The Evening Star THURSDAY, NOVEMBER 16, 1933. AN EXPERT’S CRITICISM.

Evening Star, Issue 21570, 16 November 1933, Page 10

The Evening Star THURSDAY, NOVEMBER 16, 1933. AN EXPERT’S CRITICISM.

If the level at which the Budget debate has opened is maintained it will be the highest for very many years past. It promises, in fact, to be a financial debate in fact as well as in name, which is somewhat unusual in New Zealand’s experience. Yesterday Mr Downje Stewart spoke, and did so to such purpose that every taxpayer ought to make a close study of what he said. For one thing, he has clarified a position on which those not in the intimate confidence of the Government were hazy and expected the Budget to enlighten them, but were ' disappointed in that hope. Briefly, people are anxious to know the disadvantages as well as the advantages arising from the raising of the exchange rate. . In particular they want to know the effect on the Government finances, for the other effects, which are by no means inconsiderable, cannot be estimated with precision. The fullest possible information on both heads was due from the Government to the people, for it was the Government who intervened and raised the rate. The Minister of Finance has given virtually no information under one head. On the other he still left people unsatisfied, although it was a first duty of the compiler of the Budget to inform taxpayers of the precise cost to tho Treasury, and therefore to them. The data were, given, but the courage and candour were lacking to assemble them properly for the calculation to be made and the answer clearly stated. A master-hand was needed to complete the task Mr Coates had left undone. Mr Downie Stewart has risen to the occasion and performed a public service deserving of gratitude. . When he sacrificed office rather than principle Mr Stewart warned the Government that its action would burden the Budget to the extent of £3,800,000. On the Treasury’s own figures (of which some are necessarily only estimates) Mr Stewart discloses the cost at £4,550,000. The items are as follow: Extra cost of external debt charges ... £1,050,000 Cost of exchange on surplus funds of £4,845,000 purchased until September ... 1,200,000 Net interest charges on Treasury bills, say ... 500,000 Customs revenue made good by extra taxation 800,000 Exchange on funds, say £4,000,000, to be purchased between September and April 1,000,000 Total -. ... ...£4,550,000 The last-mentioned item must bo conceded to bo a conservative estimate, and the ono above it perhaps requires some explanation. Early in the year Mr Stewart (in his £3,800,000 forecast of loss) estimated a drop of £1,250,000 in Customs revenue through a high exchange discouraging importation. That was disputed, Customs revenue being estimated in this Budget to at least equal last year’s. But that was only with the help of £BOO,OOO extra taxation on.such necessaries as petrol, tobacco, and sugar to make up for reduced importations on other lines that could be done without at a pinch. Originally Mr Stewart assessed 1 at £500,000 tho decline in income tax caused by the repressive influence of tho high exchange on inward trade, etc. Challenged, lie conceded this point (too generously, we think), but in the light of actual experience ho now brings forward a fresh item chargeable—viz., £500,000 for net interest charges on Treasury bills issued to buy surplus London funds. At 5 per cent., the rate charged in New Zealand, the Budget states the amount- at £690,000, while the interest earned by those funds in London is in the neighbourhood of $ per cent. On tho aspect of how tho high exchange affects New Zealand outside of Government finance, Mr Stewart has invited tho Government to ponder the view' held by many authorities that world prices for farm products are being held down through competition between countries in depreciating their currencies. (One recalls how swiftly Denmark followed in New Zealand’s footsteps.), Mr Stewart ajsp mentioned the

loss of goodwill to New Zealand in Britain. This we cannot help regarding as serious in the extreme. Unfortunately the Now Zealand Government is successively aggravating it. The latest instance is the terms of the acquirement of the trading banks’ gold by the Government. To-day’s cabled comment by the ‘ Financial News ’ conveys an unmistakable warning that this is not a purely internal concern, and that the British interests affected expect British fair play in the matter. The statement from the Associated Banks (appearing in .yesterday’s issue) controverting the Finance Minister’s arguments on tho gold reserves question sufficiently indicates what the departures from that fair play are. The banks’ contentions appear to us most convincing. Wo need quote only one extract from a superabundance of apt material: “It is obviously and irrefutably clear that to take gold assets and to give, in exchange for those assets, depreciated notes which could repurchase only 80 per cent, of the amount of sterling, or only about 53 per cent, of the amount of .gold, would be very greatly at the expense, of the banks and of their shareholders, who number over 50,000, more than a third of whom reside in New Zealand.” Furthermore, tho “ world experts consulted recently in London,” according to Mr Coates’s defence, are countered by. the experts consulted by the banks, these experts condemning the Government’s proposal as confiscation. The personnel of those experts or the Government’s presentation of the case to them are matters on which there is curiosity. A former statement on behalf of the banks concluded thus; “It has never been disclosed to the banks exactly how tho Government has presented its case to the authorities upon whose opinions it relies. Throughout all the conti-oversy it has been felt by the banks that, if the case of the Government has been presented with the same disregard of essential facts as exhibited in its published statements here, a proper and complete consideration of the question has not been possible.” Disingenuousness is out of place at the Treasury. 'Recently it was stated that since Mr Stewart’s resignation there had been lessened confidence in the Government among those who were numbered normally with its supporters.