LAND OF BUSINESS

Manawatu Standard, Volume L, Issue 254, 22 September 1930, Page 8

LAND OF BUSINESS

ECONOMIC FACTORS. TRADE ASPECTS REVIEWED. “Bank debits, which provide one of tho best indicators of business activity, show a decline of 10.4 per cent tor the month of June, 1930, as compared with June, 1929. Other evidences of trade depression are a falling off in totalisator investments, in building permits and in land transfers,” states the September business bulletin issued by the Canterbury Chamber of Commerce and prepared by tho department of economics at Canterbury College. “The continuance of a large volume of unemployment also indicates economic maladjustment. As in almost all other "countries, our producers are suffering from the disparities in price changes of different groups of commodities, the fall in export prices being much greater titan that of retail prices, so that the prices of the goods they sell in world markets are much lower than the prices of the goods they buy. Trade recovery in New Zealand depends partly on the return of prosperity in our overseas markets, and partly on the improvements that we are able to make in the organisation of our own productive activities and in the reduction of overhead expenses. Various factors have operated to delay the business recovery that was anticipated this year in England. Among others are tho fall in price of silver which reduced" the power of Asiatic peoples to make their usual demand for imports from Great Britain, and more particularly the boycott of English goods by the people of India, a country which is normally England’s best customer, and which absorbs about 11 per cent of the total exports of Great Britain. Such factors as the raising of tariff barriers and the adoption of schemes of price control by national and international cartels and combines also operate to delay re-adjustment to market changes. A high degree of inequality in the gold holdings of the central banks of different countries, and the failure to establish a practicable international policy that will enable credit to be expanded sufficiently to provide for world monetary requirements in face of decreasing gold production also add their quota of uncertainty as to the future trend of world prices. On the other hand there are several features of the overseas business situation that suggest trade improvement. Low prices tor raw materials are likely to increase demand, tho continuance for very low money rates is favourable to business expansion, and great advances are being made in industrial re-organisation aiming at elimination of waste and improvement of efficiency. These changes will probably make for a permanent lowering of the prices of the goods which we require to import, and will help to reduce the costs of our export industries. We must, however, be prepared to adjust our economic conditions to a lower level of world prices. “There are several factors that are favourable to our economic progress. We have a high ratio of natural resources to population, and the recent increases in the volume of production of exports furnish evidence of the possibilities of expansion of our exportable surplus of primary products by more efficient methqds of production, marketing and business organisation. Our credit is deservedly high in the London capital market, thus facilitating adjustment of our national loans at they mature. There is u large supply of local capital available for industrial expansion when conditions favour a return of confidence in business stability. Our banks hold an unusually large proportion (over 100 per cent) of good reserves against note issue. “A reduction of all money rates deposits as well as overdraft, and also of the high rates now offered for loans for public bodies, would help materially to direct the flow of liquid capital into business enterprises and to stimulate business recovery.

“The high exchange rates now prevailing between New Zealand and London increase the difficulties of importers and tend to raise prices of imported goods. The abnormal rise in sterling exchange is probably due to Australian difficulties rather than to any adverse condition arising from New Zealand’s balance of payments. The disadvantages of high selling rates for New Zealand drafts on London are, from a national point of view, largely off-set by the correspondingly high buying rates, which are favourable to exporters. As a temporary measure to meet an abnormal situation, they are probably justifiable, but the fact that wide fluctuations in exchange rates are possible so long as our monetary standard is still governed by emergency war legislation again raises the interesting question of an early adoption of a gold bullion standard or a sterling exchange standard with the range of variations of exchange rates limited by the ‘gold points.’ ”