FOR NOW OR FOR GOOD?

Nelson Evening Mail, Volume LXXII, 17 January 1939, Page 9

FOR NOW OR FOR GOOD?

GOVERNMENT POLICY INSULATION IDEAL REACTION TO LICENSING A full-dress review of the Government's policy as to finance and commerce is given by the Auckland Chamber of Commerce, and special reference is made to “insulating” New Zealand. After a brief historical survey of the Dominion’s overseas funds situation, and their temporary building up by the raising of the rate of exchange New Zealand-London in 1933, the Chamber refei-s to the present Government’s policy and the sharp revival of public works activity, although the rising level of export prices was by then bearing promise of an early reabsorption into private employment of the “out-of-works.” ALLURING EMPLOYMENT “So attractive, however, did the new Government make the public works that much labour was attracted thereto from farm and city occupations, with the result that the reabsorption of labour into private enterprise that would otherwise have taken place was consideraoly checked. There was at the same time an expansion of Government capital expenditure financed not in the orthodox way by raising a loan but mainly from the savings bank deposits, credits reqmsiti mid from the Reserve Bank, and the like. Almost simultaneously difficult 123 aru»e by reason of rising costs of production incidental to the very liberal employment conditions provided by the 1936 Labour legislation. Parenthetically it is ler.iarked that “the advantages fo work ) aof the higher wages are being 'argeiy cancelled out in increases in the coct ut living. ' SERIOUS CONSEQUENCES Costs of production rose :nd ists of living also rose as a consequence of this policy. Some farm land went ou'. of production or was switched over to 1 ses offering less employment. Many n-ai ufacturing industries found thsoueives increasingly unable to stand -p ?o overseas competition. Australia *uppla ucd i ,T tw Zealand heavily in the Pacific Islands market. Some minor tariff increases brought relief to particular ind rsvies ; some actions of the Bureau of Industries brought a certain amount of ecouvuy in operation to other types of und3 ••liking . But business executives found the ms 3 Ives more and more unable to show reasonable net profits, save in those few industries (t g., brewing) which oea-filed greatly ia increased turnover due to adlj 1 purchasing power of t lie worke s in th-j earlv days of the Übour legislation, etpecraiiy before the rising cost of living had begun to operate harshly. Exports dwindled. Loud n fuuis x e the banks declined. Barm adviuis increased, and “therd is a tendency for the banks to call in overdrafts.

RIGID REGULATION Dealing with the December, J 938. trade regulations the Chamber remarks that, they give the Minister of Customs “wide powers to interfere in the matter c-J the nature and direction of imporos; in Let in general nothing can be imported w’tnout a license. Information is still not available as to the principles that will he folowed in the granting and witlu-hiing of licenses. A grave responsibility (fraught with far-reaching consequences on the consumption habits of all and the livelihoods of many) has rested with those ».oufronted with the task of deciding on the exact form of the restrictions.” “In the meatime it is by no means clea r whether the measures are pure'y temporary to meet a passing emergency c-r arepart of a long-range policy; official statements appear to be in con.i'ct on the point. “It may well be that -•urtai'i members of the Government have long Ttie-.-isheJ the regimenting imports, and that the state of the London funds lias now given the pretext for putting such a policy into practical effect. Official statements have been equally inconsistent as to the guiding principles to be adopted in the licensing of imports; much has been said of each of the following, which are by no means mutually consistent: ‘insulating’ New Zealand from overseas cycles of depression and prosperity ; checking luxury expenditure; safeguarding existing New Zealand industries; increasing New Zealand imports from Britain, New Zealand’s best customer. If object three is given more weight than object five there may well be a breach of Article 8 of the Ottawa Agrement, the sanctity of which is a dogma in many circles in New Zealand.” CREDITS GONE TOO FAR The chamber holds tahat “internal credit expansion has proceeded too far, though the proposal to raise an internal loan to facilitate the present rapid expansion of Governmental expenditure is as against the present tendency to finance by raids on the Reserve Bank and the Savings Bank funds the lesser of two evils.” It seems to the chamber that resericted “imported goods must acquire a scarcity value, which will throw the present basis of prices out of gear and will immediately react on the budget of the fan in the street. “So far no public anouncement has been made as to the principles on which import licenses are being refused or granted in whole or in part. Uncertainty is ever inimical to international trade. Doubtless the Governments of certain countries within the Empire whose quotas have been drastically reduced under the new sc!u»me will hesitate before continuing with their respective national pavilions and the general importing community appears much more loath to participate finin. cially in local Centennial efforts.” Where licenses have been granted they appear to the chamber £o be, in most cases, rather rigidly calculated as such and such a percentage of the business’s imports of that commodity from that country for a particular six months last year irrespective of the fact that the business’s imports then may not have been typical—on account of such diverse conditions as the seasonality of many imports, temporary accumulation of surplus stocks, the fact that the introduction of new lines takes time etc., etc. Some of the reductions seems hard to understand, e.g., the drastic cutting down of certain imports of essential foodstuffs the demand for which is apt to be constant irrespective of the increases in the price per unit charged. PUBLIC ADVERSELY AFFECTED ‘The reactions of the licensing system arc likely to be much more widespread than is commonly supposed, and than the Government itself can have envisaged. "It cannot be denied that there is al-

ready a feling of anxiety amongst persons with fixed incomes (especially retired folk and the like) regarding the safety of their incomes.” “There will be permanent adverse reactions’’ nob only directly on employment in import houses, but generally freight rates may have to rise. Sales staffs will be reduced. The chamber foresees that—- “ The wage-earner and the farmer will probably suffer in higher prices to be paid lor the New Zealand article that replaces the imported line, while there is the probability, in the transition stages at least, that the quality of the New Zealand article will not reach the level to which the public has been accustomed.” POINTS TO BE STRESSED The Importers’ Section Committe of the Auckland Chamber holds that in view of the condition in which the Governminl had placed itself some action was necessary to protect London funds, but that thf following points require stressing : The present situation is in no way due to an unhealthy position of the import trade but is due mainly to a decline in exports, which should be stimulated, i here is a danger that import restrictions may lead to reprisals from other countries There is need for a reconsideration by the Government of its recent policy of high wages and vigorous public works activity, which are fundamental causes of the depletion of the London balances at banks. NEED FOR CLARITY The following points require atention if the licensing system is not abandoned : (1) There is need for clear statements : (a) as to whether the import licensing system is to be temporary or permanent, and (if temporary only) at what level of the London funds it will cease; (b) as to the principles according to which application for licenses are being dealt with. It is practically desirable that some form of explanation of these points should be forthcoming in order that business houses may decide as to future staff requirements,. and to enable importers to know to what extent they are to switch over their imports from one source to another. Manufacturers should be informed on what scale to make purchases of raw materials and otherwise plan outputs. If the Government will explain specifically its aims business can and will, in a spirit of co-operation, assist the Government to reach its objective as soon as possible, when it was presumed restrictions would be eased. Inconvenience is resulting from the fact that applications for licenses for imports in the second half of the year are not yet being entertained, and the reactions of this especially on indent business—will probably be adverse. If the system of licensing is continued, then the basis should be on a period of not less than twelve months.