TRADE AND FINANCE

Manawatu Standard, Volume LVI, Issue 310, 28 November 1936, Page 2

TRADE AND FINANCE

DOMINION’S POSITION. LEGISLATION DISCUSSED. Sir Thomas Buckland, president of the Bank of New South Wales, in his speech at the annual general' meeting of shareholders in Sydney yesterday, discussed at length the condition of the Dominion’s trade and finance during the year ended . September 30, 1936. Emphasising the Dominion’s dependence on prices obtainable for its main exports, Sir Thomas said the higher prices received abroad had stimulated every phase of economic activity. Retail prices had responded, manufacturing industry was expanding and unemployment had lessened in some directions, though it was difficult to assess the real unemployment position owing to the Government’s new relief policy. Since the Labour Government had been in office, some of the Dominion’s economic institutions had been “drastically reconstructed.” Amendments to the Reserve Bank of New Zealand Act had given the Government supreme control over monetary policy and administration. There was practically no limit to the Reserve Bank’s power to increase the amount of money in circulation for any purpose desired by the Government. So far, there -was no indication that the Government intended to abuse that power. State influence had been extended to other spheres. Railways, transport, and broadcasting had been subjected to political control, but the most significant innovation was the institution of State control over the marketing of dairy produce through the device of guaranteed prices. This had been described by an English journal as “the most ambitious attempt yet made at State export trading outside Russia.”

THE GUARANTEED PRICES. At present the guaranteed price was slightly exceeded by the sterling prices ruling in London, but in the event of a fall in world parity prices, the New Zealand Government might incur difficulties “similar to those which beset the Canadian Government in its attempt to regulate the price of wheat. The guaranteed price scheme would then become a heavy burden on the New Zealand people. While the Labour Government’s moderation so far had allayed fears of “dangerous financial experiments,” all its policies tended to raise costs of production. The increase of costs would eventually cause traders to buy relatively cheaper foreign commodities and neglect the local market. Such conditions would cause an increase in factory unemployment. The Government’s heavy increases in taxation would prove a serious handicap to industry, for “there is a limit to the amount which can prudently be raised by taxation. Already high before the advent of the Labour Government, taxation had now reached the highest level of the Dominion’s history. Primary industries had benefited by the increased London prices. Exports of wool and dairy produce had greatly increased. Outstanding developments in the meat trade were the increasing substitution of chilled for frozen beet and the increase in exports of frozen pork. The latter, however, would probably be checked by the British Government’s policy of encouraging home production of pigs. OVERSEAS TRADE lAIPROVES. The Dominion’s oversea trade continued its improvement. In the year ended June 30, 1936, exports had increased by 25 per cent., imports bylo per cent. As the Dominion had had little difficulty in recent years, in achieving a surplus in its oversea accounts, its London funds position was strong. . _ The banking position in New Zealand was very liquid. Deposits had increased over the past year by between five and six millions, but advances had increased by no more than one million pounds. This meant that the banks and their customers were unwilling to undertake commercial operations, the risks of which had been increased by recent and promised actions of the Government. If the Goverment s marketing powers were extended to include other exported produce the Reserve Bank would be so closely tied to industry that its assets might become frozen under adverse conditions. This was the first danger in the situation. Any tendency in this direction would make it more difficult to avoid the second ■ danger, namely, strict control of foreign exchange resulting from a shortage of London ■ funds in the hands of the Reserve Bank. “With so many examples of exchange control in other countries,” Sir Thomas concluded “there is no need for me to elaborate the dangers of the situation in New Zealand.”