The Northern Advocate Daily “NORTHLAND FIRST” SATURDAY, APRIL 22, 1939. Realities Of Finance

Northern Advocate, 22 April 1939, Page 6

The Northern Advocate Daily “NORTHLAND FIRST”

SATURDAY, APRIL 22, 1939. Realities Of Finance

Registered for transmission through the post as a Newspaper

NO subject is of greater interest to New Zealanders at present than public finance. This interest was first awakened 7 during the depression period, when the decline in national revenue affected practically all classes of people. Prior to that the subject was a closed book to most New Zealanders, and they had little desire to investigate its mysteries. Then, following the depression, came the present Labour Government. Taking over the Reserve Bank as a State institution only a few months after its establishment, it launched a series of bold innovations, and spent public money on a lavish scale. It was only natural that interest in the financial policy of the State should be further stimulated by these processes. On the one hand, Labour supporters awaited with breathless eagerness the success of the experiments, while on the other hand stood a Conservative financial opinion, deeply sceptical of the results. Actually, it became clear, as the new Government proceeded on its way, that in the meantime, at any rate, no departures were contemplated from what orthodox schools of thought regard as fundamental principles of sound finance. Aided by rising prices for the country’s primary produce, and by an increased yield in taxation, Mr Nash was able to balance his Budget without recourse to the more dubious expedients to which his critics feared he would be driven. Certainly there was criticism of the Government’s failure to reduce taxation in a time of prosperity, and private enterprise began to find itself hampered and restricted in various irksome ways. But no attempt was made to introduce any new and untried system of financing the business of the country. As a result, the apprehension of the Government’s critics was directed chiefly at its policy of high spending and high taxation. It remained for the most acid criticism to come from within the Labour Party itself. The full story of Mr J. A. Lee’s attack on Mr Nash, and his effort to rally the members of the Parliamentary Labour Party to an attack on the ramparts of orthodox finance, has recently been laid bare, and the nature of the humiliating setbacks received by Mr Lee is now common property. Both Mr Savage and Mr Nash have declared themselves for a continuation of the methods designed, above all, to maintain the country’s credit both at home and overseas, and this policy has received the handsome endorsement of the Labour Party as p whole. Further than this, there is evidence now that they have learned a good deal during the past three and a-half years. At present, the country’s position is not nearly as healthy as it was two years ago. It is considered doubtful, despite an air of superficial prosperity, whether it is as good as it was in 1935, when the Labour Party took office, just as the Dominion, in common with the rest of the world, was emerging from the severest depression in history. The reason is that while more public money than ever is being spent, expansion of private enterprise, except in the case of industries favoured under the import restrictions, is practically at a standstill. What the Government now realises is that the mere spending of money is not a cure for economic ills. The theory that if you keep on spending money things will come out right in the end, is a delusion that can last only as long as the supply of money lasts; and today, as far as the Government of New Zealand is concerned, there is suspicion that the supply of money is running perilously low.

Mr Savage and Mr Nash have themselves admitted that there are difficult years ahead. Mr Nash, reversing the philosophy of lavish expenditure which the Government itself has been expounding, now counsels the people to save their money, and says it is only in the savings of the people that economic salvation can be found.

In the Government's new and somewhat chastened mood, it may accept assistance and advice from sources it has hitherto despised, for Mr Nash now realises that the old-fashioned virtues have some merit after all. The co-operation of the business community would assist him greatly, and he could have it for the asking. There is a good case today for an approach to the problems of public finance from an entirely non-political angle.