BUDGET DEBATE

Evening Star, Issue 21569, 15 November 1933, Page 6

BUDGET DEBATE

LABOUR ATTACK LAUNCHED EMPLOYMENT MINISTER REPLIES [Pek. Usited Press : Association.] WELLINGTON, November 14. The debate on the Budget was commenced when the House of Representatives resumed at 7.30 p.m. by the Leader of the Opposition. ■ Mr Savage said the state of dominion affairs appeared to be getting worse, as the years went on. There was nothing in the Budget to offer encouragement to any section of the community. The Minister of Einance had spoken about the Government's action in assisting the unemployed, but at the same time the Minister of Employment was giving instructions for a reduction in the weekly pay of relief workers. According to the Minister’s own statement, the wages of one section of relief workers were to be-reduced from 25s to 20s a week in order to force the men by the lash of- necessity to accept employment at comparatively low rates. That was not a solution of the problem.- A solution could.be found without doing injustice to anyone. AA’hen men were offered proper rates of pay they would go wherever tlie work was. Those who were expected to offer proper rates of pay should have a guarantee of a return on their outlay, sufficient to maintain a decent standard of life. Mr Savage declared that guaranteed prices for tlie whole of New Zealand’s production, supported by guaranteed incomes to those responsible for that production, was the only way out. Full control of the dominion's monetary system was a necessary part of such a policy. At present New Zealand's monetary system was based on the external prices received for approximately one-third of the total production, which left New Zealand at the mercy of cbean-labour countries competing with us abroad.

“ The alternative to that,’’ said Mr Savage, “ is to base our monetary system on the products of our own country, and to increase our living standards in accordance with our ability to supply our own needs. Our duty is to provide the means whereby our own people may exchange their services with each other without paying , toll ,to any external or internal forces.”

Continuing, Mr Savage said it was difficult to see how the Minister had arrived at the conclusion that there had been no fall in the purchasing power of full-time wage rates. Even if that statement were correct one might reasonably ask how many wage-earners were in receipt of full-time wage rate?. In all kinds of employment the, hours of work bad been reduced for a .number of employees, and the 75.000 relief workers were certainly not paid on a full-time basis. The real effect of’wage and salary reductions had been to cripple industry. Air Coates had said that cheap money was an- essential element in recovery, but unless cheap money found its way into the pockets of the people in the form of .increased pay in returu for services the position would not be improved. Referring to the mortgage rate. Mr Savage said that the Aliuister might well take a leaf out of the Labour Party’s book and make a definite move in the direction of stabilising mortgages on land and homes on the basis of the average of the past seven years’ wholesale prices, with a guarantee, pf prices and wages sufficient to maintain that basis. It was not sufficient, to urge mortgagees to accept the responsibility for doing it. Air Savage declared that there had been no attempt on the part of the Government to strengthen the foundation from which the State revenues must spring. On the contrary, the Government was relying, mainly on taxation in some form or other to carry on aIF forms of State'activities'. It was taxing ih© girl who earned 10s a week, the old-age pensioner, the widow’s pension, and other pensions, and then it told the country that the restoration of sound economic conditions was the first slep toward? sound finance. It was proposed to borrow another two millions from the Bank: of New Zealand during the current year. By doing that the Government was bor-

rowing for the purpose .of. paying, its. way. How long could that last? The last financial year the Minister had raised two andka-half millions on discharged soldiers’ settlement securities to obtain a surplus of £40,000. For tlie current year he proposed to raise two millions to get a deficit of £2,094,000. ■; :: -

