THE BUDGET

Grey River Argus, 23 July 1941, Page 7

THE BUDGET

ECONOMIC POLICY Primary Products WELLINGTON, July 17 In |he course of the financial statement, Hon. W. Nash dealt with the Government’s policy in the matter of export trade and secondary industry. He stated particulars of the contracts

and other arrangements made with the United Kingdom Government toi ' the disposal of our dair” produce and meat have recently been announced by his colleague, the Minister oi Marketing. For the current production season now drawing to a close the United Kingdom Government have treated New Zealand very fqiily in agreeing to purchase, shipped or unshipped, 248,000 tons of meat, 120,000 tons of butter, and all the cheese available. Even so we are faced with storage problems of con- i siderable magnitude, particularly for meat, where- the carry-over at the | end of September is likely to be as high as 108,000 tons. In anticipation of such a contingency, arrangements have already been made for additional storage facilities throughout the Dominion. at an estimated cost of over £500,000. To make more meat available to the United Kingdom Government than can be lifted in available refrigerated ships, the canning plants in the Dominion are being considerably extended at an estimated cost of about £300,000. To meet the needs of the United Kingdom Government we have undertaken to increase cheese supplies for export, to 160,000 tons. This involves a widespread change-over from butter production to cheese, but with the full co-operation of the industry it is being carried out. In one way and another financial assistance is being given to farmers and to factories concerned to enable necessary plant and equipment to be obtained. Special measures are also being taken to pro. vide housing for additional cheesefactory employees and some compensation to butter and cheese companies for the increased costs arising from the change-over. It is difficult in precent circumstances to assess the real cost to the State of the, change-over, but the best available estimate is over £500,000. i Produce Contracts: rr ” - agreements < recently finalised between the United ' Kingdom and New Zealand Govern- , ments for the coming and subsequent j seasons’ produce constitute in prii<- < ciple a distinct departure from the ( previous agreements which have been on a definite quantitative basis. Briefly the new agreement provides —(1) The United Kingdom Government are to purchase and pay all the New Zealand produce that' can be shipped in any given season; (2)— ; New Zealand primary industries a r«? to make every effort tn adapt their ' production to actual shipping potsibilities —that is, by adopting every ‘ possible economy such as the debon- ' ing. canning and pressing of meat, 1 and the possibility of processing whey 1 butter, etc.; (3)—alternative markets are to be developed wherever possible; (4) —Reserve stocks of storable foodstuffs are to be agreed upon between the two Governments, and to be determined in relation to—(a> probable demands during or after the war, and (b) the importance of tne industries to New Zealand; (s)—The . financial burden of acquiring and ’ holding these reserve stocks, together with contingent charges in relation to storage, insurance, quality deterioration, etc., to be shared equally -between the two Governments.

The conclusion of the foregoing agreement provides a definite basis on which the future financial obligations of our export trade with the United Kingdom will be determined. Secondly, it creates a broad framework within which our future primary production must be organised and directed.

Under these arrangements the financial results of the coming season will obviously be governed to a large extent by the quantity of goods that can be shipped. It is likely that millions of pounds will be tied up in stocks held in store and on these there will be a charge for storage and other services, together with the possibility of loss arising out of the ultimate disposal of the produce. The estimated cost of purchasing whey butter amounts to £450,000 with, at present, no major outlet in sight. Notwithstanding all these liabilities actual and contingent, the Government have alreadv announced that they are prepared to purchase all butter and cheese available for export at the same guaranteed prices as for the season just closed. Although the dairy industry may be involved in some minor losses arising out of all these difficulties, the decision of the Government will protect them against the major risks and give farmers financial security to carry on their operations with confidence.

Fruit: It is anticipated that no shipping will be available this year for the export of fruit, which in the past has been worth from £5U0,000 to £750,000 per annum. The fruitgrowers, however, are protected by the arrangements made for the State to purchase the whole of the apple and pear crop for the season. Successful endeavours are being made to absorb the surplus by increased consumption within the Dominion.

