EXPORT SURPLUS

Hawke's Bay Tribune, Volume XXII, Issue 36, 26 January 1932, Page 6

EXPORT SURPLUS

BUT FALLEN CUSTOMS. IS REMEDY TAX OR AXE? While pointing out that New Zealand’s cutting of imports and maintenance of exports is good so far as favourable trade balance goes, “Current Problems” (Australia) also observes that the Budgetary position in New Zealand is not well suited to meet such a trade policy, because the Budget carries too big a proportion of fixed charges. To meet these, tho Government relies on a Customs revenue that is only compatible with high exports and imports. If a big fall in imports means too big au increase in direct taxation, this latter eventually cuts at tho root of all internal production, including production for ex port. The alternative is to reduce all Governmental expenditure that is not fixed, to reduce social services, and to curtail State business undertakings. ACCURSED WORLD PARITY. “New Zealand is dependent upon exports, and to 95 per cent, of her exports upon that accursed thing world parity. From the commencement of 1928 until last September world prices have been steadily falling, and in terms of gold it is by no means certain that bottom has yet been reached. As between 1927 and 1931 the export price index number dropped from 1684 to 1267: wholesale and retail price indices also fell, the former from 1541 to 1267, and the latter from 1615 to 1573. The wages index increased from 1656 to 1664. Although the index number system has manifest shortcomings, inasmuch as it covers commodities but not services, it does indicate definite trends. The trend that the indices for the years 1927 to 1931 suggest is that the peak of the upward movement had been reached, and. in nautical parlance, sail had to be shortened for an approaching storm. Further, there rapidly accumulated evidence from overseas that the storm would be a typhoon. On the contrary, in the critical year, 1929, imports, reached a total of £48,797,977.”

The writer thinks that tho Government should have taken earlier steps to check the growth of Government expenditure, and the corresponding necessary increase in revenue and taxation, apart from that necessary to meet the fixed charges of public debt. “Using the ‘adjusted’ figures published by the Dominion’s Treasury since 1922, expenditure has increased from £19,544,916 to £25,020,953 in 1930, a total expansion of £5,476,037. or 22.8 per cent. Of this total £17,225,000 is mortgaged in advance, that is to say, it is spent under permanent appropriation, an irreducible charge, leaving only some £7,000,000 upon which economies can be effected. Ou the revenue side of the accounts taxation produces, or is expected to produce, £19,500,000, leaving £5,400,000 to fie found elsewhere. The main source of revenue is indirect, the Customs duties, which are expected to provide approximately 50 per cent, of the taxation revenue and about <33 per cent, of the total revenue. CONSTANT v. INCONSTANT. “The position, therefore, is that New Zealand is a country the national income of which is dependent upon a highly fluctuating quantity, world parity. No less than 68 per cent, of revenue is mortgaged before being received. Thirty-three per cent, of revenue is dependent upon the full maintenance of export values, which must provide the imports from which that proportion of revenue is obtained The financial system balances a constant equilibrium, which is indefensible. Admittedly, it is the mistake that every country of primary production has made, but that is only an excuse, not a justification. “The results are that taxation has risen from 18 per cent, in 1924-25 to 27 per cent, now, and'is being largely paid out of capital. Nor is this all, for apart from consolidated revenue, out of the fallen income have to he met special expenditures to meet the

limes, which has meant further taxation, direct through increased taxes, or indirect through increases charges. “It is quite clear that the restoration of the national income is vital. That can only be achieved by restoring prosperity to the primary producer, which necessitates that Governmental expenditure be cut to the bone that social services be drastically reduced, and that Government enterprises be either made to pay or eliminated. A net return on railway capital of El 12/4 per cent, only goes less than a third of the way to meet an average interest rate of £4 D/8 per cent. “New Zoaland, like Australia, has been indulging in inflation by bor rowing. While the war debt and that for discharged soldiers was reduced during the decennium, 1920-1930, by £22.565,000, the ordinary debt and State Advances rose by £80,000,000.”