“ONLY WAY OUT”

Gisborne Herald, Volume LXVI, Issue 19994, 20 July 1939, Page 6

“ONLY WAY OUT”

HIGHER EXCHANGE RATE SHEEPOWNERS’ ATTITUDE GUARANTEE NOT WANTED WOOL AND MEAT EXPORTS (Special to the Herald.) WELLINGTON, this day. “I am more than convinced that the only way out of our present difficulties is by raising the exchange rate,” declared Mr, H. D. Acland, in his presidential address to the annual meeting of the New Zealand Sheepowners’ Federation to-day. Mr. Acland reviewed the very grave position of many sheepfarmers, the prices of wool and store stock having fallen far short of those required to meet the enormously increased costs of production, and said that at no previous period had the position been so difficult and fraught with such dangerous possibilities as at present. Farmers had cut their costs as low as possible, but it was now clear that unless an adjustment between the level of internal costs and export returns was made, no prospect of profit for sheepfarmers, especially those depending on returns from their wool and store stock, could be looked for. ‘’Costs both on and off the farm arc increasing, while our export returns are still steadily declining,” Mr. Ackland said. Farmers Penalised “Put shortly, the position appears to be that in addition to bearing an equal share of taxation with other sections of the community, the primary producer exporter is further taxed under the existing exchange control regulations to the extent of 15 to 20 .per cent on the gross value of his exported products, measured in New Zealand money.

“To illustrate my point, take export wool values, for instance, say 9d. per lb. for the last season’s average. It was given in evidence in Wellington recently that the average weekly wage of a waterside worker had been £9 12s Gd. This, put into terms of wool value, would equal 256 lbs. of wool per week, and it would require the grQss wool product of 1064 sheep to pay the yearly wage paid to this worker, allowing for an average clip of 81b. per sheep. “I mention this as showing that the money paid to many classes of workers within New Zealand is greater than that which is justified by receipts for export. Wool and Meat Prices

“Average wool prices this year are 9.19 d per lb, and £l3 2s 2d per bale, which is roughly 3d lb less than last year, and lower by 22s per bale. The average wool price per lb over the last 10 years is 8.07 d approximately. I mention this to give you some indication of what we may expect to get under .a guaranteed price for wool.

“The fixed price we might expect under a Government guarantee would probably not exceed 7Ad per lb for lamb, with other classes of meat in proportion.

“Experience so far shows that not only in New Zealand, but in other countries also Canada with her wheat for instance—the so-called guaranteed price can give no more in the long run than an average price for the particular export product on its overseas market averaged over a period of years. Effect of Exchange

“I am more than ever convinced that the only way out cf our present difficulties is by raising the exchange rate. This would assist exporters by lifting export prices in New Zealand money in proportion to the rise in exchange, and would also hold out greater inducement for primary producers- for export to maintain their land at its maximum production level, and st> continue to feed our sterling funds to the fullest extent from the only source available to us.

“Also it would have the effect of bringing down the volume of imports and assist in restoring the balance needed to properly provide for our debt services’ overseas, and payment for our essential imports. “Admittedly it would involve increases, in New Zealand currency, of interest and other payments overseas, but this would only effect a proportion of our export returns, while the rise in exchange would apply to the gross amount realised for our exports, and be of great assistance to us. An Alternative “Failing a rise in exchange, it would appear to be essential to reduce expenditure on unproductive works, and bring labour costs generally down to a point where productive industry can continue without using up capital, or unduly mortgaging its future ability to give employment. “Regulations and fixation of costs on industry may divert real wealth within a country, but they cannot create it, and I still maintain that with governments, as with individuals, any breach of fundamental economic principles In the long run will bring its own detrimental result.

“It will be obvious that unless a substantial lift in prices, or what would appear at the moment to be an almost unattainable reduction in costs, is arranged for, large areas of grazing country may be forced out of production. A restoration of the balance between internal costs ancj external prices is the first essential to recovery.”