How N.Z. Is Paying Its War Bill

Northern Advocate, 7 March 1942, Page 8

How N.Z. Is Paying Its War Bill

The Hon. Walter Nash, New Zealand Minister of Finance, contributed the following article to a recent issue of the “Sydney Daily Telegraph” which commented: “The outline of New Zealand's war finance offers interesting comparisons for Australia.” The only way to pay for a war is to pay as you go.

A war uses up munitions, materials, food, clothing, and general economic resources. You’ve got to evolve a financial system to suit this. You’ve got to try to evolve a financial system to suit this. You’ve got to try to avoid having to ask the future generation to pay financially for what the present generation uses up physically. This philosophy underlies the New Zealand Government’s present financial policy. New Zealand tries to pay as much as possible to the British Government of the cost of overseas materials used by New Zealand fighting forces, and some of the goods and services ordinarily used by New Zealanders are transferred to the war effort.

In financial terms this means: (1) Paying from sterling funds any amounts which may be borrowed to finance materials supplied from United Kingdom sources; (2) The use of New Zealanders’ money to pay for that portion of the war effort which is provided from New Zealand resources. The result is greatly increased taxation and heavy contributions from the people’s savings. Taxation For War Purposes

New Zealand’s increased taxation for war purposes involves a five per cent. National Security tax on all wages and income, doubling of the sales tax to 10 per cent., heavily increasing estate, succession and gift duties, steeply increasing income tax, increased Custom duties, beer duty, gold export duty, and postage. In addition, last year a compulsory loan was levied on income tax payers. There were exemptions for lower incomes. but other taxpayers were required to subscribe to the loan to the extent of the income tax they paid—a man paying £IOO in tax subscribed £IOO to the loan, and so on. The loan bears no interest for the first three years, and 2J per cent, thereafter for 10 years. There has also been the ordinary issue of war stock, and a National Savings campaign especially suited to small savers.

One test of whether war finance is achieving its object is the price level of goods which are bought by the ordinary wage-earner. Over 100,000 men have been withdrawn from civil production in New Zealand, which means that goods and services to the public have been restricted.

But expenditure has increased because of the war, and there is more money about with which to buy goods. Where there are less goods but more money there is likely to be a rise in the price level, which could lead to inflation. To overcome this, New Zealand has tried strenuously to increase the production of goods and services by those people who are not in the armed forces.

More women and young people have been taken into industry, more overtime is worked, and holidays are reduced. In some cases the working week has been extended and shift systems have been introduced. Normal Government expenditure has been reduced wherever possible. Railway projects, roading schemes, and building programmes have been reduced —in some cases abandoned altogether—for the duration. The 5 per cent National Security tax on wages tended to hit earners with families much more than those without, especially wage-ehrners on low incomes. Legislation was passed to extend the family allowance scheme so that it is now payable for the first child, to all workers with children under 16 who do not earn more than £5 a week. Family allowance is 4/- a week for each child. The Government has also introduced a stabilisation scheme in order to ensure that the basic items entering into the ordinary wageearner’s cost of living should not rise in price. Sugar and coal are subsidised by the Government in order to keep their price down. Flour is subsidised to keep down the price of bread. Butter, eggs, citrus fruit, and apples are controlled by the Internal Marketing Department. Rents are controlled. the prices of electricity and gas are fixed. How much New Zealand bank credit has been used to finance the war? None. The Reserve Bank of New Zealand is owned by the State. In the past, Reserve Bank credit has been used to finance the guaranteed price scheme for butter and cheese. and to build thousands of State houses. Yet the amount owed by the State to the Reserve Bank is less today than it was before the war.

Budget Balanced

New Zealand’s ordinary Budget is balanced up to date. The Social Secur--ity Fund is not only balanced, but also is in credit.

The war has emphasised one fact —the peoples of Australia and New Zealand have been, and will continue to be, inextricably linked together.

In the last war Australians and New Zealanders fought together at Gallipoli. Today Australians and New Zealanders are again fighting side by side.

When victory comes. I am sure that we will collaborate even more closely, not only for our joint defence, but in the economic field. Australia is a big country; New Zealand small. Australia has a population of over seven millions. We have not one and three-quarter millions. Australia has a wide variety of industrial raw materials; New Zealand depends a good deal on imported supplies. Australia will emerge from this war a highly industrialised country. New Zealand has been engaged for some years on a plan to increase her secondary industries, in order to balance her economy and give better employment to her people.

After the war the economic interdependence of Australia and New Zealand will be greatly strengthened

New Zealand will look to Australia, as she looks to her today, for many of her essential requirements. Australia wall look to New' Zealand as an important market for industrial equipment which New Zealand will need in building up her own industries. and as a convenient source of supply for certain materials which New' Zealand has and Australia lacks.