King Country Chronicle. Tuesday, March 8, 1932. ECONOMIC REPORT.

King Country Chronicle, Volume XXVI, Issue 3440, 8 March 1932, Page 4

King Country Chronicle. Tuesday, March 8, 1932. ECONOMIC REPORT.

The report of the Economic Committee has now been made public, and it cannot be said that this report favours any one section of the community. There is one sentence in the report which sums up the position when it states: "Resistance by any section of the community to the sacrifices involved will only delay the process of recovery, dampen down enterprise, and ultimately injure the interes'ts of that particular section in common with those of the whole community." This is a statement that cannot be refuted by any, whether a business man, investor or worker, who has given any thought to the acute situation that has arisen in this country. The national income has been reduced by 27 per cent, this year as compared with last year, and we have to face this fact, unpleasant as it is for all. The report has no more respect for the "sanctity of contract" in dealing with mortgages than it has with that sanctity concerning the wages question, and this is only equitable. The truth is that this Dominion is over capitalised in land, in all businesses, and all Government undertakings. If it is found that a business is over-capitalised there is only one thing to do write down the capital. This will have to be done in New Zealand, though the process will be both an unpleasant and a difficult one. Unless some action is taken the country will drift into ah impossible position. The main points of the Economy Committee's report are (a) 20 per cent, reduction in fixed charges, principally interest and rent; (2) a further 10 per cent, cut in wages and salaries; (c) an artificially high rate of exchange; (d) .the issue of Treasury notes to cover the Budget deficit. The first two proposals are closely connected. The workers have already had a 10 per cent, cut in wages, and to make a further cut without any compensating factor would' not be just or fair. This factor can be supplied by a general reduction in house rents, which is impossible unless the rate of interest is reduced. The report states that the sacrifices must be as equally divided as possible. A reduction of interest and wages rates would be an important contribution towards the reduction in costs, one of the essentials in the process of adjustment, but to make one without the other would bring about well justified opposition from the workers. The proposal for a high exchange rate practically means a surtax on imported goods, and to put this into practice is bound to affect negotiations at the Ottawa Conference to be held in July to consider Empire trade reciprocity. A high exchange rate has many disadvantages, for it means a form of inflation. Such a means of bringing relief means only temporary benefits and will have to be paid for sooner or later. No country can tamper with the exchange unless it is self-contained, The report points out that "the fundamental issue is to restore the spending power of the farmers by allowing profits to emerge; hence the crucial problem is to remove the disparity between farm costs and farming selling-prices." This is one of the most outstanding statements of the report. The prosperity of the whole of the Dominion hinges on the farming industry. This industry, the life blood of the country, has been nothing less than a gamble during the last decade. Land values have been too high, labour too costly, and money too dear. The markets for our primary exports have been subject to violent fluctuations, and most farmers have only been able to keep going by the fact that during the last ten years one of their products has given them a payable return, if another had slumped. The position to-day is that meat, butter, wool, skins, and every commodity the farmer produces has slumped together, and the primary producer is in a parlous position. To reduce the cost of production is the paramount need of this country to-day, and a high rate of exchange would only add to the cost of production. Also it would be most disastrous to the farmers of this country if this Dominion were to lose the benefits of .Britain's present preferential tariff, with still more benefits probable as result of the Ottawa Confer-

ence, by raising a wall against imports from Great Britain through an artificial high rate of exchange. There appears to be little sense in taking a line of action which will penalise Great Britain, which has made the Dominion an offer for reciprocal trade, not without some sacrifice on the part of her people. Let us put our own house in order by our own efforts, and not by artificial means, which can only have a boomerang effect in time to come.