WELLINGTON NEWS

Hokitika Guardian, 29 July 1929, Page 2

WELLINGTON NEWS

COSTS OF PRODUCTION. (.Special Correspondent.) WELLINGTON, July 26. With values of wool, wheat and sugar .depressed, and the probability that the present Socialistic Government in Britain will abandon, or at least very much modify the preference duties granted to the Dominions, and which have proved very helpful to Australia so far as sugar and dried fruits are concerned, is causing business people in the Commonwealth to become alarmed. Industries protected by the tariff have been 'in a very favourable position compared to industries which have to compete without the aid of protection, and there can be little doubt that those favoured industries with the aid offered have been alble to exist comfortably without recourse to scientific methods in ascertaining accurately the proposition of each of the . various factors in production to the whole cost of production. The same can be'said of sheltered industries in New Zealand. Take for instance the cement industry which is highly protected. The concerns are getting along comfortably and profitably, and prices are fixed, and for anyone who wants cement the cate is “ take it or leave it,” that is the price and the buyer cannot get other cement, that is cement of New Zealand manufacture, he is bound to take the protected article and pay the price demanded. There is no incentive to the producer to improve the article or so to reduce costs as to bring down the selling price. Why should the producer bother about such affairs. A good deal of strong criticism can be levelled at the cement industry and other industries in New Zealand' but it is not necessary to do that just now. In Australia the Tariff Board and the Arbitration Court between them have' constructed a “ vicious circle ” that is causing considerable trouble. The protected industries have been able to apply with success for increased protection as the cost of production arose, chiefly through the continuous increase of wages. Of course this uneconomic procedure cannot continue indefinitely, and a position is being reached when a close and scientific investigation will become necessary to ascertain the causes which have produced such a Gilbertian state of affairs. The obvious remedy ia to reduce tne cost of production without interfering with the standard of living. Economically this is possible, but politically and industrially it will be exceedingly difficult to accomplish. With the present living as high as. it is, a proposal to reduce wages is certain to helmet with bitter opposition because the fallacy exists that reduction of wages will lower the standard of living. The general price level would fall and the reduced wages would buy the same measure of comfort as the higher wages at the higher price level now do. The present conditions in Australia and here will continue so long as the primary producers realise good prices in the overseas markets,'Thut it also follows that when prices‘for primary products fall, some modification or adjustment of tariffs, wages and the other factors that directly influence costs of production becomes necessary., Politicians will not tackle this problem, but the economic conditions are changing in such a way that the question will have to be faced sooner or later. Mr M. H. Wynyard, chairman of the Auckland Harbour Board in an address at the Commercial Travellers’ Club last • week deplored the fact that, although money was more plentiful than it had been for years, little was being invested, and as a result progress in many directions was being arrested. What Mr Wynyard would like to see is more money going into industrial investments, but there is little chance of witnessing such a phenomenon just yet.* 1 Capital is really frightened of industrial investments, be they ever so sound, because of a variety of causes, but principally political interference through tariffs, regulations, licenses and Arbitration Court, and so capital is going into gilt-edged securities on the Stock Exchange, or is placed at fixed deposit until opportunity for investment offers. The suggestion that the Associate Chambers of Commerce fehoukl appoint a special committee for the purpose of investigating schemes Sidvanced for investment purposes. Such a committee would not do the work hs efficiently as the undenvriting organisations are now doing it, and even these concerns are not partial to industrial investments.