The Northern Advocate Daily “NORTHLAND FIRST” THURSDAY, JULY 28, 1938. Reserve Bank And Government

Northern Advocate, 28 July 1938, Page 6

The Northern Advocate Daily “NORTHLAND FIRST”

THURSDAY, JULY 28, 1938. Reserve Bank And Government

Registered for transmission through the post as a Newspaper

HEN the present Government brought the Reserve Bank, W which had been established by its predecessors, under direct'Government control, it was made known by the Hon. Mr. Nash that, although the Governor. Mr Leslie Le Peaux, was not in complete sympathy with certain of the Government’s ideas concerning public nuance, he would continue to serve it according to the policy laid down for him. Prom the tone of the bank’s latest reports, however, it seems that Mr Le Peaux has not accepted a position of mute subservience, for parts of the report may be taken as definitely critical of the course the Government is following. The bank patently desires to maintain as far as possible a measure of financial independence of the Government, and so it insists on the desirability of recognising the principle that advances, especially those made to finance both external and internal marketing of dairy produce, should be adequately secured. There is at least an understanding that any deficit is “the responsibility of the Government,’.’ but from what source the deficit should be made up, and advances repaid, if the marketing accounts themselves are not in credit, lias apparently not yet been defined. The bank’s proposal is that security should be given against the Consolidation Pund “in accordance .with the usual practice.” This is no doubt a satisfactory enough way out of what appears to be largely a technical difficulty, but in the present condition of things it would seem in actual practice to be difficult to divorce the bank’s operations completely from those of the Government and to the casual observer, unversed in the intricacies of high finance, any security offered by the Consolidated Pund will seem largely equivalent to taking money out of one pocket to place it in another.

The close association necessarily present between the bank’s operations and the execution of Government policy is shown by the' fact that the report includes what is virtually a warning to the Government not to let Public Works expenditure, get out of hand. Since over £19,000,000 is to be spent under the latest set of estimates, it may be said that expenditure is already out of hand, and that the warning has come too late. So far, however, Mr Nash has adhered to orthodox methods of finance. It is against the possibility that, faced with declining revenues, he may be in future compelled to resort to inflationary methods that the bank sounds a warning note.

It also touches on the dangers attendant upon a policy of keeping vast numbers of men on Public Works when the general of the country is such that they should be in private employment. Unfortunately, the Government has deliberately set out to make conditions on Public Works jobs so attractive that many private employers, especially farmers, simply cannot compete in the labour market. Under the agreement of June 1, 1936, Mr. Semple offered Public Works employees a five-day week and a basic wage of 16s. a day, rising to considerably more, according to the skill and danger involved in various occupations. Many of the labour troubles of farmers can be traced to this agreement. Today the number of men on Public Works jobs is disproportionately large, and the Reserve Bank’s report indicates that it recognises the dangers of the position. But it is difficult to see how there can be any early or appreciable alteration in it. In the first place, Mr Savage does not agree with the Resrve Bank’s views, and, in the second place, private employers cannot absorb unemployed men on any large scale because taxation and costs are both too high. The Government set out to restore prosperity by squeezing the taxpayer and using the proceeds for Public Works. Had it eased taxation and encouraged private enterprise the whole economy of New Zealand would now be on a sounder basis, and the Reserve Bank, one of the Government’s own ancillary institutions, would not have had occasion to warn it, gently, but firmly, of the dangers ahead.