Tobacco: During recent years to-bacco-growing has become an important industry, and in conformity with the Government’s policy oi eventually making New Zealand self-supporting in the matter of tobacco-leaf much has been done to incourage the growers concerned. Not only does the quality of the product continue to improve, but the guaranteed basic prices determined by the Government assure the grower a reasonable return for his activities. Wheat: As regards wheat too, the Government’s policy of growing our requirements within the Dominion is producing satisfactory results, and during recent years both the quality and quantity of the product has shown a marked improvement. Growers are guaranteed a minimum price, and the Wheat Research Institute set up by the Government m co-operation with the industry has been most succesful in the development of better-quality wheats which do not require blending with imported wheats. As a war measure the Wheat Committee, representing the Government, the growers, and the bakers, has arranged for the holding of substantial stocks of wheat in the Dominion. Secondary Industries: In regard to our secondary industries, the war has brought additional business to mam z of our factories, and their chief trouble lies in getting essential supplies of materials and plant from abroad and uncertainty as to when goods will come to hand. The Government, and particularly my colleague the Honourable Minister of Supply, are doing everything possible to minimise these difficulties.

Stocks of Materials: Arrangements have been made for the accumulation by maufacturers of reasonable stocks of certain basic materials to ensure continuity of operations, and in other cases the Stat' has made bulk purchases for distribution as and when required. The supply organisations in London America, and Australia are being stfengthened, and the volume of representations to assist manufacturers to

obtain their requirements is con-

siderable. The issue of import licenses covering a year a'nd. the intention to issue certain licenses for 1942 now should' also assist manufacturers in overcoming their difficulties. Supply Council: The setting up oi: a Supply Council should also indirectly be of much assistance to manufacturers. This body, has been established and will be given powers to operate under the general control of the War Cabinet and the Minister of . Supply, primarily to overcome difficulties in obtaining supplies for the armed forces. Bv planning supplies for the forces well ahead of required delivery it is anticipated that the Council will he able to give manufacturers longer- ' unn contracts and continuity ot business that should be of consider- , able value to them in duv.ing up ■ their production schedules. The council 'will also take steps to ensure that the necessary materials for defence contracts are available when required. ■ and action along these lines should avoid trouble arising from local stocks cf materials being used up on account of rush orders. I Reduction in Bank overdraft ana desposit rates: Another matter which will be of considerable benefit to all producers and in fact, to all sections of the community is an arrangement made with the trading banks, for a i reduction in overdraft rates from I the present minimum of 41 per cent. | with a maximum of 61 pre cent, to al minimum of 4 per cent, and a max-1 imum of 5 per cent. A similar re- 1 duction in the rates charged by stock and station agents is at pres-I ent under consideration by the companies concerned. These reductions will operate as from Ist August. This change will necessitate some reduction in bank-deposit rates, and, concurrently, it has been arranged that the maximum deposit rates that may be paid by building and investment societies and local authorities and trading companies will .also oe reduced. These adjustments in deposit rates will be effective tomorrow.

In keeping with these reductions the interest rate for deposits m excess of £5OO in the Post Office Sav-ings-bank will be reduced to 2 per cent., a reduction of 1 per cent. The present rate of 3 per cent, on deposits up to £5OO will remain unchanged. Price Stabilization: In dealing with reactions from the war, the Government has not overlooked the consumer. With many cases oi goods for consumption in short supply owing to difficulties in obtaining imports from abroad combined with the diversion of a considerable part of our manufacturing capacity to war work, the retail prices of goods are likely to rise unless adequate measures are taken to deal with the situation. Realising this, the Government took ear l - action in setting up a Price Tribunal, which has done good work in checking avoidable increasefe in retail prices. Increase in the cost of articles imported from overseas is beyond our control, but the Government is considering ways and means of stabilizing within reasonable limits the cost of the principle essential commodities that enter into lhe day-to-day living costs of the average citizen. It is a very thorny problem, and different methods will

• probably have to be adopted for ■ different commodities. Payment of I subsidies is one method that has al- ; ready been used to stabilize the prices of bread (£288,000), sugar (£240 000), and coal (£200,000) making an aggregate annual cost ol £728,000. The objective we have in mind is protection of the standard of living of the rank and file of -,o people by stabilizing retail prices of essential commodities as well as wages. It might appear that the objective could be achieved much more easily by offsetting price-rises with cost-of-living bonuses or wage-in-creases, but that provides no solution at a time when goods for consumption are in short supply. Short supply of consumption goods is inevitable while the whole British Commonwealth of Nations is making a giganitc war effort involving the loss to industry of millions of men and the call upon industry for | enormous quantities of supplies to equip and maintain, cur armed forces. An illustration o f the effect on New Zealand is provided by an analysis of the import figures. During the calendar years 1938 and x„39 the value of consumers’ goods imported was £14.8 millions and £10.9 I millions respectively, wnue me vaiI ue of producers' imported goods remain practically stationary, and when the analysis of 1940 imports becomes available I have no doubt the downward trend in consumers goods will be found to have continued. I would also draw particular attention to the table which appears in the appendix to this statement showing the satisfactory growth during recent years in farm and factory production and showing also that since the outbreak of war the > reduction in goods available for con-1 sumption is due solely to the reduc-1 tion in imported goods. National Savings: The cheerful and resolute manner in which the people of the United Kingdom have accepted drastic curtailment of their consumption of many classes of commodities excites our admiration, and I have no doubt that our people will willingly do without things that might stand in the way of our part in the war effort. The average citizen, perhaps, does not realise the extent to which he can help the war effort and at the same time assist in maintaining stable prices by curtailing his consumption of goods, and particularly imported goods or goods made from imported materials; that he can reasonably do without. His. saving in such goods consumed can be made available for the war effort by paying the money into

