DOMINION’S FINANCES

Manawatu Standard, Volume LIII, Issue 243, 11 September 1933, Page 8

DOMINION’S FINANCES

IMR COATES IN REVIEW. COALITION’S WORK SURVEYED. CHRISTCHURCH, Sept. 10. Measures taken in New Zealand during the past four years in an effort to ease the burden of the economic depression were reviewed by the acting Prime Minister, Rt. Hon. J. G. Coates, when speaking in support of the Coalition candidate in the Lyttleton byelection at Opawa last evening. After explaining in detail what had been done in the way of economies, Mr Coates said it was obviously impracticable to carry reductions further. No more sweeping economies were possible. All that now remained was for the Government to go on carefully watching expenditure. ? ‘lt was in 1931,” said Mr Coates, “that the financial and economic problems confronting the world became pressing to all New Zealanders. It was evident that something would have to be done and done quickly to meet the situation—a situation not met with before in our history. There were entirely novel problems which involved new, and, for New Zealand, solutions that had no precedent. To deal with this the inter-party committee was formed, and as a result the Coalition emerged as the only practical method of getting anything done and putting remedies into action, at the same time sinking party differences. “There is no doubt that the financial situation called for combined effort in adjusting the public accounts. There had to be substantial agreement. The people signified by theii votes at the polls that they desired a Coalition Government vested with full authority to ease the burdens of the day and ensure that New Zealand could weather the storm and emerge well fitted to take advantage of the better times ahead.” Mr Coates said the financial year 1930- opened with a prospective deficit of £3,345,000, which had to be met. Economies in expenditure totalled £1,684, 000, and additional taxation of £1,661,000. Despite a 10 per cent, reduction in Public Service salaries, by the latter part of the year the deepening of the depression so acutely affected the returns from revenue sources that to balance the year’s expenditure liquid reserves accumulated in more prosperous times had to be drawn upon to the extent of £1,639,000. By this time the situation had become critical, and it was at this stage that the Coalition was formed. On assuming responsibility its first problem was to deal with an anticipated budgetary shortage of £8,445,000, which had faced the Government for the year 1931-

The National Expenditure Commission composed of business men exhaustively investigated every item of public expenditure and submitted re- | commendations in the direction of effecting economies of approximately £4,000,000. Of these the Government effected about £3,000,000 by further reducing salaries, by cutting administrative votes and by making further economies in social services, s It regretted having to take these ,j steps, but it was a matter of making I expenditure fit prospective income. | Even so, the year ended with a deficit a of £2,140,000. What the Government ■ would like to have done in the direction t* of keeping up wages and extending 1 social services was not the question; ] the exigencies of the times, the pressure I of circumstances were inexorable. . The year 1932-33 opened with another prospective shortage, this time of £8,300,000; the remedial measures proposed, mainly by the use of reserves and by further economies, were calculated to reduce this to £1,000,000, but owing to rigid control of expenditure and unexpected increases in some revenue items, the year ended with a surplus of £40,000 after £2,500,000 from reserves had been taken into account. The following was a summary of the actual saving rear by year: 1930, £260,000; 1931, £1,360.000; 1932, £4.1 320.000; 1933, £3,550,000; total £9,1 490,000.

1 PRUNING EXPENDITURE. “If expenditure had been kept up on the same scale as in 1929 and no a economies had been effected.” said I Mr Coates, “it is evident that the 1 ■ additional amount the people of New i Zealand would have been called upon jj to meet by taxation would have been ! over £17,000,000. This figure can only be a general and approximate one since grants in one year are not necessarily repeated the next year. “But it is evident that to have raised anything like this huge amount of money would have drastically lowered the standard of living of the people and made it impossible for business to carry on. In fact such a situation would have been brought about as to make it impossible i for the Government to carry on at ? all

“The expenditure on Public Works, which was financed by loans, has also had to be cut from £8,500,000 in 1931 to £2,200,000 in 1933. It was the economic situation that also put the brake on loan expenditure. This was necessary in order to cut down outgoings in interest which had to be controlled within budgetary limits ;an important factor is the conditions under which borrowing can be undertaken. . “When a certain price level is ensured for the future, we can borrow with the knowledge that we shall benefit and be able to repay our debts from the good returns ensuing the development undertaken. But if this future is not reasonably assured, the loan expenditure acts only as a temporary and inefficient stimulus, followed by an aftermath where the country has to struggle with an additional burden of dead-weight debt.” After pointing out that the present year (1933-34) also opened with an anticipated shortage of £9,850,000, Mr Coates emphasised the permanentnature of the Dominion’s fixed charges. The biggest item in the expenditure of £22,528,000 in the past year was £12,193,000 which was mainly for debt. service and fixed charges for highways. Other items were £6,797,000 for social services, of which £3440,000 was for pensions and £2,620,000 for education (which had already sustained a reduction of nearly £1,500,000). In addition, £l,328 000 was for law and order and defence. There was £852,000 . for the development of primary and secondary industries; that was part of the policy of bringing producers’ costs and prices more into line. Lastly, there was £1,433,000 for the administrative and general costs. . ~ , “It is obviously impracticable to carry reductions further—the policy has been carried to its full extent,” said Mr Coates. “There are no more sweeping economies possible. It is sound policy to prune the rank growth that inevitably appears in the flush of development;,the parent stock will remain, benefited by the pruning On the side of economy., what remains for ns is to go on carefully watching expenditure.” .