Labour Initiates Budget Debate

Manawatu Times, Volume LIV, Issue 7314, 15 November 1933, Page 7

Labour Initiates Budget Debate

Mr Savage Sees Nothing in it to Offer Encouragement

Minister Defends Exchange Rate Increase

Per Pressi Association.

WELLINGTON, Last Night. ’ The debato on the Budget was commenced when tho House resumed at 7.30 p.m. by Mr. M. J. Savage (leader of tho Opposition). Mr. Savage said that the state of Dominion affairs appeared to be getting worse as the years went on. There was nothing in the Budget to offer encouragement to any section of the community. Tho Minister of Finance had spoken about tho Government's action in assisting the unemployed, but at tho same time the Minister of Employment was giving instructions for a reduction of the weekly pay of relief workers. According to the Minister’s own statement, the wages of one section of relief workers wero to bo reduced from 25s to 20s a -week in order to force the men, by the lash of necessity, to accept- employment at comparatively low rates. That was not tho solution of the problem. A solution could be found without doing injustice to anyone. When tho men wero offered proper rates of pay they would go wherever the work was. Thoso who were expected to -offer proper rates of pay should have a guarantee of a return for their outlay sufficient to maintain a decent standard of life.

Ho declared that guaranteed prices for the whole of New Zealand’s production, supported by guaranteed in- ; comes to those responsible for that production, was the only way out. Full control of the Dominion’s monetary system was a necessary part of such a policy. At present New Zealand’s monetary system was based on tho external prices received for approximately one-third of tho total production, which left New Zealand at the mercy of the cheap-labour countries competing with us abroad. “The alternative to that," said Mr. Savage, “is to base our monetary system on tho products of our own country and to increase our living standards in accordance with out ability to supply our own needs. Our duty is to provide the means whereby our own people may exchange their services with each other without paying toll to any external or internal forces." Purchasing Power of Wages. Continuing, Mr. Savage said it was difficult to see how the Minister had arrived at a conclusion that there had been no fall in the purchasing power of full-time wage rates. Even if that statement were correct, one might reasonably ask how many w’age-carners were in receipt of full-time wage rates. In all kinds of employment, hours of work had been reduced for a number of employees and the 78,000 Telief workers were certainly not paid on a full-time basis. The real effect of the wage aud salary reductions had been to cripple the industry. Mr. Coates had said that cheap money was an essential element in recovery, but unless cheap money found its w'ay into the pockets of tho people in the form of increased pay in roturn for their services, the position would not bo improved. Referring to the mortgage rate, Mr. Savage said that' tho Minister might well take a leaf out of the Labour Party’s book and make a definite move in tho direction of stabilising mortgages on land and homes on the basis of the averago of the past seven years’ wholesale prices, with a guarantee of prices and wages sufficient to maintain that basis. It was not sufficient to urge mortgagees to accept the responsibility for doing it. “Merely a Transfer." Criticising the increase in the exchange rate, Mr. Savage said that the Minister’s statement in the Budget w'ould lead one to believe that there had been no alternative to raising tho rate of exchange. That was far from correct. Not one penny had entered the Dominion as an immediate result of raising tlio rate of exchange. It could not raise prices abroad; it merely transferred money already in tho Dominion from one section of the community to another. On tho Government’s own showing, raising tho exchange had had for its object tho supplementing of tho meagre incomes of a section of the primary producers and had been an acknowledgement that tho external price levels were not sufficient to maintain a reasonable standard of living for New Zealand j farmers. The chief effect of raising: the rate of exchange had been to depreciate New Zealand’s currency without increasing it. The Labour Party suggested that the Government could have issued more money to put men to work at work that was worth doing. Tho currency would then not have been depreciated, but would have been increased in volume and goods would have been increased in volume. Again the Government could give relief to the farmers by direct methods, and it would have been possible to deal with all cases on their merits.

Continuing, Mr. Savago said that an alternative to the liight rate of exchange "was provided in Labour’s policy of guaranteed prices. The Government's policy was an awkward admission that something must be done. The proper control and use of public credit ■within New Zealand would provide the foundation for an equitable return to all producers. The leader of the Opposition declared that there was no attempt on tho part of the Government to strengthen the foundation from which the State

revenues must spring. On the contrary, the Government was relying,

mainly on taxation in some form or other to carry on all forms of Stato activities. It w T as taxing girls who earned 10s a week, old-age pensioners and other pensioners, and then it told the country that restoration of sound economic conditions was the first step to soud finance. It was proposed to borrow another £2,000,000 from the Bank of New Zealand during the current year. By doing that the Government was borrowing for tho purpose of paying its way. How long could that last? Last financial year the Minister had raised £2,500,000 on discharged soldiers’ settlement securities to obtain a surplus of £40,000. For the current year he proposed to raise £2,000,000 to get a deficit of £2,094,000 Superannuation Funds. Concluding, Mr. Savago said the Budget suggested that the liabilities which rightly belonged to the State in connection with the superannuation funds should now bo shared by the public servants who had from the beginning kept their agreement with the Government and had made their legitimate payments in full.

Hon. A. Hamilton said the farming community had not asked for advantages over any other section of the community. It had only asked for fair conditions in the economic struggle. An investigation of the position had shown that the farmers had not been receiving fair treatment so far as internal conditions were concerned, and tho raising of the exchange rate had been one means of assisting them. He considered that even with tho increased exchange rate, farmers were still at a disadvantage.

