The Franklin Times PUBLISHED EVERY MONDAY, WEDNESDAY AND FRIDAY AFTERNOON. Office and Works: ROULSTON STREET, PUKEKOHE. ’Phone No. 2. P.O. Box 14. “We nothing extenuate nor aught set down in malice.” WEDNESDAY, SEPTEMBER 14, 1938. GUARANTEED PRICE GAMBLE

Franklin Times, Volume XXVII, Issue 108, 14 September 1938, Page 4

The Franklin Times PUBLISHED EVERY MONDAY, WEDNESDAY AND FRIDAY AFTERNOON. Office and Works: ROULSTON STREET, PUKEKOHE. ’Phone No. 2. P.O. Box 14. “We nothing extenuate nor aught set down in malice.” WEDNESDAY, SEPTEMBER 14, 1938. GUARANTEED PRICE GAMBLE

Office and Works: ROULSTON STREET, PUKEKOHE. ’Phone No. 2. p -°- Box 44 ' “We nothing extenuate nor aught set down in malice.”

WHILE the Government both fixes and guarantees, through the Dairy Industry Account at the Reserve Bank, the price to be paid for dairy produce it cannot nope to escape demands from the industry lor higher and still higher prices. It is clear also that the Government cannot tlx prices without guaranteeing their payment and that it cannot guarantee payment unless it decides lor itself what the price is to be. Cabinet at present is laced with the task ol fixing the price lor the current season and it has before ii the recommendations ol the Special Advisory Committee which recently heard evidence from the interested parties. If also has before it the comprehensive evidence which was placed before the Committee on behalf of the dairy industry. The case for the industry is based very largely on a wealth of statistical information showing the increase which has taken place in farmers’ costs and the. suggestion is that in order to' give tlie producer a fair return it will be necessary to fix the guaranteed price at 2-Jd a pound higher than last year. The recommendation of the Advisory Committee has not been disclosed officially, but it has been stated, apparently with some authority, that the increases recommended is 2d a pound. If it is to satisfy the farmer —and in election year it is obvious that that will be an important consideration —the Government, faced with \vjhat is reported to be the unanimous recommendation of the Advisory Committee and the evidence of the industry itself, cannot very well avoid acceptance of the responsibility of paying a considerably higher price for the current season’s dairy produce. In other words, it will have to take a bigger gamble than ever on market prices over which it has no control.

In the first year of the operation of the guaranteed price plan there was a deficit in the Dairy Industry Account. In the second year the Account showed a surplus. But the surplus of the second year was not used to meet the deficit of the first year. Instead of balancing the accounts, the Government decided on an additional pay-out of approximately a halfpenny per pound, which absorbed £815,349. Now the Government is faced with the necessity of still further increasing the guaranteed price without any guarantee that the price it receives on the London market will reimburse it. A market recession would inevitably place a further burden on the Reserve Bank. How is that burden to be met? If deficits are to be borne by the Dairy Industry Account and surpluses are to be distributed to the farmers there is no prospect of the accounts being balanced and New Zealand will be faced with a growing debt in the Reserve Bank. If the present method oi dealing with deficits and surpluses is maintained, the only way in which the debt can be liquidated is by adding enormously to the present heavy burden of taxation. Non-liquidation means inflation. The Minister of Finance has stated that a case can be made out for moderate inflation so long as the farmers’ position is secured, but even moderate inflation is a dangerous experiment. Once it gets out of hand there can be no security for the farmers or anybody else. If the farmer is to receive an increased price for his dairy produce every time lie can show that his costs have increased it is difficult to see a stopping place. Costs are still mounting and while the present policy of the Government is pursued they must continue to mount. The dangers of the Government’s guaranteed price plan are becoming more and more apparent.