Evening Post. FRIDAY, JULY 21, 1939. A SHORT REPRIEVE

Evening Post, Volume CXXVIII, Issue 18, 21 July 1939, Page 8

Evening Post. FRIDAY, JULY 21, 1939. A SHORT REPRIEVE

New Zealand has been granted by the British Government export credits for £9,000,000—£5,000,000 for defence and other Government requirements, and £4,000,000 for private imports. No information is available at the time of writing as to the terms of interest and repayment, and the only condition disclosed is an assurance by Mr. Nash that the Government will not use import restrictions to foster uneconomic industries and -will, so far as it can, having regard to obligations to industries already established, restore the opportunity of reasonable competition to British manufacturers. No exception can be taken to this condition—though it cuts away the ground from the "insulation" policy j to which Mr. Nash, at least, was never wholly committed. For this generous aid,-New Zealand must be deeply grateful to Britain, especially when it is given at a time when Britain herself is shouldering the heaviest burdens ever laid upon her in peace time. Credit is due also to Mr. Nash for the skill.with which he has conducted negotiations leading to this result.

Export credits will afford immediate relief, and it is reported also that negotiations for the £17,000,000 conversion are proceeding satisfactorily. It is suggested unofficially from London that the conversion will probably be for a short term, 1941----45, with an obligation to make interim repayments. If this is correct, the interest rate may be much higher than that of the present loan (3£ per cent), and the necessity of making early repayments will make it essential that the Dominion should put its finances in order speedily. It will,: nevertheless, be a relief to" have the terms settled, even if only for a short period. The impending maturity, with the possibility of having to redeem a substantial sum if conversion of the whole amount could not be arranged, has hung like the sword of Damocles over the trade of the Dominion, If it is lifted even for a little while, New; Zealand will be relieved of pressing anxiety and be able to concentrate | attention upon the restoration of trade and sterling transactions, if not to normal, at least to a basis conducive to a growth of confidence. It is confidence that is needed now, and the Government can do a great deal to restore it by assuring the public not only that it will review the import restriction policy (as it •is bound to do by Mr. Nash's promise) but also that it will reorganise internal expenditure to avoid a Recurrence of the crisis.

It would be entirely wrong for New Zealand to assume, however, that this aid brings the country right out of the wood. The export credits obtained, with careful husbanding, should see the Dominion over the difficult between-seasons period, when little is coming in from exports and yet, there are payments to be made for imports and debt service. In previous years the transactions of this period have been made by drawing upon accumulated reserves. Now the reserves are at so low a point that they would not, unaided, suffice for debt service and even severely restricted imports. The export credits will permit the importation of essential commodities and the payment of interest; but it is improbable that there will be a margin for more than this. A great easing of import restrictions will not be possible. In brief the country is in the position of a business man with limited credit. A period of probation has been arranged—time to reorganise and place the business on a sound footing. If that time and die limited credit are used to the best advantage, business should gradually improve. If the lesson is not learnt and there is no change of policy it is highly probable that there will be the same difficulty to meet again next year, and with little prospect of repetition of the generous aid afforded by Britain s on tljis occasion. That the Minister of Finance recognises the need for a changed policy is highly probable. His appeals for a pause in the "onward and upward" movement, and for savings, were an indication of this change of mind before he lell New Zealand, His;

experience in the London negotiations has doubtless strengthened his inclination for orthodoxy .and safety. That is shown by his statement in a letter to an English manufacturer (quoted on Tuesday): "As soon as jwe are in a position to do so—the present restrictions operate until the end of 1939—imports will be resumed to the full extent of our ability. We have no wish to pursue a policy of isolation or self-sufficiency." But do the members of the Labour Party who have remained in New Zealand and have not faced-the realities of London negotiation, recognise this too? . There is considerable doubt when one talks of "financial gangsters" and another says that the drain on London funds was "the result of adeliberate determination on the part of certain financial interests to face the Government with a financial crisis if it won the election." All the evidence is against such allegations. As Mr. Coates said last night, the Government and no one else "was responsible for the financial situation. The

Government was warned by the Opposition and the Press eighteen months ago, but took no heed. Members who now put forward a fantastic "financial gangster" explanation of a crisis due to the Government's profligacy and destruction of confidence, are deluding themselves and attempting to delude the people. If the Government adopts their argument, it cannot restore confidence and bring the country out of its difficulties. The "financial gangster" absurdity is simply an attempt to save the face of the Government arid evade the responsibility of reshaping Government policy as the reality of the position demands. But that responsibility lies on the Government nevertheless ; the more so because of the aid given and the trust in the country shown'-by Britain. If the Government shuts its eyes to these facts, the people cannot do so. t