Continuing, the Minister said it was not because of the soundness of its policy that tho Labour Party was popular at the present time. The Labour Party’s main strength seemed to be tho Government’s unpopularity. “Wo are not too popular, I’ll admit," the Minister said. “We are not seeking popularity; we are endeavouring by a sound polioy to deal with an extremely difficult situation. Tho Labour Party can thank its stars it is not in office to-day." Tho Ministor said that tho Labour Party’s policy of guaranteed prices on a basis of average prices over a number of years sounded very good, but tho leader of the Opposition had not told the whole story. The Labour Party desired to consume beforo it had produced; it desired to spend beforo it had earned. He would have grave fears concerning tho outcome of a policy of guaranteed prices. There were two outstanding possible results: (1) Very large borrowing, or (2) inflation through what the Labour Party called “creation of money” would be necessary to make the payment of guaranteed prices possible. I lii “The present position Is bad enough," the Minister said, “but it might bo very much worse if we started ou eithor of thoso courses.” He submitted that it would have cost the Government £9,000,000 on the basis of last year’s national income to pay guaranteed prices along the lines proposed by the Labour Praty. Not An Unsatisfactory Position. Tho Minister said, in his judgment, tho Budget revealed a not unsatisfactory position, if not a satisfactory one. Surely some credit was due to tho Government for its careful handling of tho public finances, resulting in last year closing wdth a surplus of £40,000. It had paid all interest on temporary loans, paid all debts owing, and bought just on £2,000,000 of surplus London funds at a cost of £470,000. It had reduced its long-term debt by £255,000 and had not taken into account outstanding accounts owing to the Government amounting to £3,000,000. Mr. Savage: But are you not borrowing to carry on? Mr. Hamilton: We arc taking £2,000,000 from reserve-* 1 .

Mr. A. M. Samuel: Isn’t that liquidating assets? Mr. Hamilton: It is calling on our reserves. It is quite a usual way to effect, a balance.

Mr. Samuel: How long can that go on?

Mr. Hamilton: Not too long. We could not fight a war too long and we cannot fight economic difficulty too long. Continuing, the Minister said that the country’s finances had been as well managed as those of tho majority of business concerns. In fact, not many business concerns had managed their finances as well. He believed, in spite of all the criticism, that tho national income was as well distributed as it had ever been.

“Those who have are being taxed severely to help those who need,” the Minister said. “Democracy is on trial. It is moving and it will need to be moved. Democracy is not standing ujj too well to the test of the difficult times and in some countries it has been moved. I believe it is still the best form of government, though confidence in it has been shaken in many parts of the world to-day. Democracy must justify its existence.” Steering Without Favour.

The Minister said the fact that practically every section of the people was critical of the Government was evidence that it was steering without favour. Tho farmers were critical, the banks were critical, commercial people were critical and the workers were critical. This, however, was quite natural in difficult time*.

Referring to tho exchange surpluses, the Minister said that the Budget showed that tho Government had taken over from the banks for tho first half of this financial year an amount of £13,345,000, whereas statistics showed thero was for tho first nine months of this calendar year a surplus of London funds of only £10,250,000. This w'ould indicate that the Government had already taken over from the banks more than tho surplus of sterling funds anticipated for the whole year. There might, of course, be other factors influencing the position, such as the transfer of capital to New Zealand and in all probability the extending of credit to New Zealand purchasers of overseas goods or the withholding of payment for a period. This should right itself in time.

' Tho Minister said it w r as also estimated that about £10,000,000 of sterling funds were required annually for the payment of Government interest, local body interest and private payments. It would appear from tho trade balance figures that tho surplus London funds would not be much in excess of these requirements. Furthermore, the position w r as very materially affected by tho Government’s policy of not borrowing any of its requirements in London.

Referring to currency depreciation, the Minister quoted figures showing tho percentage of depreciation in 23 countries, including Britain, the United Statos, Canada, Japan* France, Italy and Australia, which, ho said, showed that New Zealand w r as ivell below the average depreciation of the countries mentioned, and that it would be necessary to maintain at least the present rate. How the Farmer Benefits. Continuing, lio said that thq net increase to the New Zealand farmer in New Zealand currency as a result, of the 25 per cent, exchange premium worked out approximately as follows: Butter 33.6 per cent., cheese 37.2 per cent., wool 28.7 per cent., lamb 40 per cent., wether mutton 45 per cent., ewe mutton 70 to 87 per cent., ox beef 4-7 per cent. He said the reason why the percentage increaso was greater than tho exchange was because the exchango was calculated on f.o.b. prices, whereas what the farmer received was that price less costs from the farm to f.o.b. It would, therefore, be seen that the farmer really gained a better advantage than it would at first appear from exchange assistance. On the other hand, the farmer did not have to pay tho full 25 per cent, extra in added cost to his imports. Operation here worked the opposito way and it wms calculated that, on such items as basic slag and. galvanised wire only, the following percentage increase took place: Basic slag 18.5 per cent., galvanised wire 19 per cent.

Mr. Walter Nash said all that had happened in connection with the exchange rate, so far as New Zealand was concerned, was that the balance of the ncople had been specificially taxed for the benefit of the farmers. Hs was not saying whether that was right or wrong, but that was what had happened. New Zealand had not received a fraction of a penny more in the Old Country for its goods. All the producers were receiving %vas something from the people here. If New Zealand was dumping butter and cheese into the Old Country irrespective of cost, and charging people there a low price because the people hero were paying 25 per cent, toward its cost, then every word that Mr. Baxter had said had been true. The debate was interrupted when the House rose at 10.30 p.m.