OVERSEAS FUNDS

Nelson Evening Mail, Volume LXXI, 7 June 1938, Page 10

OVERSEAS FUNDS

EFFECTS OF ARTIFICIAL BASIS I ' . I want now to draw attention to a .! few—and only a few—of the many ' 1 items of a serious nature to-day, that 5 1 are very disquieting. L j These last few years have been tairly prosperous, and New Zealand should i have been strengthening her resources. | Instead, what do we find? We find I many items to-day of a very disturb- ’ i ing or disquieting nature. What are ; some of these? I shall give three | there are many more. . j 1. The first item is the serious drop . j in our overseas credit, or the drop in | our London funds. It is not easy to t > Set the exact figures, but I have comi piled what I consider a reasonable estit j mate, based on the published figures. IJ Taking the figures as at the end of 5 1 March, 1936, and again at March, 1938 ! —being the first two full years of Lab--1 our rule—we find the position to le somewhat as follows: £ ; Overseas Interest Payments :! for 2 years at £11,000,000 \ P er year 22.000,000 • Paid off London debt to the I I amount of 2.707,000 • Or, a total overseas payment , ! of 24.707,000 j Then, take from this amount the excess of exports over | ‘ imports for the 2 years . which amounted to 19.500,000 This leaves a shortage of ■; exports to meet overseas needs for the 2 years, of 5.150.000 This means that even during boom i times such as we have had that our exports were not sufficient to meet our ’ i overseas purchases and interest payi ments. ! I But, worse than this—our overseas J funds fell during these last two years, ‘;not by the above £5.150,000, but * by lover £17.500.000. From this, we find that over £12.000.000 of money must ■ have left New Zealand in the two : years—a flight of capital in two years of about £ 12,000.000. j Our total overseas funds are now little more than half what they were two years ago. This, to my mind, indi- ’ cates a somewhat alarming position. Many people were disturbed when the exchange went up to 125, but, :f we are not careful—and that right speedily—this problem of high exchange will again soon be a burning question. These figures are all tending in'that' direction. This, no doubt, was the reason why Mr Nash took legislative authority to! take control of overseas credits, which 1 placed in the hands of the Minister full, autocratic control of all overseas busi-i ness and personal requirements. If, this power has to be exercised—and! events point in that direction—then the! people of New Zealand will get a real 1

i taste of personal submission to State j dictatorship. 2. The large amount being borrowed to-day, together with extra credit expansion, in a time of boom prices, is a second serious situation to-day. \ The Minister of Finance told us in , his broadcast speech, that the new j borrowings for last financial year I amounted to £7.492.000. This large borj rowing at a time of high prices and record income is surely not warranted. I And when we realise that a very i large proportion of this borrowed money is being spent on a very costly , basis, building railways that are esti- | mated never to be able to earn any i interest on the investment, we can 1 readily see how we are piling up a : costly debt burden. Speaking of railways, there was an i interesting statement in the Press a lew days ago. giving the railway figures I for the first four weeks of this financial year. These figures showed that the j revenue compared with the same period last year, was down by £15.000, while j the expenditure was up by £20.000. The taxpayers have to find large amounts to pay the interest on the present railways, but what will the position be when the ones now being constructed on a very costly basis, are opened for traffic? Borrowing is not sc bad. if the money is invested in inter-est-earning assets, but that cannot be said of the present policy. Last year our export income ol £65.000.000 was easily a record, and was £28.000.000 above the average for 1931-1932-1933. I was interested and pleased to note that the Minister ol Education was sufficiently fair in his statement recently, as reported in the Press, that he did not take credit for the high prices, nor did he blame the previous Government for the depression years. This is a welcome change to the attitude of the Prime Minister who wenl so far as to say that the Government caused the depression, and was the cause of the reduced export income. On top of the large borrowing ' anc record export income there is the extra £10,000.000 collected from the taxpayers. In addition to these items, the note issue has been expanded by £4.000.000, and further advances from the Reserve Bank to the extent of another £4,000.000, making a total credil expansion of over £8,000.000. Jusl think of it — A record export income of £65.000.00C Extra taxation of £ 10,000,00 C Further Credit Expansion of £ 8.000,001 And they still borrowed a further £7,500.00( And the Prime Minister states thai they are the only Government that has lived within its income. The public car draw their own conclusions from such £ reckless statement. Never in the history of New Zealand has money beer splashed about by the State as is b?im done to-day. EXCESSIVE BORROWING AND CREDIT EXPANSION 1937-38 borrowings £7,500.0Q( This on top of extra £10.000.000 ir taxation, and also record export seasor of £65,000,000. This latter is £28,000,l)0( more than average of 1931-1932-1913 Mr Savage said the last Governmem reduced the export income. Consider where money is being spent I presume the above is without hous ing. This may be another £3.000.000 No chance of ever earning its own interest. There are many good State investments—P. and T. Department, Electricity Account, State Advances etc. The real point is who is to find the interest, or carry the loss? 3. The third serious and disturbing factor to-day is high costs. This problem is met with at almost every turn High costs are embarrassing nearly al —if not all—of our industries. This factor is throwing New Zealand out ol gear with its main competitors—Australia and Great Britain. It is rather interesting to observe how people like to handle more money even though that extra money will nol purchase any more, or perhaps not sc many, goods as the previous amount. High costs, as well as embarrassing industries, is causing large amounts ol capital to be idle, which should be ir use employing labour, building industries, and developing and subdividing | our farming lands. Compared with 1937* there is about £36.000,000 more money deposited in our Savings Banks. I am bound to conclude that this policy of high costs is quite deliberate and a part of the Government’s policy for two main purposes—first, to make it as difficult as possible for our industries so that they will be easy for the State to acquire, and, secondly, to provide an ample supply of idle money for 1 the Government's own use. This is at j least the way the present policy of high 1 costs is working out, and I am con- ; vinced it suits the Government. | Take the sawmilling industry as an ; example. Their costs have been so increased by the present Government, i that we have practically lost our export j trade of timber. Also, the higher costs ■ are being reflected in higher cost of ' building houses, and therefore higher ■ rents for the tenants. I On the other hand, it is enabling the j Government to jump into the sawi milling industry. It was reported lately ! that a State sawmill was being erected at Rotorua al a cost of up to £IOO,OOO the second State sawmill to be erected. High costs is certainly the farmers’ bug-bear. There is no other single factor that cuts right across the farmers’ hope and security, as do high costs. This policy of high costs may be at- | tractive in certain quarters but anything j that tends to push New Zealand up on I to an artificial basis is bound to have ; its injustices and reactions. The hign ■ costs policy being pursued to-day must ibe responsible for preventing large i quantities of undertakings from being [ started by private enterprise, which is : the main hope of our success and the employment of our people.