Concluding, Mr Savage said the Budget suggested that the liabilities which rightly belonged to the State in connection with the superannuation funds should now be shared by the public servants, who had from the beginning kept their agreement with'the Government and -. had made their legitimate payments . in full. The Minister of Employment (Hon. A. Hamilton) said tlie farming community had not asked for advantages : over any other section of the community. It had only asked for fair conditions in the economic struggle. An investigation of the position had shown that the ..fanners had not been receiving fair treatment so far as internal conditions were concerned, and tlie raising of the exchange rafe bad been one means of. assisting, them. He considered that even with the increased exchange rate the farmers were still at .a disadvantage. CONSUMPTION BEFORE PRODUCTION. = Continuing, the Minister said it was not because of the soundness of its policy that the Labour Party was popular at the present time.’ Tlie Labour Party’s main strength seemed to be the Government’s unpopularity. “ We_ are not too popular, I’ll admit,’’ the Minister said. AA’e are not seeking popularity. AA ? e are endeavouring by a sound policy to deal with an extremely difficult situation. The Labour Party can thank its stars that it is not in office to-day.” The Minister said that the Labour Party’s policy of guaranteed prices on the basis of average prices over a number of years sounded very good, but the Leader of the Opposition had not told the whole story. The Labour Party desired to consume before it had produced. : It desired to spend before it had earned. He would have -grave-’fears concerning the outcome of a policy of guaranteed prices. There were .two outstanding-possible results;— (1) Very* largo borrowing, or (2) inflation through what the Labour Party called “ the creation of money ” would be necessary to make tlie payment of guaranteed prices possible. “ The present position is bad enough,” the Minister ?aid, “ but it might be very much worse if we started on either of those courses.” He submitted that it would have cost the Government £9,000,000 on the basis of- last year’s- national income , to pay guaranteed • prices along (he lines proposed by the Labour Party. The Minister said that in his judgment the Budget revealed a not unsatisfactory position, if not. a., satisfactory one. Surely some credit was due, to the Government for . its careful -handling of tlie public finances, resulting, in ,lastyear closing with a surplus of £4.0,000. It had paid, all the interest on .temporary loans, paid all the debts owing, and had bought, just on £2,000,000 surplus London funds at a cost of. £470,000, Tt had reduced the long-term debt by £255.000. and had jiot .taken into account the outstanding accounts owing to the. Government amounting to £3,0q0.0D0.:/ . ‘ ... Mr Savage i But are you not borrowing to carry on? Mr Hamilton; AVe are taking £2,000,000 from the reserves. Mr A. M. Samuel (Thames) ; Isn’t that liquidating assets? Air Hamilton: It is calling on the reserves. It is quite a usual way. to;' effect a balance’. • ~.’ Mr Samuel: How Tong can that go - on ? ‘ Mr Hamilton: Not too Tong. AA 7 e could not fight a war too longhand we cannot fight an economic difficulty too long. DEMOCRACY ON TRIAL. Continuing, the Minister said the country’s finances had been as well managed as those of the majority of business concerns. In fact, not many business concerns had managed their finances as well. He believed in Spite of all the criticism that the national in-

come was. as.well, distributed as.lt .bad, ever been. “ Those who' have are being taxed severely to help those, who need,” th Minister said. “ Democracy is pu trial. It is moving, and it will-need to be careful lest it bo moved. Democracy is not standing up too well to the test of difficult times, and in some countries it has been moved. I. believe it is still the best form of government, though confidence in it has been shaken in many parts of the world, today. Democracy must* justify its existence.” The Minister said that the fact that practically every section of the people was critical of the Government was evidence that it was steering without favour. The fanners were critical; the banks were <critical, the commercial people were critical, and the workers were critical. This, however, was quite natural in difficult times. Deferring to the exchanges surpluses, the Minister said the Budget showed that the Government had taken' over from the banks for the first half of this financial year an amount of £13,345,000 whereas statistics showed that there was for the first nine mouths of this calendar year a surplus of the London fund of only £10,250,000. Tin’s would indicate that the Government had already taken over from the banks more than the surplus sterling fund anticipated for the whole year. There might, of course, be other r factors influencing the position, such as the transfer of capital to New Zealand, and in all probability the extending of credit to New Zealand purchasers-of overseas goods or the withholding of payment for a period. This should right itself in time. The Minister said it was also estimated that about ten millions of sterling funds were required annually for the payment of Government interest, local body interest, and private payments. It would appear from the trade balance figures that the surplus London funds would not be much in excess of these’ requirements. Furthermore, the position was very materially affected by the Government’s policy of not borrowing any of its require2uents in London. . . Referring to currency depreciation, the Minister quoted figures showing, the percentage of depreciation in twentythree countries, including Great Britain, the United States, Canada, Japan, Franco, Italy, and Australia, which he said showed that New Zealand was well below the average depreciation of the countries mentioned and that it would be necessary to maintain at least the present rate. Continuing, he said the net increase to the New Zealand farmer in New Zealand currency fs r the result of the 25 per cent, exchange premium worked out approximately as follows: Butter 33.6 per cent., cheese 37.2 per cent., wool 28.7 per cent., lamb 40 per cent., wether mutton 45 per cent., ewe mutton 70 to 87 per cent., ox beef 47 per cent. He said the reason-why the percentage increase was greater than the exchange was because the exchange was calculated on f.o.b. prices, whereas what the farmer received was that price less costs from farm to f.o.b. If would therefore be seen that the farmer teally gained a better advantage than would first appear from the exchange'assistance. 6n the other hand, the farmer did not have to pay the full 25 per Cent, extra in added cost to his imports. The operation here worked the opposite way, and it was calculated that on such, items as basic slag and galvanised wire only the following percentage increases took place Basic slag 18.5, galvanised wire 19.

Mr Walter Nash (Hutt) said all that had happened in connection wth the exchange rate so far as New Zealand was concerned was that the balance of the people had been specifically taxed for the benefit of the farmers. He was not saying whether that was right or wrong, blit that was what had happened. _ New Zealand had not. received a fraction of a penny more in the Old Country for its goods. All the producers were receiving was something from the people here. If' New Zealand was dumping butter and cheese into the Old Country irrespective of cost and charging the people there a low price because the people here were paying 25 per cent, towards its cost, then every word that Mr Baxter had said had been truO. The debate was interrupted when the House rose at 10.30 p.rm