NATIONAL INCOME

Nelson Evening Mail, Volume LXIV, 3 February 1931, Page 3

NATIONAL INCOME

POOLING THE LOSS AUSTRALIAN ECONOMISTS’ STATEMENT A first, condition for recovery in the national income is a pooling of the loss, according to a statement which lias been issued by the economic and statistical section of the Australasian Association for the Advancement of Science. In May last the section issued a statement dealing with the economic crisis and outlining the stops necessary to prevent a further fnll in the national income and to promote recovery. After a further survey of the position, the economists find that the fall is still going on, and the declino from 1928-29 is probably now of the order of 25 per cent. The increasing loss is partly due to a further fall in export prices, but more to a failure to take tho necessary measures to promote recovery. After declaring that the pooling of tlie loss is far from complete, the statement continues: — “Some sections of the community are bearing little or none of the loss, producers with a fixed price for homo consumption and lower prices for everything else, some manufacturers who have high prices through increased tariff protection or embargo on imports, and most wage earners who have retained full employment. Tho last class is much the most important, because it includes a large proportion of tho population. Tho loss is being borne principally by producers for export and unemployed wago and salary earners. Most incomes from property have also been reduced by serious fall of dividends and rents and by increased taxation. This reduction has been so large that tho yield from taxation at greatly increased rates is shrinking. “Recovery depends on a renewal of confidence and increased production, for which threo things arc necessary:— 1. Reduction of cost including labour costs. 2. Tho balancing of budgets. 3. Tito improvement of external and internal prices. “Each of those aims, so far as thev are within our power, will tako some tune to accomplish, but in each a definite move car: now be made which will promote that end, and, in addition, will directly help to the renewal of confidence :

1. A reduction in the rates of real wages of at least 10 per cent, and a substantial reduction in interest rates. 2. Reduction of public expenditure, chiefly of salaries and wages, but also some reduction of expenditure on social services. 3. Allowing foreign exchange to go to tho natural price, which would givo some check to the downward movement of internal prices, and help the oxport producer. “These are tho three primary steps to be taken. The delay in revising real wages is probably responsible, for a good deal of the delay in carrying oat fully and effectively the other measures. “The failure to reduce Government expenditure is largely a result of this, and is a very disturbing influence. It lias increased the floating debts of Governments and diverted flic credit resources of the community from use for productive enterprise to tho maintenance) of an extravagant scale of public expenditure. A continuance of this practice would lead lo inflation. “When budgets arc balanced and tho Governments no longer absorb the credit resources of tho banks, ample credit will be available for productive enterprise, and banks would proceed with confidence lo reduce interest rates. Tho net effect of all these measures will restore confidence, and when they liavo beep completed a definite though slow and gradual improvement of business and employment will follow. It would then bo necessary to consider what steps should be taken to restore parity with sterling, and to place the currency system of Australia upon a permanent basis.”