"OVERHEADS."

New Zealand Herald, Volume LXVI, Issue 20293, 28 June 1929, Page 14

"OVERHEADS."

Sir,—The address of Sir Geo.- Elliot is of great interest to the farming community, as it indicates most clearly that he is gradually being forced to consider the vital importance of "overheads." Undoubtedly the most important question \V3 have to deal with to-day is the ridiculously high, and ever rising, cost of production. Tho profit anyone makes is the difference between the cost of production and the price received in payment for commodities. The same rule applies to "Services rendered," so that the farmer, the merchant, the . storekeeper, the professional man and the wage-earner are equally interested in keeping down: .the cost of production. Overhead costs include interest on capital, interest on borrowed money, cost of raw material, rent, rates and taxes, freights, wages and all other costs incurred in running a. business. There are very few cases in which a seller can influence the price received for commodities, because competition renders price-fixing impossible in, most cases. In the case of "services" pricefixing is to a limited extent, but invariably breaks down if too high a chargo is made. Consequently, speaking generally, as you cannot influence prices you are bound to concentrate on reducing overheads. Most of our troubles in New Zealand are due to "overheads." Some of these troubles are beyond our control, some are due to our lack of business ability, some are due to bad methods of taxation, and some are due to legislation. Those beyond our control are the cost of raw material in the country of origin and freight charges inasmuch as they are affected by distance- from our buying and selling markets. Those duo to lack of business ability are of course confinod to tho individual or company concerned, and vary enormously. . The chief cause, however, of high cost of production, or "overheads," is due to the incidence of taxation. It is a common saying that labour produces, all things. It is absolutely true that nothing of value is produced without labour. If this is so,' then it follows that the lower the cost of labour the cheaper will be commodities. The labourer, however, must live, or he can't work; as a consequence of this the cost of living and tho cost of labour must mean about the samo thing. It is quite clear then that all our efforts should be directed toward keeping down the cost of living. This is how wo keep down tho cost of living in New Zealand: We tax wheat so as to raise tho cost of a 41b. loaf to 4£d more than it should be. We tax oats so that our morning porridge is raised in liko proportion. Wo raise the price of boots, clothing, woollen goods and nearly all household requirements by 33 1-3 per cent. Wo tax the tools of our trade. Not satisfied with this wo impose a very heavy tax on tho profits of limited companies, which, of' tours©, they pass on in the increased price of goods. The natural result is that tho cost of living rises, then, of course, wages must also rise. When wages rise it costs more to build houses, so rents rise. It costs more to build railways, so freights rise. It costs more to make roads, so rates rise It costs more to " run " the Government, so taxes rise. The next step is that the "overheads" of farmers are so increased that farming on the poorer land does not pay. You not only stop more land coming into cultivation, but you force men off tho poor lauds already occupied. We put a label on them and call them "deteriorated lands," and having coined a name for tho disease we are happy. Tho next step its unemployment. The next is to borrow money to pay idle men to do work that is uneconomic. This borrowed money _ carries interest, which means more taxation. We have only to -follow this policy long onough and the last step is bankruptcy, I trust that we shall follow Sir Geo. Elliot's advice and reduce our overheads before it is too late. ' Frank Cojdbbck.