NATIONAL FINANCE

Greymouth Evening Star, 18 June 1930, Page 5

NATIONAL FINANCE

MR. FORBES’S STATEMENT.

[PEE PEESS ASSOCIATION.]

WELLINGTON, June 17. The Prime Minister and the Minister of Finance, Hon. G. W. Forbes, in an interview to-day, stated: “My attention has been drawn to remarks concerning the deficit of £577,0.00 in the ordinary revenue account of the Consolidated Fund for the year 1928-29, in which the suggestion has been made that such deficit was “more apparent than real, and that had a change in the accounting for the Post Office receipts not been made, the deficit would, mainly, not have occurred.” The deficit referred to, he said, was quite real, as was indicated by the following figures, taken from last year’s Budget:-—-Ex-penditure, £24,176,928; Revenue, £23,599,676; deficiency £577,252. “In public finance, as in private finance,” said Mr. Forbes, “each year s transactions are judged separately, as apart from any other year, and the State, in the same way as the individual, either lives within its income, or it does not. For the year in question, it did not, and no ; mount of discussion will alter that fact. In respect to thj P. and T. Department, the Prime Minister draws attention to the P. and T. Amendment Act of 1927, which sep: rates the P. and T. finances from the ordinary revenue account of the Cons didated Fund, and provides for the l ost Office accounts to be kept on a coi xmercial basis, with provision therein fc r setting up an ade-

quate depreciation and renewal reserve. That change was made by statute, and it could not have been departed from unless fresh legislation had first of all bee .1 passed by Parliament. 'lt was trv. 3 that the ordinary !revenue account t i the Consolidated Fund received les:; revenue from the Post Office in the year 1928-29 than it did in the previoi. s year, but insofar as me previous ye. r was concerned, and other years p: '.or thereto, the additional receipts rc ferred to, and used for general expend, ture purposes, actually represented a Post Office depreciation of reserves, which, according to the procedure adopted in ordinary commercial practice, should have been retained intact until such time as those moneys wore required for the renewal of telephone and telegraph lines and apparatus, all of v. Inch are comparatively short lived. The capital expenditure on this type of asset has been very heavy in the last few years, and if the change had not been made in the direction of enabling a Depreciation Fund to be created, it would merely have meant unsound finance to use the excess cf receipts to relieve tho taxpayer in the interim, as, within a comparatively short period, when renewals become necessary, the taxpayer would have been called upon to find en bloc a considerable sum, which should have accrued over a period of

years. Illustrating this point, the Prime Minister remarked that a statement prepared in 1926 (the year before the Amendment Act was passed) shows that in 1940 it is estimated that no less an amount than £1,250,000 will be required for renewals alone. The only alternative to setting up reserves for this purpose would bo to resort to the unsound practice of capitalising such expenditure out of loan funds to replace assets work out in a period very much shorter than that provided in the legislation governing the repayment of the public debt. The Prime Minister added that a further suggestion had been made that the profits of all the Government trading departments should be handed over to the Treasury. Whether, for example, remarked Mr. Forbes, the Government

J ife Insurance Department, the funds of which belong to the policy holders, s included in such a recommendation is not clear; but, in any case, a preference to that Department serves to illustrate the value of such a casual suggestion. The fact that legislation last year was passed to provide foi half the profits in the Public Trust Office being paid to the Treasury is also referred to, but that criticism surely overlooks the fact that, for a number of years, that Department had retained the whole of its profits, which were used to build up fairly substantial reserves. When that stage had been reached in Post Office finance,,t will be time to talk about allocating the profits to other sources. Undei all the circumstances, the setting aside o surplus post office revenue after meeting working expenses and inteiest charges was the right and proper thing to do, notwithstanding any temporary inconvenience to the Consolidated Fund. Hence the suggestions made by the critics merely amount to nothing more nor less than advocating the adoption by the Government of unsound financial methods, which suggestion it is not my intention to adopt.

MR POLSON’S ADDRESS. WELLINGTON, June 17. A survey of the economic conditions of the Dominion was made by Mr W. J. Polson, M.P., during the course of his presidential address, at the opening of the annual Dominion Conference of the N.Z. Farmers’ Union today. He outlined the features of the depression of the past year, and made

suggestions for the alleviation of the present conditions. “Farming is the basic industry of the Dominion,” he said. “On its success depends the prosperity of the Dominion, but the converse is also true. Every efficient unit of labour, of distribution, of finance, of trade and of manufacture, can contribute directly to the success of the farming industry, therefore, while we are farmers first and last, it is because we are farmers, that we are compelled to take an interest in the whole body politics. The chief features of the past year’ are the decline in produce prices, and the continuous and persistent numbers of unemployed. Reviewing the decline in the price for wool, Mr Polson said that finance in Japan, Germany and France had been unsettled, with the result that the Foreign demand was absent. On top of this, the British export trade was stagnant in textiles during the selling season, with the result that there had been practically no market. In consequence, there had been an export decrease of 122,426 bales, or 22.33 per cent, for nine months of the year ending March 31. The 603,260 bales exported had been valued at £10,610,979 as compared with 635,653 bales at £18,576,291 for the previous, year. “Those who were able to withhold their wool from sale were wise to do so,” he said. “The British buyers were not really operating because they expected industrial troubles. This situation called fox- Government assistance to -wool growers, and it has cost

the Dominion a great deal that no method of financing the holding of the wool clip was available. Butter fared better at the beginning of the season, but the market weakened in sympathy with the weakening of markets generally, and with world conditions. Some co-operative factories wisely held off from throwing their product on the market. To have done so would have increased the difficulties of the situation.” In the speaker's opinion, a return to high prices could not be looked for. In fact, experts giving evidence before the Indian Currency Commission had pointed out that the output of gold was decreasing and that this presaged a period of declining price levels. The unemployment problem could not be met by borrowed money and the position could only be faced by reducing the costs of production. This was not an easy thing to do, but the shock could be cushioned by the intelligent handling of the situation. This did not mean that they should proclaim a general reduction in wages, as such a step would bring labour trougles throughout the Dominion. “We must combat every effort to increase production,” said Mr. Poison, “therefore let us say frankly that every wage increase, every reduction of output, go slow and “ca canny” are directly caus-

ing unemployment. Every taxation increase, and every social surcharge tends to increase unemployment, because the higher production costs are the fewer the products will be made, and the smaller will be the profit and consequently there will be a reduction of our national income. New Zealand must produce more at lower cost, to sell at dower prices, and thus make possible larger consumption of her export products. It is our only hope of salvation. In the first place the credit of the Dominion must be preserved. One of the chief objections to the super-land tax introduced last year was that it reduced the value of our chief asset, land. It is necessary tq break up those large estates which are suitable for closer settlement, but this must be done without depreciating the value of farming land.”