The Evening Star THURSDAY, FEBRUARY 25, 1932. ARRESTED DEVELOPMENT.

Evening Star, Issue 21036, 25 February 1932, Page 8

The Evening Star THURSDAY, FEBRUARY 25, 1932. ARRESTED DEVELOPMENT.

The financial year closes rather more than a month hence, and the estimated deficiency of about three millions sterling may be accepted as trustworthy. The further estimate of a deficiency of ten millions sterling in the year soon to be entered is necessarily much more in the nature of guesswork, but it can hardly have been given publicity without some sense of responsibility or without as full an examination as possible of what factors- are so far available. After the calls made on taxpayers and the beginning made on the overhaul of public expenditure, this outcome is disappointing and disquieting. The only consolation to be extracted is in the fact that other countries -are having equal or greater difficulty with their Budgets. The United States, for example, has a deficit of two thousand million dollars facing the Treasury in the current fiscal year, which, it is said, can only be met in small part by increased taxation. In Australia the aggregate deficits of Commonwealth and State Governments are estimated at £18,000,000, instead of the £12,000,000 to which it was aimed to reduce them. However, the contemplation of similar troubles elsewhere does not absolve New Zealand from the attempt to reorganise her own finances. It is being brought home more insistently almost daily that for years past it was mainly the inflow of money borrowed in London which kept the wheels of Government finance revolving, even when our income stood much higher than now, because of higher prices then for our export production. The consequent fall of Government revenue has made it plain that, whatever may have been the case previously, the Government now would be drawing on new borrowed capital, if it were available, to help in paying interest on overseas debt. But that money is not now available overseas. Public issues of capital in London were almost entirely absent' in the second half of 1931. According to the ‘ Economist’s ’ statistics the first sis months yielded £89,200,000 and the second only £12,900,000, compared with £267,000,000 in 1930, £285,000,000 in 1929, and £369,000,000 in 1928. The feature of the reduced total last year was the high proportion which went overseas —all in the first seven months of the year. Most of it went to British possessions, India being the chief culprit—for that is how the London market in its straitened financial position regards would-be borrowers. It may be salutary that no such resort as borrowing abroad is available to defer the day of reckoning, but it concentrates the blow. One very direct effect is the curtailment of public works. These have already been partially stopped, and a further drastic constriction of the programme lies ahead. This was foreshadowed in the last ■ Public Works Statement, and it has been confirmed in the Governor-General’s speech yesterday. The way Mr Coates put the matter last session on his resumption of the portfolio was that so long as our primary industries increased at a rate faster than the borrowed money was spent, the position was sound; but when prices of primary products fell “ the justification for developmental works became less apparent.” The use of plainer words will be necessary in unfolding the actual position to Parliament and the country presently. There can be no disguising the fact that it amounts to this; that beggars cannot be choosers. This matter has been closely brought home to Otago people by the disclosure of the possibility of the headworks of the Waitaki hydro-electric power scheme being left uncompleted for the time being. From an engineering point of view this undertaking is a tremendous one; and so it has been proving in the financial sense. The industrial aspect is one which needs consideration. There is a pay roll of over a thousand names, and it is understood that so far as has been possible the ordering of electrical machinery from overseas has for some time been deferred so that what funds were available should be applied to provision of employment. But it seems that even those funds are depleted, and work may have to cease. At the same time the Administration has announced that a big scheme for relief work is to be undertaken elsewhere. The policy does not appear businesslike, unless the main consideration has to bo the difference between standard wages and relief wages. At Kurow there is a scheme in being and in going order, and it is to be assumed that the work will be reproductive and eventually paying. Closing down will mean much capital

lying idle for an indefinite time, and for this the taxpayers will meantime have to pay. On the other hand, it remains to be seen whether the new relief schemes will be of a really reproductive nature, and it is certain that getting them under way will involve much preliminary expense. The uncertainty has once more reopened the question of the Dunedin City Corporation’s programme of headworks at Waipori. In tho construction of the new dam there very great fresh capital expenditure has been incurred, and, failing tho opportunity to purchase power in bulk from Wnitaki for an indefinite time, there arises tho matter of tho provision of yet more fresh capital at AVaipori to enable the available water to be reused at power stations proposed lower down tho river. There seems to bo an assumption that the necessary loan money could be easily raised and that increasing the power output will be necessary. In both respects tho present experience of the rest of the world points in the opposite direction. A halt in the increase in the demand for current is a present-day feature in the experience of practically all concerns which generate and distribute electric power.