National Savings Account or by using it to buy Bonds or other war loan securities. The accumulation of small savings by the mass of the people is of the greatest importance at a time when commodities are in short supply. That the efforts of the Government. to keep retail prices stead'/ has been reasonably successful is shown by the fact that since the outbreak' of war the retail price index in New Zealand has shown an increase of 61 per cent. only, compared with SI per cent., in Australia and 271 per cent, in the United Kingdom. Sheep Industry: The proposals lor

the sheep industry provide that wool ■ will continue to be purchased on behalf of the United Kingdom Government, and no great difficulties are | anticipated in dealing with this product. In connection with the allied 1 product of meat, however, we nave already had to take special measures I to increase storage and to extend the I c anning plants to cape with the quantity of meat that cannot be shipped in frozen form. It is recognised, however, that it would be inequitable and contrary to the best interest of th-.? industry and the Dominion to allow losses to remain where they fall according to present war necessities. For the sake of economic stability now, and to preserve intact our productive resources for the future, it is necessary to consider wool and meat together, and work out a scheme under which the State will accept tnni financial responsibility lor the normal exportable surplus as determined | in the light of the new agreement ' with the United Kingdom Government. The schedule of meat prices] is at present under consideration and will be discussed with representatives of the industry. Broadlv, it can be said that the arrangements made win give the industry a measure of financial security that will enable it to carry on successfully.

Subsidies to Pastoral Industries: Apart from the large liabilities and the risks being taken by the State to protect the pastoral industries from the major economic shocks arising from the war, these industries are receiving considerable assistance, in keeping their production costs down. There is provision on this year's estimates for subsidies and other pavments amounting in the aggregate to approximately £1,400,000, the chief items of 'which are as follows: — Fertiliser subsidy £751,000, railage rebate (lime and fertiliser) £377,500, railage rebate on farm produce £65,000, noxious weeds destruction £55,000, compensation for condemned stock £39,000, grant. New Zealand School of Agriculture £33,000, rabbit destruction £32,000, subsidies on account of cow testing £15,000, subsidy on account of manufacture of butter boxes £lO,OOO, miscellaneous £20,b00; total £1,398,000. The war must not be used as an excuse to put the clock back. We have great advantages over people in manv other countries in that we have already achieved many of the things which other peoples are now begining to ask for. We have gone a long way in building up a better world in which there is more equality of opportuniU- and fewer extremes of wealth and poverty, while we have freed men from economic uncertainty. Having gained much, we have much more to lose unless we win this war.

This financial review- is placed before honourable gentlemen during one of the most devastating conflicts in hitman history. It. appears that the whole world may be drawn into the vortex of war—a war not of the choosing of the democratic peoples bitt of the cold calculating will of a small body of persons who have studied the reactions of normal peoples and used the knowledge so gained together with an application of diabolical genius to crush and subjugate the peoples of the world. Czechoslovakia, Austria, Poland. Denmark, Norway, Luxemburg. The Netherlands. Belgium. France. Yugoslavia and Greece have all in turn

been subjugated and occupied. The force of the Axis Powers has now been turned against Russia, with whom they were in complete agreement, and no one knows how soon the ' cables may announce an extension of the area of conflict. All that we can do is to resolve that come wiiat may, we will hold on to the freedom which has been built up through the-ages, ’ and all that we have shall be used ■ with no thought of surrender, that 1 with the United Kingdom. Canada. 1 Australia. South Africa, India, and 1 the colonies we are one—strong to resist and determined to overcome. Aided by the magnificent material resources the United States of America mobilized under the leadership of its great President, Roose- 1 veil, we shall ultimately see the conflict ended in the triumph of the freedom-loving powers. Then we will' turn our hearts and minds to building up a State worthy of the sons of freedom who have devoted their lives, to its maintenance and expansion. |