DANGEROUSLY LOW

Evening Star, Issue 23122, 23 November 1938, Page 2

DANGEROUSLY LOW

THE LONDON FUNDS DROPPING BY £1,000,000 WEEKLY [Pan United Press Association.] AUCKLAND, November 22. The possible repercussions from the continued fall in New Zealand sterling funds were discussed by Professor T. Hytten, economic adviser to the Bank of New South Wales, who left for Sydney by the Awatea after a three weeks’ visit to the Dominion. The relationship between public works expenditure and sterling funds was traced by Professor Hytten, who said the present position was at least symptomatic of a partially unbalanced economy. “ As far as I can gather,” Professor Hytten said, “ New Zealand’s sterling balances have been dropping at the rate of nearly £1,000,000 a week. They are rapidly reaching a dangerously low level, but it should be possible to make the funds hold out until Christmas. The heavier export returns in the first few months of the New Year should bring at least temporary relief, although the measure of the relief must of necessity depend on the general trading position, Quito apart from tho drop in stealing funds, Professor Hytten continued, both the production and the export prices were falling as far as New Zealand was concerned. Australia had already suffered a minor recession with regard to wool and wheat and now that dairy production in New Zealand showed signs of falling, accompanied by lower prices on the London market, tho Dominion’s general trading position would have to be carefully watened. IMPORTS THE PRINCIPAL CAUSE. “ It is impossible to determine how far the fall in the London funds has been due to heavy imports and- how far it has been due to capital the professor asded. “ The general impression is that heavy imports have been the principal cause. In general two main factors govern . heavy imports. In the first place a good export season, with buoyant prices, brings about a demand for consumer goods many of which in a country like New Zealand must be imported. Those conditions, however, do not rule at present. The second main factor in swelling imports is heavy Government expenditure on such activities as public works' and housing, and expenditure of this type has definitely been canned on in New Zealand.” TOO RAPID EXPANSION. The reaction from the public works prograsme was in itself twofold, Professor Hytten said. A high wages bill financed by the Government automatically led to a heavy demand for consumer goods, with corresponding effect on imports. Another factor was the importation of capital goods, such as heavy machinery and materials for use nn public works. Any such movementAvas likely to cause a considerable drain on the overseas'funds, and it was for tho Gpvernment to apply any necessary degree of control. “ In time of trade recession,” Professor Hytten continued, “ public works can certainly be expanded ,;as a pallia-! tive, but if they*are expanded too far ors too rapidly there is a serious risk of unbalanced economy. Tn thy opinion that stage is aproaching in New Zealand, although I do not say that it is too late for correctives to be applied.” KEEP PUBLIC CONFIDENT. One thing -which particularly impressed Professor Hytten during his tour of New Zealand was the apparent determination of the leaders of industry, both primary and secondary, to withstand any tendency towards panic. They realised that in a largo measure the future of the country was in their bands, he said, and they were doing all in their power to see that public confidence, and with it public credit, were not shaken.

IMPORTERS’ VIEW NOT EXCESSIVE WELLINGTON, November 22. The position of the Dominion’s London funds was discussed at the annual meeting of the New Zealand Importers’ Federation. There was general agreement with the statement of the president, Mr G. W. Guthrie, in his annual report, that the fall in the funds was by no means conclusive evidence of excessive imports and might indeed in a large measure be caused by factors other than imports, altogether. It was decided to renew the offer of the federation’s co-operation, made to tho Government in June, in regard to remedying the position. , Mr Guthrie was .re-elected president of the federation.