ECONOMIST ON “VICIOUS SPIRAL” OF RISING COSTS

Northern Advocate, 16 February 1938, Page 9

ECONOMIST ON “VICIOUS SPIRAL” OF RISING COSTS

LSpecial To “Northern Advocate.” I AUCKLAND, This Day.

New .Zealand’s labour legislation enactments came in for considerable comment last night when they were criticised by Mr W. K. McConnell, Secretary-economist to the Sound Finance League of Australia, who has just completed a tour of New Zealand.

Mr McConnell stressed the need for closely watching ahd guarding against inflation in normal periods such as the present. Inflationary processes were always at work in prosperous times, and the Government should check them rather than accentuate them. Mr McConnell criticised State borrowing, the guaranteed price, short hours and high wages, and the lavish expenditure of money raised through taxation' by the Labour Government.

“The Government’s policy , has unquestionably caused marked increases in costs, and these in turn Ratified increases in prices,” he said; Those bring, among other things, an increase in the farmer’s cost of production, and thus any

guaranteed price must be altered tb sitit changes in costs. The guaranteed price to farmers must turn ultimately bn oversea prices, and at present oversea prices and shipping costs In New Zeadand bear no relationship whatever.

“The lavish expenditure by the Gov-

ernment of money from taxation and various forms of loan, always tends to accentuate inflationary processes, as 'at present; If the Australian Government, both 3tate and Commonwealth, were collecting taxation at the same

rate as the Government of New Zea-

land, they would this year collect £160,000,000, Instead of - only about £110,000,000.

“If the Australian Governments were borrowing in various forms at the same rate as the New Zealand Government, they would be, borrowing atettt ’ £60,000,000 instead of £16,000,000 this year. If such policies were being pursued in Australia, they should hardly fail to develop very unhealthy boom conditions.’'

He stated that his observations bad revealed that the Government’s policy had brought about a clamour lor greater protection to which the Government would have to accede, In turh, this would bring about further demands from UtMta; ahd Workers. Prices - would Immediately increase. With the Government'continuing, to please each section, which would bid •one against the other, a vicious spiral would-become inevitable. Good fortune might allow the Government to please each of the three sections in turn. The Government would be in ■ a difficult position were there to be a change for the worse in overseas prices for-.butter and wool. Then there would be only one road of escape, and that would, be the abandonment of an impossible policy,, Mr McConnell is accompanied by Mr W. ,V ?i McCall, a number of the Federal Parliament.