“ Business Re-construction ”

Manawatu Times, Volume LIV, Issue 7250, 1 September 1933, Page 10

“ Business Re-construction ”

DISCUSSION BY ACCOUNTANTS,

On Tuesday last the Wellington North branch of the New Zealand Society of Accountants held the monthly meeting at Messrs. Collinson and Cunningliamo’s tea rooms. The chairman of the branch (Mr. N. T. Nielsen) presided and introduced Mr. E. E. Wright, F.P.A. (N.Z.), of Wanganui, who gave a most interesting address on a proposed scheme for a recoustructional defrosting of mortgages, and internal costs reduction.

Tho speaker stated that at the present time the whole Dominion was just drifting in hope and little constructive effort had been made to stop it- Tho position was getting steadily worse as capital was being ton rapidly used up and if a timo came of acute credit shortage, it would bo too la’e then to provide an adequate remedy. Wo could still do something and what was wanted was a plan capable of just and universal application. Over tho past twelve years our nett overseas returns were £33,000,000. Our overseas interest bill in the same period was £53,000,000, and we increased our overseas indebtedness by £81,000,000. These figures left no doubt as to the urgent need for the application of some plan for plain, common sense, national reconstruction. It was necessary to inject new life into business to-day to save a collapse of values by assisting fluidity of capital without bad inflation, but it was also absurd to think that there should bo destitution in a country like this where at present we were considering reducing output as we grew more than we could use or sell. Here was a problem that was a distinct challenge to tho members of the society. New Zealand has' the capacity and material to put these troubles right if it wants to, and it is as foolish to wait until we arc forced by circumstances, as it is for a person to carry an aching tooth until they cannot stand it any longer. Tho wholo world sought a new era of prosperity, but it must be remembered prosperity was a condition of balance, and the essentials to that balance were that the returns from the use of money and from the use of personal service in any form were a right relationship. Interest on the one hand and tho produce that the wages of service could buy must be kept iu some way in constant and consistent ratio.

With rapidly changing market values for our exports, it was generally recognised by the adjustment commissioners that interest relief was just. Mortgage contracts were good to a point, but if they becamo impossible of completion then equity came into consideration. What is wanted is some national machinery providing more or less auto- ! matic adjustment under which not only mortgagors, but also mortgagees, who became difficulty placed could be assisted to carry on. Its lack showed a need for more constructive statesmanship. The Government must assist taxpayers to balance their budgets also. After very lengthy consideration it appeared to the speaker that the solution of this could best come about by periodical interest rate adjustments, with compensating rises or falls in wages, rents and commodity prices coming into force coincidently, and later reduces Government and local body taxation. These reductions should enable exports to bo produced and soli at a profit, and the need for superexchange would vanish. At present most of our exports show a loss so that the more we export the more we lose. Added to this was the need for some scheme by which many mortgagees would be ablo to borrow against their securities and so tide over this transition period. This, in the speaker's opinion, could be best arranged by the establishment of a Mortgage Bank on a national scale, the board of which could from .time to time settle rates of interest for the Dominion. Their plan would simply bo to follow what is already being done by many private mortgagees to-day where, after providing for national taxation, the balance of revenue was equitably distributed

between living costs for tho worker, maintenance of the security and just reward to tho mortgagee for the use of capital. Later on as tho values of laud became stabilised the bank could undertake its primary function and begin to lend mopey direct to borrowers in accordance with the recommendations of the Royal Commission of 1926. At the present timo they could probably give assistance to few such owing to the need for land value adjustments, but later such an institution, should become the main channel for private lenders for this class of investment.

It may be claimed that this constitutes a partnership between borrower and lender, which -was never intended, but unless these two Dominion wide and concomitant interests agree to and get down to a permanently readjusted basis, we can never regain the balance -which brings trust and confidence, the most necessary factors in a return of permanent prosperity. What is urgently wanted is an up-to-date improvement of tho long term mortgage system designed to fit tho post-war needs of all borrowers (city as well as rural). The Advances to Settlers system worked well whilst conditions were stable and on the upgrade, but now even those do not meet to-day’s requirements. We have got to face the fact that money which is purely a medium of exchange, has to be the servant of man, not man tho servant of money. It must be organised to meet our particular needs. A full two hours of most interesting discussion was spent in consideration as to how far and in what way such a scheme might be brought into practice. Undoubtedly it might bo novel and perhaps unorthodox, but tho fact that aviation was unsafe 30 years ago did not stop it being perfected immediately after tho war created an urgent need for its immediate and universal nse. That «is where we stand to-day. Wo need a financial cum-social readjustment. He was sure the people of the Dominion were ready to give loyal support to any just and balanced effort for internal recovery. The meeting closed with a hearty vote of thanks.