PUBLIC CREDIT

Hokitika Guardian, 16 September 1937, Page 2

PUBLIC CREDIT

information sought EXPLANATION BY PRIME MINISTER WELLINGTON, September 14. The Leader 0! the Opposition (the Hon Adam Hamilton) stated an interesting debate in the House of Representatives to-day, when lie sought from the Prime Minister (the lit lion M. J. Savage) an elucidation of Government statements dealing with the use of public credit, and at the same time some indication of the Government’s credit policy. Mr Hamilton mentioned particularly some statements made rcy cently by the Prime Minister, which he said, needed clearing up. Mr Savage eagerly seized the opportunity, and gave Mr Hamilton and the House peihaps his clearest views yet on (lie money question, a notable point being his very definite declaration that the Government had followed the policy of using the public credit for developing its housing schemes. Mr Hamilton said that frequent references had been made hy the Prime Minister to “use of the public credit.” He said he thought it desirable in the public interest to clear up exactly what was meant by the term. Either the Prime Minister or the Minister for Finance (the Hon W. Nash) should explain the meaning of it. “The Government,” added Mr Hamilton, “should explain the term in language that one can understand, and not in vague generalities. It should he explained in terms that a plain individual like myself can understand.” ‘‘UNEXPLAINED WORDS” Advocates of social credit, said Mr Hamilton, lived in a vagueness of unexplained, long, large words. The Government should take the public into its confidence and explain exactly what it meant. The Govornmorn should not try to pull life wool over the eyes of the people. We have had a wonderful production year, and it could not very well ho anything else. At the same time, credit depends on what the other fellow thinks of us, and it might be possible for the Prime .Minister to give us some outside opinions concerning the course we arc following.

Credit is a hard thing to establish, but an easy thing to destroy,” said Mr Hamilton. “I txinX a suspicion is awakening in New Zealand to-day, if it has not already awakened. I am only interpreting public opinion.” A Government member: Trying tr create a scarp.

Mr Hamilton ; NoS That is the last think T would like to do. The investing public is a little uneasy. That is evident from the idle money lying about.

Mr Hamilton asked if the term, “the use of public credit,” bad been useu in the sense that it could be operated by book entry. Was it simply a bo** entry that could be wiped out ? Some Ministers had said that was the position. Was that the sense in which the Prime Minister Tied referred t> “the use of public credit!” If that was the definition of the term, and railways could be built without any debt lining left behind them, it was very disturbing. Tf it were not an entry was it a loan from lhe Reserve Bank at interest, which had to be repaid? That was not creating money.

What was going to happen in the event of a deficit of £650,000 in the dairy industry account at the Reserve Rank? asked Mr Hamilton. He had been told that the Minister lor Marketing had stated at Stratford that .this sum would be a charge on the Consolidated Fund, and not on the dairy industry. 1

Mr Nash: Then, someone has been lying to you. Air Hamilton; Well, how is it to be liquidated ? Will it simply be strucs out of the books? If there is a surplus of £452,000 in the national accounts, or a deficit of £65u,000 in the dairy industry account, what exactly is the position ? “If the term does not mean a book entry or a loan from the Reserve 'Bank, does the Prime Minister mean the 'use of the Surpluses in public departments?” asked Air Hamilton. “The Post Office and the Life Insurance Office have money tc spare. If the Prime Minister does not mean any of these things, does he mean by the term borrowing in the ordinary sense. I think the use of public credit will ultimately amount to that.” “It seems to me that the Leader 01 the Opposition is looking for a policy,” the Prime Minister said in his reply, “and I am going to do my best to help him to find one. He lias asked about the •use of public credit. We are going to use the public, credit direct, instead ol going round through Great Britain or somewhere else, and borrowing on it from external sources.” “Air Hamilton had complained of vagueness regarding the use of the term public credit,” Air Savage continued. “Surely he was able to distinguish between something issued from a national banking system, anu something issued from a private banking corporation. In the past, whether money had been borrowed from public or private sources, the public credit had still been pledged; but if the people themselves owned the financial . system through which money was 1 borrowed, tlieir liability would he to | themselves.

“We sot out. for instance, to bmld houses.’' the Prime Minister said, “and for that purpose we have had credit extended to ns by the Reserve Bank, which is owned by the people of New Zealand.’’

Mr Hamilton: It holds the credits of private banks as well.

“We have obtained a credit from the •Reserve Hank,” Air Savage repeated, “and we will bo indebted to tiic Reserve Bank for Tile money we have used to build the houses. II that is so, we are indebted to ourselves.” It could be said that the Government had determined to use the people’s savings, plus tint public credit, for the development of industries and public assets ; but it had to he remembered that if, was no use creating wealth unless the people had access to it. One had only to recall that during the bad times the dairy Dinners of the Dominion bad doubled their production in 10 years without increasing their incomes by a single penny piece.

As a result of the Government’s financial policy the distribution ot wealth was changing, Mr Savage continued. During the last 12 months the national income of New Zealand had increased by £20,000,000 a( least, ihe Leader of the Opposition had been complaining about taxation. Tt was true that taxation bad increasect irom £25.500,000 to £31.000,000. but even after that increase was paid the income of the people was still on Tim credit side by about £14,000.000. Ibe country was in a bettor position today than it had been for many long years. Mr Hamilton : What is causing that? The Prime Minister; 1 ran think ol a number of tilings, but one is that instead of cutting wages and salaries, w e increased them. EXPORTS LAST YEAR Mr Savage also referred to the export position, and stated that exports last year were valued at £64,000,0u0, an increase of 20 per cent. Mr Hamilton ; The public credit lias nothing to do with that. Have you used the public credit to improve the state of the country?

“We 1) ave used the public credit for building homes for the people,” the Prime Minister replied. “We have not gone very far vef ; but we are going the full journey.” Reverting to his survey of the economic position of the country. Air Savage said then' had been increased returns from all -classes of primary products, and to-day the price of dairy cattle was rising. That did not suggest that the country was going to the dogs, or that the dairy fanner was dissatisfied. The assessable incomes of companies bad increased by 27 per cent., and the circulation of bank notes by 27 per cent. Cheque' transactions also showed a marked expansion, the figure for last year being £17,200.000 representing an increase of 15 per cent. For once the dairy farmer was receiving a fair reward for his labours, something he’ had not received during the last 20 years.

A-money system based on the assets and wealth created by .the people. Air Savage .continued, represented something liitich sounder than had overbeen known before. There was the cry about increased taxation, but it had to be remembered that the governments of the last 10 years decreased direct taxation and increased indirect taxation. They had risen the exchange rate and introduced the sales tax; but when the proper foundations bad been laid by the present Government, the reactionary methods of former (administrations would be abolished.