WHY VALUE OF MONEY IS DROPPING

Greymouth Evening Star, 18 October 1948, Page 8

WHY VALUE OF MONEY IS DROPPING

Can any measure of stabilisation be achieved when the supply .of money, freely spent, is greatly increased? Recent figures taken from the Abstract of Statistics show that the total income in New Zealand for the year ended March, 1948, is estimated at £455,000,000, which is more than double what it was in 1938-39, says the Otago Daily Times. Do these 1948 figures indicate that the people are materially better off than they were in 1939, or, when they are read in conjunction with the figures showing the goods available for consumption, do they indicate a degree of inflation that has a steady tendency to increase? In the year 1934-35 the aggregate of income was £106.4 millions, and the value of production stood at £97 millions. Total normal income should keep step with production, or, to put it another way, total aggregate production should keep abreast of income.

Ever-widening Gap

The tendency of recent years, however, has been an ever-widening gap between money in terms of aggregate earnings of the people and production. . There must always be a small gap between the two for the reason that the value of production is based on those at the point of production; that is, at the factory. To this value must be added certain charges for services of various types. When the gap continues to increase there is evidence of inflation. The 1934-35 figures show a fair equeation between goods and earnings, but subsequent years disclose an ever-widening gap. Thus by the time 1945-46 is reached (the last figures available) there is a bis disparity. The figures are: Aggregate private income, £326,100,000; value of production, £156,500,000. Decline in Volume of Goods

In his Budget statement of 1947 the Minister of Finance, Mr Nash, said that “goods available for consumption in New Zealand during 1945-46 were onlv 89 oer cent, of what was available h> -1938-39, and on a per head of population basis the rate is only 83 per cent. This means that on the average each person could obtain only about fourfifths of the goods available to him oilier in 1938-39. Whatever might be done in the way of increasing money incomes cannot alter that fact, which is the real measure of our general standard of living.” Between 1939 and 1946 the actual

volume of money in circulation nearly trebled, while the volume of goods de- ' dined by 11 per cent. Production has not kept pace with money, and until there is a better balance between the two, prices must remain high, or possibly rise higher.