The Evening Star MONDAY, MAY 6, 1929. A DEFICIT.

Evening Star, Issue 20167, 6 May 1929, Page 8

The Evening Star MONDAY, MAY 6, 1929. A DEFICIT.

Thk financial year ended six weeks ago has resulted in a deficit of about ,0579,000 in the dominion finances, in August, 1928, Mr Downic Stewart budgeted for a surplus of £260,146, and four months later, in the short session of P.arliamcnt which resulted in a change of Government, his words, in virtually handing over the Treasury to his successor, wore that there was then no indication that the estimate of a balanced budget would not be realised. He made his estimates on the assumption that the Customs revenue would show a small inerea.se after the decline of over £300,000 it had shown in the previous year, but he did not expect income tax to show much response to reviving business resulting from « lavonrablc trade balance. As a matter of fact, although the figures .show a continuation of a surplus of exports over imports, income tax receipts fell below Mr Stewart’s conservative estimate, and the effect of the break which traders have kept on importation is a shortage of between £300,000 and £400,000 in the Customs revenue, which Mr Stewart had reckoned on yielding £8,261,000. This is a repetition of the experience of the previous year, ■when the Customs revenue showed a comparative decrease of nearly £310,000. Though it was Mr Stewart's claim in the last speech he made prior to rclinf|uishing the Treasury that the Coates Government had in each year balanced its Budget, it is hardly likely that it could have done so this year had it remained in office. Latterly the finances had been going back. The surplus in 1926-27 was £587,142, and in 1927-28 it was only £179,076; and now. as stated above, there is a deficit of about £579,000.

There will have to be a readjustment of taxation, says the. Prime Minister, and the eurrent year's Budget will contain his proposals. bio has given no inkling whatever of what these are, and in the normal course of events the country will have to wait three months before knowing. It would be much more satisfactory if the additional icvenue needed could be obtained from a revival of trade and industry on the same basis of taxation as at present. The banking returns show that there is an accumulation of capital in the dominion resulting chiefly horn tne heavy excess of sales of produce abioad over purchases abroad; but unfortunately this capital is largely lying at interest instead of being reinvested in, enterprises for the dominion's development. This withdrawal of working capital, if it may so be termed, is a curious feature of the present phase of New Zealand’s economic life; and it is an unwelcome one, leading as it does to curtailment of employment and •reacting unfavourably on the national finances. That such a result was finite unexpected by the advisers to the Treasury is shown by a reference made by Mr Downic Stewart in Parliament last December, when he said that, with the increase in the accumulated wealth of the dominion, it should he possible

to supply more of our own loan requirements by local borrowing, and, as the years went by, to an increasing extent out of revenue. It is evident that the Prime Minister i-.i resolved that the Government shall give the country a lead in shaking off its lethargy in respect of continuation of development. Ho says we are to look to the land for prosperity, and as ouo step towards making laud accessible ho proposes considerable capital expenditure on the completion ol railway construction on four arterial routes, two in each island. Sir Joseph has been criticised for proposing expenditure on railway construction when existing lines arc hard put to it to hold their own against road competition. But it has always been his contention that tho country has been losing money on these four unfinished lines. At the same time he is resolute on the futility of cockspur lines. So far as can bo judged, his policy is tho vapid bridging of gaps between certain railheads which a glance at the'railway map indicates as absurd to leave as gaps, and then writing finis to further railway construction in New Zealand. If so, it has the merit of being clchr-cut and businesslike. It should put an end to tho “political ” railway which has cost the country dearly already. Last year's loss irom this source was £770,000. On the recommendation of tlie Fay-1 (aven Commission of 1921 tho Coates Government separated these non-paying branch lines from the Railway Accounts, and left tho Consolidated Fund to make up tho deficiency each year. Sir Joseph Ward proposes to revert to the old system of accounts, and hold the railways responsible for the financial results from the whole system, not merely from a selected part of it.