should have known—the tremendous strain that it would put upon the economic strength of the country. We can acknowledge without qualification the courage of the Minister of Finance in now taking a stand and facing accumulated difficulties. Also, we can recognise his desire to be fair, even though it involves his going, as he said, to people he had been helping to ask for more for years and asking them not to ask for more. But it is the Government's own spending propaganda, its "sky's the limit" policy, that has made that task so difficult.

The cost-raising process certainly must be checked and the check must be fairly applied. But we cannot admit, though we acknowledge the Minister's desire to be fair, that the steps taken by the Government will ensure equity. Upon certain sections of the community costs have been raised without adequate compensation. The farmers are not alone in that respect, but their case serves as an example. They were promised that the price guarantee scheme would insure them against the costraising consequences of the Government's industrial and spending policy. Other classes had a similar assurance that they would not suffer —manufacturers and traders were told that more business and greater turnover would make up costs to them. These assurances have not been fulfilled. This season the dairy farmers have a guaranteed price, giving them almost £1.300,000 less than the price unanimously recommended by an expert committee as required to place their living standard on an equality with that of the rest of the community. Farmers with no guaranteed price—such as wool growers —are in « worse position. What guarantee have these sections and others that, if they voluntarily agree to a halt in prices, the check will be general, that others to whom the appeal is addressed will fall into line? But even more than this is needed. To assure equity there must be an endeavour, in which the Government must lead, to reduce costs, to lighten the burdens pressing upon production, industry, and trade. The vigour with which the Government applies itself to this essential part of its task will be the test of its sincerity, and will also determine the measure of success that will attend its efforts.