The Dominion Sound

Evening Star, Issue 19552, 10 May 1927, Page 2

The Dominion Sound

Finance Minister Analyses

Position

Peak Years of Expenditure

Completing Great Works

Debt 77 Per Cent Productive In an address at Feilding, the Hon. W, D. Stewart delivered a comprehensive address on the finances of the dominion, rebutting criticism that things arc going to the bad annually; pointing out that while with one hand public bodies made a gesture denouncing Government expenditure, with-the other they demanded more and more; that the next few years represent peak years of expenditure for the completion of hydro-electric and irrigation works, but that presently there should be no more need for overseas loans; that New Zealand’s debt at any rate is 77 per cent, productive; and that the Government, stepping in where private money is not attracted, has loaned £75,000,000 in State Advances, etc. The Minister sketched the possibility of applying the principle of rural credits to the housing problem in the cities, and the probable benefits of a conference among all parties concerned on wages and production.

EPsn United Press Association.!

FEILDING, May 9,

The Hon. W. Downie Stewart, Minister of Finance, addressed a largo meeting here to-night. , ' ~. , The Mayor of Feilding (Mr E. hair) who presided, offered a warm welcome to the Minister, who was loudly cheered by the audience. Mr Downie Stewart, who .was listened to with- close attention and practically without interruption, said: The Government has been criticised lately for the infrequency with which Ministers speak, and we have been called in some quarters the “ Silent Ministry.” It is true that we do not talk as freely or as frequently as was the practice at one time. I can remember when the Ministers of a previous Government were criticised for travelling round speech-making and banqueting instead of working. But if I am called upon to justify the present (practice, I would point put that in these modern days all the information necessary to enable the public to form a judgment as to the state of the country and its production, trade, commerce, and finance, is furnished in great detail, and hence there is not the same need for public speeches. But anyone can see from a casual glance at the trade figures, the banking returns, the unemployment figures, the bankruptcy statistics, and other items that we are passing through a depression similar to what occurred in 1921. You will remember that we recovered from the 1921 depression with astonishing rapidity,; but it is not so clear that our present difficulties will be so soon overcome. These rapid fluctuations of prosperity and adversity are a well-known feature of post-war conditions, and were xoiecasted by all economists as certain to °I am glad to say that the effects of the present depression did not reflect themselves in the public finances for the year just closed to anything like the extent I had anticipated. I have already made public the fact that ».here was a surplus of revenue over expenditure of £587,000. That is a modest surplus compared to some we have had, bnt it Ls a satisfactory one under present conditions, and better than I had hoped for. In the Budget I calculated that the revenue and expenditure would just about balance. But an unexpected feature of the Customs revenue was mainly responsible for my good fortune in having a surplus. The Customs revenue did not fall in proportion to the decreased imports. We had anticipated that the imports would drop by £6,250,000, which would decrease the revenue by £900,000. Actually they dropped by £4,833,000. which should have produced a drop in revenue of £725,000. Yet, in fact, the Customs revenue only fell short of the previous year by £131,000. . This curious and unexpected windfall was partly due to_ the English coal strike, which forced importers to buy from foreign countries when they could not fill their orders in England; hence they had to pay the higher duties which are payable on goods from foreign countries. ‘ Thera were other faetprs which influenced the results which I will deal with in more detail in the Budget. Bnt at any rate when we look abroad at the frequency of deficits instead of surpluses which mark so many Budgets of other States and countries, I think wo may congratulate ourselves on the Now Zealand results. A few details as to principal increases and decreases in revenue and expenditure as compared with the previous year are as follow: REVENUE, —lncreases.

appropriated for the year, and an increase of only £IIO,OOO over the actual expenditure for 1925-26. Increases in certain votes, such as education, arc inevitable, being dependent largely on population, and in view of this and an increased expenditure for naval defence the figures show that departmental expenditure has been kept under close control.

Practically the whole of the increase in expenditure compared with that for last year is to be found under the heading .of permanent appropriations —that is, interest, pensions, etc.—the expenditure under -which totals approximately £14,260,000, as against an estimate of £13,693,000, and compared with an expenditure for the previous year of £13,587,000. Details of the expenditure have not yet been finalised, but will be available when the annual accounts are published. Those who aro sceptical whether any surplus exists mean that we may not have made all proper charges against the revenue. In reply to them I may say that the subsidy to the Railway .Department on account of losses on branch lines and isolated sections is included in the ordinary expenditure for tho year. Certain redemptions of debt, such as the annual sum required for the repayment of the funded debt and the statutory contribution to the Public Debt Repayment Account, which are fixed annual charges, are also included in the year’s expondi-

ture. , Accumulated surpluses are used for further redemptions of debt, and details of the transactions for the vear will appear in annual accounts when published. No transfer was made to the Public Works Fund during the year. All legitimate expenditure charges against the year’s revenue have been made. . Whenever prices fall and national income shrinks, critics demand an immediate contraction of public expenditure. But public expenditure cannot be expanded and contracted with the same ease as a concertina without intensifying unemployment_ and serious dislocation of public services. When the Government cut down expenditure _ by some millions during the previous slump, I did not observe that the public followed the good example of the Government. In fact, |he moment the depression showed signs of lifting everyone seemed to assume that we had turned the corner. I issued a note cl warning in 1923, and said that the recovery was only temporary, and that owing to the of post-war conditions we would certainly be faced with another drop within two or three years. The critics discounted my statement, and said that I could not have been fully reported, as the recovery was too obvious to give ground for the note of caution which X struck. However, wo see the position as it exists to-day.

Some critics have complained that this surplus is too large, and some say it is too small, and some seem doubtful whether it exists at all. Those who say it is too large mean that we purposely under-estimated the revenue m order to avoid giving effect to any policy of reducing taxation. But I nave already shown that the Customs revenue was larger than we looked for owing to circumstances that no one could foresee, and that under normal circumstances there would have been no surplus on which to reduce taxation. Those who say it is too small mean that the expenditure has_ been too high. But the expenditure is only £130,000 in excess of the appropriations for main and supplementary Estimates approved by Parliament, which is a fairly close calculation on a Budget expending about twenty-four millions. So far as expenditure on departmental services is concerned, this totals £10,094,000,' which shows a decrease @£. £434,000 compared with the amount

Post and Telegraph £148,800 Income tax 55,700 Interest on railways (capital liability) 130,100 Departmental receipts 57,400 —Decreases.— Customs £131,300 Land tax 37,500 EXPENDITURE. —Increases. — Vote naval defence (increase due to expenditure on H.M.S. Diomede for the whole year) £85,000 Vote defence (increase mainly due to purchase big gun ammunition) 33,900 Vote education 99,800 —Decreases.— Vote Post and Telegraph working expenses ... £63,300 Vote industries and commerce ... 56,500 Vote electoral 91,400