NEW ZEALAND'S INDEMNITY.

New Zealand Herald, Volume LVI, Issue 17140, 21 April 1919, Page 4

NEW ZEALAND'S INDEMNITY.

There are clear indications that the Allies have modified their original proposal that as part' of the price of peace Germany should undertake to pay the whole cost of the war. No official statement has yet been given of the amount which will be demanded of the Germans, but there is sufficient evidence of agreement in the allied councils that Germany's financial power has been sapped by the war, and that the indemnities to be imposed upon her must be severely proportioned to her ability to pay. Such a compromise will fix huge burdens upon the shoulders of the nations which have fulfilled the task of destroying German militarism, and it may be presumed that the Council of Four has not abandoned any claim which could possibly be pressed with any, prospect of securing payment. The I latest forecast suggests that Germany will be asked to indemnify individuals and not States, so that the allied nations will bear the full cost of their military operations, and only the losses suffered by individuals through the destruction of landed property and shipping and personal injury or death will be compensated from the German indemnity. The consequences of such an arrangement to New Zealand can be very briefly stated. The Dominion's war expenditure amounts to about £61,000,000. This represents almost entirely national expenditure, the only item falling within the classification of individual loss—the destruction of New Zealand-owned shipping is not included in the war expenses account—being war pensions, The total expenditure on war pensions is approaching £3,000,000, with ail annual liability exceeding £1,500,000. If Germany is compelled to pay New Zealand's war pensions the Dominion will be relieved of one-third of the annual charges arising from the war, but it will be faced with a permanent addition to its public debt of at least ,£60,000,000, and of a permanent increase in its annual interest bill of some £3,000,000. Thus the prewar debt will be increased by 60 per cent., and the pre-war interest bill increased from less than I £3,000,000 to nearly £6,000,000. As | a matter of fact, the amount I absorbed by interest and sinking fund charges during the 1918-19 financial year exceeds £6,000,000, but the country has been enabled to set aside this vast sum by the expansion of its wealth through war time increases in the value of its production. The problem for the future will be to meet this bill under normal conditions, in which prices will gradually return to a stable level, and efforts will be made to reduce taxation. During the war the value of the Dominion's export trade has barely maintained its pre-war standard. In other words, the volume of production has diminished. It will be the task of the future to expand production so that, there will be a steadily broadening body of wealth to bear the burden of the war debt. The only means by which this can be done arc n systematic development of the country's idle resources, by a rapid extension of communications, and an effective utilisation of its fertile lauds.