FINANCIAL CRISIS

Evening Star, Issue 23292, 14 June 1939, Page 3

FINANCIAL CRISIS

FRUIT DF GROSS OVERSPENDING AND INCOMPETENCE SURVEY BY LEADER OF OPPOSITION RESOURCES ALL USED UP The financial crisis at present affecting New Zealand would be to the forefront of discussions in the coming session of Parliament, the header of the Opposition (Hon. Adam Hamilton) told an audience in the Town Hall Concert Chamber last night. It was a subject of conversation to-day when politics were touched upon, and a concise survey of the circumstances which led up to the situation was well worth while. “ The country faces serious commercial, financia'i, and industrial difficulties,” he said, “ and I would emphasise that all this is the direct result of gross overspending and incompetent administration.” Although much of such a survey dealt with subjects that some might consider dull and uninteresting, Mr Hamilton said that he thought it was abundantly clear now that a little more consideration of this side of politics would more than repay electors. Everyone took a live interest in local body affairs because the facts of finance—conditions that affected the pocket—were brought nearer homo. It was a similar interest in national government —the most important subject of all—that would rapidly restore confidence and stability in the Dominion:- It was for this reason that be made an appeal to all to devote a few minutes to earnest consideration of the facts. PRODUCTION’S RISE AND FALL. “ It is idle to deny now that the Labour Government reaped all the benefits of the general world recovery,” he continued. “ Between 1935 and 1937 export values of our primary produce rose by 40 per cent. Consequently, national income rose to record high levels and prosperity was widespread. Then came the fall in the return from our exports. This was first apparent in 1938, and the return from exports fell bv £8,000,000. “ Imports, however, maintained by inflationary borrowing and heavy expenditure on public works, kept up. Sterling funds commenced to fall, and soon reached critical low levels. Of this position the Labour Government was warned time and time again,” Mr Hamilton said. “It ignored and even ridiculed all warnings. But suddenly import restrictions had to be introduced, so serious a position had developed. The crisis could no longer be denied.” What bad the Government’s policy been while all this was developing? he asked. It had had the effect of increasing heavily all public expenditure, and it meant regulation and interference by the State. This heavy expenditure meant heavier drawing upon the taxpayer, and no relief was suggested. Emergency taxes were retained. Some of the immediate demands were cushioned by borrowing, thus putting off the evil day. The result of the increased interference by the State with enterprise and production was to interfere with the_ sources of the national income—to injure them. BURDEN OF TAXATION. Looked at from the taxation point of view, the situation was quicldy expressed. The figures for State taxation in the last few years were as follows:

“ And taxation is still increasing,” Mr Hamilton added. “ Those figures do not include local hodv rates and taxes,- which unfortunately have a ris- : mg tendency directly associated in many instances with the Government’s policy. The majority of taxes are in- , direct taxes, which are paid by all people through higher prices for goods and services. The customer may be always right, hut the consumer always pays. “As far as the next Budget is con- ' corned,” Mr Hamilton said, “it appears 1 certain that another £5,000,000 to £6,600,000 will need to be extracted , from the community to balance it. The ' cons .inter —the individual—will pay.” The burden of public debt was important in taking any account, he stated. It should now be clear that the burden of interest created on unproductive debt merely added a further burden on the taxpayer There were interest charges amounting to more than £9,000.000 to be met annually. POLICY REVERSED. “ The Government’s policy has, therefore, been the direct cause of the present financial crisis, with its emergency measures concerning imports and exports,” Mr Hamilton said. “And today we find the Minister of Finance abroad endeavouring to find sources of i money, oven although last year lie was the same Minister of Finance who said that no additional funds had been raised abroad, and that it was the policy of the Government to repay external loans as quickly as possible and to restrict borrowing to amounts necessary for conversion purposes. This somersault in policy is the most difficult thing to understand to-day, and to many it suggests the same sort of crisis that the Labour Party faced in England in 1931. “ Everyone has seen the major evidences of this reversal in policy,” Mr Hamilton continued, “ interest rates have been allowed to break. There was the case of the recent internal loan, which, apparently, was settled about the time of the General Election.” The Reserve Bank provided another angle on Labour finance. Since! 1935, State deposits with the bank had fallen from £9,710,000 to £3,820,000 at the end of March this year, while State Advances hud risen from nothing to £19,430,000. So that, as well as affecting the Dominion’s credit abroad, the Government’s policy had spent its reserve resources in New Zealand. SOCIAL SERVICE COSTS. The latest addition to the Government’s programme was the Social Security Act, which provided for increased expenditure. Everyone knew the story of the setting aside of the expert’s advice and of the assurances that ample provision had been made to meet new costs. First, the companies were brought in after this assurance, and now Mr Nash said that : there would be a shortage of £2,000.000 to he made up this year. Some of the benefits were being paid, but, as had been brought out recently, the severity of the means test applied make them appear much loss liberal than was expected. It would he interesting, too, to see how the Government intended to meet unemployment needs. The Social Security Bill provided for £1,500,000,

but last year the Government spent more than £5,00(J,000 ou unemployment m New Zealand. “It will also he interesting,” Mr Hamilton said, “ to see how the Government intends to meet the emergencies its policy has created and will continue to create. REDUCED NATIONAL INCOME. “ The national income,” he said, “ is reduced and primary ’ production has fallen. Reserves have been exhausted —reserves left by previous Governments. 'J'lie Government has been forced to appeal for funds both internally and overseas. Intlation is continuing and must still reap its unhappy harvest. Money has been depreciated and our credit injured. Import restrictions are further involved to-day by the impossibilities of even meeting the demands of importers who hold licenses. Finance is not available to continue public works on the former lavish scale. The country faces serious commercial, financial, and industrial difficulties. I would emphasise that all this is the direct result of gross overspending and incompetent administration. For the man in the street it means high prices and high taxes. That inevitably means reduced living standards. “ All this came after years of unprecedented export incomes,” Mr Hamilton added. “ Instead of being in the throes of emergency measures we should be enjoying plain sailing, security, and prosperity for all sections of the community.”

Total Millions. Taxn tion Per Head. £ s. d. 1928-20 ... 17.8 12 4 3 1934-35 ... 24.7 15 18 4 1935-36 ... 25.4 16 5 6 1936-37 ... 31.1 19 14 10 1937-38 ... 36.7 23 1 3