FINANCIAL OUTLOOK.

New Zealand Herald, Volume LIX, Issue 18087, 11 May 1922, Page 8

FINANCIAL OUTLOOK.

A RISING BAROMETER.

DOMINION'S POSITION.

RETRENCHMENT EFFORTS.

QUESTION OF TAXATION.

£B? TEI,EGRArn.--OWK COBRESrOKMSNT.j

FEILDING, Wednesday. The problem of deflation as it affects this country and tho general finances of the State were dealt with by tho Prime Minister at some length in a speech here to-night. Tho hall was crowded. Great enthusiasm was displayed. " It must have occurred to most of us, at all events since the end of the war," said Mr. Massey, " that there is a limit to tho taxation which any country can carry without serious inconvenience to its people, and we are all agreed that tho best thing that could happen to this country, if it were passible, would be the reduction of taxation. I know numbers of people, and they arc not people who {rrumblo without causo, who under existing circumstances have the greatest difficulty in making ends meet, and who if they had tho opportunity would use the money ' now hindeci over to the tax-gatherer tor the pu'poso of useful work involving the employment of labour. If we are going to reduce taxation, however, we must iirst of all reduce cost of government, redact) the cost of production, reduce tho cost of living, and increase output. " I think it is well known th=vt on * account of tho enormous amount of additional work that was required to be done by the departments a very large number of. people were taken into the employ of the Government during the war years. These people have long since finished tho duties for which they were engaged, and they are now no longer required. It is impossible for the State to continue finding for them wages or salaries. It became tho duty of the Government, therefore, to arrange and to carry through a policy of retrenchment —a cutting down of expenditure. " During the war, and say for the two yeara following, the cost of living had increased seriously as compared with 1914, and to meet th'is increased cost of living bonuses had been paid by the Government to practically all the people in the employ of the State. The aggregate amount of the "bonuses per annum when Parliament met for last session was about £4,500,000. Legislation was introduced with the object of cutting down this amount in proportion to the fall in the price of goods in daily use by the people of the country. It was thought, however, that those in receipt of fairly large salaries might reasonably bo called wpon to share in the retrenchment, and as part of this policy the Prime Minister and his colleagues in the Government were required to accept a less amount than they had been receiving for some time past. The same policy was fob lowed with respect to the Speaker's and the other officers and members of both Eousesu Automatic Increases* " Many other economies were also •undertaken in different directions and tho result of what has been done during tho past six months is now beginning to make itself felt. Bnt it has to bo remembered that along with the economies that have been and are being effected there are automatic increases on the other side. Interest and sinking funds for the loans that have been raised in the meantime have to be provided for, as part of tho permanent charges, and taking sinking funds into account as well as interest, the rate to be paid is very often not less than 7 per cent. These items on the other side of the ledger mount up very rapidly. We have to remember also that there are automatic increases in the scale of salaries—iricreaaes in salaries provided for by Act of Parliament"—and provision has to be made also for any new department that happens to be created for special work.

" Many people are inclined to forget, the hardships of the past, and especially those experienced at a time like this, "i have no doubt that these people will be coining along as soon as we get back to normal and asking for enormous expenditure in the good old way. I hope, however, that the lessons of the war will not be forgotten.

Question of: Taxation, "A beginning has teen made in the direction of reducinj taxation. Probably it will be suggested that the reduction was not of much importance, but actually it was pif tiio greatest importance. I knew perfectly well that we were going to have serious difficulties in collecting the land tax and the income tax and with, the object of encouraging the payment of the taxes due, and at the same tirao assisting the taxpayer to a certain extent, I arranged for rebates if paid on cr before tho due date. I am glad to say that the scheme worked well. With the rebate on the one side and the penalty on the other there was such an incentive to payment as had never existed previously, and the result was that the xnoney cam* into the Treasury,

Financial Outlook. "I am glad to be able to tell you that the financial barometer is rising. In proof of that I need only refer, to the result of the recent loan which, the New Zealand Government placed in London. I look upon the result of the loan as a great compliment. It is undoubtedly a vote of confidence in New Zealand, and I believe also that it augurs well for the future. Money is certainly very much more plentiful in England than was the case even six months ago. I believe that the present position is due to a redistribution of capital by the operation of tho loans which were raised for the war. A huge sum of money is distributed _in England during every year and for this money investment has to be found. The people who have these funds at disposal nave evidently come to the conclusion that t.'iey can find no better investment for them than in this country. "One point I should like to emphasise, speaking as la m to a community of producers, is that we should at au" coste keep up the quality of our exports. Freights and other charges have also to be reduced so that the producer will be left with something for his industry, otherwise tho whole country will suffer. Over Importation.

M Another matter which affected Government finance was t'he over importation ■which took place in the last two quarters of the year 1920-21. Huge quantities of customs paying goods were imported to this country from England, America., and even Australia, and stacked up in tho warehouses in every centre. The result for the time being was that some millions of pounds were collected by way of customs duties, which should have ccrmo into tne yeai; following, and our finance was affected accordingly. I pointed this out at the time in the Financial Statement, wliich I delivered just after coming from England on tho iaat occasion. I then made the statement that the surplus customs duties would have to bo carried forward to the following year in order to make the accounts balance. This turned out just as I had expected, and in tho brief summary of the public accounts, which I propose to make public, what we have done is set forth in a way which t stand eVCryone wiU be *bli to under h*&& l Tx *»*»*•*• change for the better has taken place. Ido not need to remind you that last year was not a good one for foe collecting of revenue. Price" were very much lower than usual and money was scarcer, but there is undoubtedly a change for the bettor. Revenue cheerful £n7 a, V he pe ° ple cheerful, and we have entered upon the present year with a great deal more cor" fidence than would have been thought possible six months ago." ">°ugnt Mr.Massoy then read a summary of the S, 1922 CC ° nXItS f ° r the yoar ended Marc^