The Star. WEDNESDAY, JULY 6, 1921. THE COST OF LIVING.

Hawera & Normanby Star, Volume XLI, Issue XLI, 6 July 1921, Page 4

The Star.

WEDNESDAY, JULY 6, 1921. THE COST OF LIVING.

Delivered every evening by 6 o'&.oak Hawera, Manaia, Normanby. Okaiawa Elttuuii, Jta^alukl, Kaponga, AwhtaM, Opunake, Otakeho, Manutahi, Alton Hur ley ville, Patea, Waverlej.

Altho^ogjb, as the Government Statistician Jbas pointed out on several occasions, the index numbers showing the fluctuations jn prices do not necessarily represent accurately the rise or fail in the cost of living, because the standard of living and the changes in the popularity or otherwise of certain foods affect the position, it is none the less interesting to note the movements of the index numbers. The latest Abstract of Statistics shows that for the three food groups (meat, dairy produce and groceries) the index number for the Dominion on May 15 was 179----compared with 1805 on April 15, The drop in the index number from December 15 last to May 15 of this year is 123 points,- and the increase per cent, over July, 1914, stood at 67.48 on May 15 compared with 78.97 on December 15, a fall from December to May of 11.49 per cent. Prices at May 15 were just a fraction higher than on July 15 last year. It will be seen then that prices are slowly falling and th© purchasing power of money is increasing, but the money in circulation has diminished The process of bringing the cost of living down to normal will no doubt take a long time, probably as long as it took for it to reach its highest point. For about seven years the cost of living continued to increase, and at the rate of fall indicated by the Intfex numbers it will take about as long for it to come down again. The cost of living may, of course, never return to what it was before the war, but we think that when another six and a half years—the downward movement began at the beginning of this year— have passed by we shall probably find prices practically the same as they were at the beginning of 1914. Why we are inclined to that view is that we believe that, whatever fluctuations take place in prices, every necessary commodity has only a certain economic value. For instance, a pound of cheese or butter has only a certain value at

which it will encourage a maximum} demand, and.as long as it is offered for sale at more than the value regarded j as reasonable by the consumer so long will the tendency among consumers be to reduce consumption, and that tendency will act as a force towards reducing the selling prices. The same principle holds good as far as the value of labour is concerned. Increase its price, beyond its economic value—that is, pay a man a wage beyond the value of the work he does—and the tendency is to reduce the demand for labour, which, of course, means unemployment. Then when labour can be secured at a price: generally regarded as reasonable the demand will automatically increase. There is a very close connection between the cost of the necessaries of ] life and the cost of labour, and the fall j of one involves-the fall of the other. The process is taking place in Great! Britain, where many thousands ot I ' workers have recently accepted wage j reductions. The retail prices of food| in the United Kingdom in June had increased 118 per cent, above those of; July, 1914, but the June figures show : a fall of 14 per cent, compared withj May, 1921. It is" interesting to note that the fall in the cost of living in Britain has been fairly rapid in recent months. The highest point was reach- ] ! ed in November last, when the. increase was 176 per cent, above that of July,' i 1014, The figure for June of this year i (118-per cent) is only three per cent. , above that of July, 1918, when the increase, was 115 per cent, above July, 1914. The increase by July, 1920, was 152 per cent. It is certain that prices are definitely falling in Britain, but it |is noticeable that with the fall there has come a great increase in unemployment. Nearly every country quoted in the Abstract of Statistics shows a fall in the retail prices of food. The downward movement, being world-wide, may be expected to continue unless some unusual interference with trade takes place, which is very unlikely. Looking back over last century one finds that there were movements of prices which operated1 as if by an inexorable law-—a period of prosperity was inevitably followed by a depression and an all-round decrease in prices. While many people welcome the fall in prices and look forward to the days when the Cost of living will be much cheaper, it should not he forgotten that the change which is taking place will bring its hardships and difficulties, and those who have not made some preparation to withstand the lower values (including lower wages) may find that the return jour ney to normal conditions is beset with troubles. The dangers will c minimised if broad and reasonable views are taken and all sections of the people try to realise the true petition. The outstanding need in New Zealand is for everybody to work hard and not make unreasonable demands, for whatever happens to food prices we cannot escape the payment of the heavy debts to which the country is committed. Those debts were greatly increased when money was showing a marked depreciation in value, but if they are i:ot paid off with depreciated money then tjie burden will become much heavier as the pound recovers its purchasing power. The greater its production, the better will the country's prospects be for paying its debts.