STERLING FUNDS

Nelson Evening Mail, Volume LXXII, 24 November 1938, Page 5

STERLING FUNDS

CONTINUED FALL IN LONDON POSSIBLE REPERCUSSIONS j I I United Pre.-B AssnciaMnnl AUCKLAND. 22nd November. Possible repercussions from the continued fall in New Zealand’s sterling : funds were discussed by Professor T. ! Hytten, economic adviser to the Bank ; of New South Wales, who left for . I Sydney by the Awatea after a three; j weeks’ visit to the Dominion. The 1 relationship between public works ex- j penditure and sterling funds was trac- j 1 eel by Professor Hytten, who said the j 1 present position was at least symptoj malic of a partially imbalanced j | economy. “As far as I can gather,” he said, ‘ ; “New Zealand’s sterling balances have • j been dropping at the rate of nearly ; j £1,000,000 a week. They are rapidly; 1 reaching a dangerously low level but j | it should be possible to make the funds j i hold out till Christmas. Heavier export returns in the first few months of; the New Year should bring at least tern- j I porary relief, though the measure of: ; the relief must of necessity depend on j j the general trading position.” ! Quite apart from the drop in ster- j ling funds. Professor Hytten continued,] j both production and export prices were i ; falling. Australia had already suf- ] fered a minor recession in wool and wheat and now that dairy production in New Zealand showed signs of falling, accompanied by lower prices on the London market, the Dominion's general trading position would have to be carefully watched. j “It is impossible to determine how ) far the fall in London funds has been j due to heavy imports and how far it ■ has been due to capital remittances,” ; the professor added. “The general impression is that heavy imports have been the principal cause. In general, two main factors govern heavy imports. REASONS FOR HEAVY IMPORTS “In the first place, a good export season, with buoyant prices. brings about a demand for consumer goods, many of which, in a country like New Zealand, must be imported. Those coni ditions, however, do not rule at prej sent. The second main factor in swelling imports is heavy Government ex- , ■ penditure on such activities as public ■ j works and housing and expenditure of, . | this type has definitely been carried j on in New Zealand.’’ The reaction from the public works , programme was in itself twofold. The high wages bill financed by the Government, automatically led to a heavy demand for consumer goods with a corresponding effect on imports. Another factor was the importation of! capital goods such as heavy mach- • inery and materials for use on public i works. Any such movement was likely | to cause a considerable drain on over--1 sceas funds and it was for the Govern--1 ment to apply any necessary degree of control. “In times of trade recession,” Pro- ! lessor Hytten continued, “public works 1 can certainly be expanded as a pal-i ’ liative, but if they are expanded too, ■ far or too rapidly there is serious risk . j of an unbalanced economy. In my opin-1 ion that stage is apprcliching in Newi j Zealand, though I do not say that it is ! , too late for correctives to be applied.” j One thing which particularly im- j pressed Professor Hytten during his , tour of New Zealand was the appar- j > ent determination of leaders of indus-' s try, both primary and secondary to' t withstand any tendency toward panic, j . They realised that in a large measure j ■ the future of the country was in their * * hands, he said, and they were doing ? all in their power to see that public • confidence, and with it public credit, 1 were not shaken.