FISCAL POLICY

Nelson Evening Mail, Volume 76, 16 May 1941, Page 7

FISCAL POLICY

QUESTIONS ANSWERED BY MR !\ NASH i Sharing sacrifices [United Press Association] Christchurch, May 15. Claiming that there is no conflict in the Government’s announcements that j the necessary consumer goods will be | produced to the maximum and a policy lof absorbing redundant purchasing power by taxation, the Minister of Finance, Mr Nash, says, in reply to questions: “This, of course, may mean that 1 the standard of living will decline. However, it is the Government’s intention that, as far as is consistent with the full and active prosecution of the war. every effort should be made to spread in accordance with ability to snare sacrifices, any diminution in such standard which possibly may have to be i made.'* 1 The questions were forwarded to ! Mr Nash by the “Press” following ; publication in “The Times,” London, ’ of the following statement: “Though . New Zealanders help Britain by buying British goods rather than American > goods, they help still more if they can do without the goods altogether. This ; has recently been emphasised in a f statement communicated in December > by the United Kingdom Government . to the New Zealand Government. This : statement also includes a request that f restriction of non-essential imports i from the United Kingdom should oe ’ accompanied by equivalent economies -in New Zealand’s consumption. Eco- • nomies in the consumption of imported i goods are being forced upon the people of New Zealand by import restrictions and by the difficulty of obtaining supplies from the United Kingdom. It is , important, however, that the demand : for goods which cannot be imported should not. be deflected to the Home t market. If this should occur, instead i of the required drop in consumption r the result will be an inflationary in- ( crease in prices. Fortunately it does - seem to be generally recognised that t this is undesirable.” f DOMINION PRODUCTION Mr Nash, in his reply, explained . that the position is that the reduction , in the supply of imported goods has -in many cases produced gaps in New - Zealand which cannot be filled. “In some cases, however, particularly with non-luxuries, it has been found pos- ? sible for New Zealand facilities to pro- - vide part or the whole of the deli ficiency. or to substitute some other • commodity available in New Zealand 1 in place of that which is now no longer 1 available,” the Minister replied. “To t the extent that supplies are readily 1 available from New Zealand sources, i the policy is that these should be made f available so long as it does not conflict -in any way with the prosecution of the The policy of the Government was i also to prevent any unsatisfied monet tary demand arising for consumer t goods. That meant that the Govern - 1 ment, the Minister explained, did not ) want the demand for goods deflected f to the domestic market where there i were no means of meeting the demand. 1 From the beginning the Government’s t fiscal policy had been directed toward - that end. 1 USE OF TAXATION 1 “The actions taken are well known. ’ 1 Mr Nash continued. “They consist on ' the one hand of cutting down Public ’ Works expenditure beyond what is ’ necessary in the circumstances, and ' thus, on the supply side, so to speak. 1 diminishing the flow of nurchasing - power toward consumer goods. How- ! i ever, taxation has been the main ; ■ method of diverting demand from con- j t sumption goods. This taxation has j i. involved a 5 per cent, national security i l tax on all wages and salaries, a cont siderable incerase in income tax, the j 5 doubling of sales tax. and other taxes. j , all directed to the same end. ’ 1 The Minister said that the operation ! 2 of that policy had been very successful I i indeed, as was proved by the fact that , r price increases in New Zealand had • i been mainly due to higher landed costs. ! d They had certainly not been due to any : ) inflationary condition, for that had | been prevented from developing. Attention was drawn by the Minis- J - ter to the Reserve Bank returns, which j l “show that for many months past Re- i , serve Bank credit has not been expanded, but. on the other hand, the amount owing by the State to the Reserve Bank 1 has been decreased.” Advances for • purposes other than the Marketing De- » partment, the Reserve Bank returns r show, were £23.690.000 on 17th Febru--5 ary and £15.500.000 on sth May.