THE H.B. TRIBUNE FRIDAY, AUGUST 26, 1927 PUBLIC FINANCE

Hawke's Bay Tribune, Volume XVII, Issue 216, 26 August 1927, Page 4

THE H.B. TRIBUNE FRIDAY, AUGUST 26, 1927 PUBLIC FINANCE

7TIHOSE who availed themselves— A there was a fair attendance, but there should have been many more—of the privilege offered of hearing Professor Murphy’s address at Hastings last night on our public finance will fully understand our justification for giving a very full report of it on another page of this issue- To those who were not present we would strongly commend its perusal as something really worth while giving thought and study. Even those who were there may find it an advantage to go through it, as the Professor’s rapidity of diction--no doubt due to the necessity for covering a fairly wide field in a limited time—scarcely gives opportunity for all his many points to sink in to complete appreciation ol their significance. As the lecturei said, there seems little capacity among our parliamentary represents tives for any constructive criticism of the conduct of the State’s finance, and what little there may. be is very apt to be tainted by party prejudice. It is therefore well for us to have the subject dealt with by one who is both capable and disinterested, and who at the same time recognises the difficulties that beset even the.honest politician under the urge of his constituents.

In the main Professor Murphy’s lecture was directed more particularly to the continuous “borrowing policy” that was initiated in 1891 and has ever since been pursued, even if with varying vigour, by Ministries of both colours. This policy, directed at its inception to the carrying out of developmental public works, though allowed later on to stray into quite different avenues of expenditure, has in the opinion of the lecturer been fairly well warranted. Indeed, his view is that, in the circumstances of a young country like this with a very limited supply of private capital, and that in no way capable of effective consolidation, there was scarcely any alternative if enterprises of the requisite magnitude were to be undertaken. With regard to the manner in which the money resources thus made availalbe, on the credit of the taxpayers, has been spent, not a great deal was said, though hints were made of unfavourable political influences in the past that, happily, were now not in operation. What was, however, emphasised was the need for closely scrutinising the ultimate products of the expenditure, and of making sure that, in the light of present day developments, we might not be rating their values too highly. Professor Murphy was especially insistent on our realising three factors that he said were likely to operate in the future and whose cumulative effect we must, sooner or later, most assuredly feel. The first of these was that indications pointed strongly to the annual outgoings in respect of our Public Debt increasing very substantially even beyond the ratio of increase in the capital amount. This seems inevitable having regard to the ruling and prospective rates of interest at which maturing loans have already been and will have to be renewed. The second was increasing difficulty that was likely to be experienced in getting fresh loan money from the accustomed source—the British investor. The third was that we must be prepared for a general though gradual tendency downward in the monetary

selling values of our products, the resumption of the gold standard in the Old Country after a long period of paper money having something to do with this. To stand against these adverse elements there seems, of course, no remedy but those of increased production and reduced expenditure in both public and private avenues. In short, we must be prepared for a time when the obvious extravagances to which we have given ourselves over owing to a false conception of the value of money must be curtailed and more general and individual effort must be put into augmenting the returns from the capital resources that are at command, and particularly from the land.

The lecturer’s view—and probably a good many will agree with him, so long as no pet scheme of their own is affected—would seem to be that the State’s borrowing policy has just about fulfilled its purpose and that it should he gradually tapered off. That it should be suddenly dropped would, of course, mean a disastrous condition of unemployment that would entail infinite hardships. The problem, of course, will be, after so long a dependence on big capital borrowed from abroad, to find a substitute for it in order to maintain the rather fictitious prosperity it has helped so materially to create. There can be little doubt but that the improved standard of living which has been attained during the last thirty or forty years among the mass of our population is to something more than a merely appreciable extent due, directly or indirectly, to the spending of this money among us. Rather, perhaps, it should be said that this is due to the credit established by these loans at the source of supply of most of the commodities, some of them of quite luxurious character, to which we have become accustomed in our daily life, has, in effect, brought goods into Lie country for which payment has been postponed for many years, and the distril ution of those goods among the people is, on the figures, far beyond what the countervailing value of our exports, less interest on our debt abroad, would possibly warrant.