THE EFFECT OF LOWER PRICES

Nelson Evening Mail, Volume LXIV, 24 December 1930, Page 2

THE EFFECT OF LOWER PRICES

INFLATION NO CURE “The fall in prices of wool, wheat, dairy produce and. metals originated in the world market, not in the Australian market. It is, therefore, futile to argue that inflation in Australia can cure the Australian situation or to assert that the deflation has been purposely caused in Australia.” says the “Sydney Morning Herald.” “The fall in prices of wool, wheat and dairy produce has brought about a fall in. land values in the country, and the fall in land values in the urban areas is_ the corollary of the falling-off in business in the Commonwealth, owing to the fall in the values of primary produce and drying-up of loan money from abroad. Every asset, whether real estate, buildings, machinery, or goodwill, is lower to-day than it was two years ago, and all owing to the causes mentioned. In these circumstances there is no ability to maintain the rate of wages out of profits which have been made in the past. The profits of the past were partly distributed among shareholders and partly kept in. business. In the latter case they provided assets which were used to further employment and increase production. The money represented by them was distributed iu wages, and in raw material purchases. The assets which represent those profits arc now greatly lower in value, and the fall in the values of all assets has greatly cut down, if not altogether extinguished, profits which for vears past were turned into the business. Shareholders probably reinvested portion of their dividends. ' Those investments to-day have their value greatly reduced. Profit's of past years have been destroyed.”