CHECK TO SPENDING.

New Zealand Herald, Volume LXVII, Issue 20596, 21 June 1930, Page 16

CHECK TO SPENDING.

DOMINION'S CHIEF NEED.

.BANKER SURVEYS POSITION.

LOW PRICES ESTABLISHED.

'ADJUSTMENT TO NEW ORDER

[from our own correspondent.] WELLINGTON, Friday,

A comprehensive review of economic ■conditions in New Zealand was presented by Sir Georgo Elliot, chairman of the Bank of New Zealand, in his address at tho annual meeting to-day. In addition to surveying tho year's activities in tho major branches of production in tho Dominion, he described the international influences that havo contributed to existing conditions and explained somo of tho problems arising from them that are now engaging tho attention of economists and financiers. New Zealand had experienced depreciation in the purchasing power of money, not by arbitrary inflation of currency, such as occurred in Germany with disastrous results, but through an over-use of Stats credit, inevitable from tho war conditions, inflating prices of raw

materials and land values, reinforced by J the millions spent in settling soldiers on tho land. Resulting from tho reduced purchasing power of tho pound tho people liad to bo " provided with the moans to pay," that is, wages increased, and •wngecarners were prepared to pay any pricos for commodities as long as wages rose accordingly. Resistance to Natural Movement. ** We are apparently now witnessing a world-wide natural movement toward a return to pre-war commodity values, that is, the pound to purchase 20s worth of goods or labour, equal in amount and quality to that of 1914," said Sir George Elliot. " Labour, entrenched behind political power and arbitration awards, is endeavouring to .stay that movement by keeping wages up. How' long can it do so ? Unemployment is one of the outward and visible signs of the effect of such an endeavour." Passing on to a general review, he continued:—"New Zealand unfortunately is to an extent following in the footsteps of Australia where acute depression is being experienced. Expenditure, public and private, is on an unwarranted scale and a few years of low export prices for primary products coupled with over-importation, and possible difficulty in raising loans from outside sources, would bring about conditions somewhat similar to those now being experienced in Australia. It does not require any prophet to foretell that unless expenditure, public and privato, but especially the former, is substantially reduced, the future financial credit of the country must be prejudicially affected. The immediate adoption of a policy of retrenchment would no doubt entail a certain amount ,of hardship in tho community, but delay in the adoption of such a policy would inevitably lead to greater hardship for greater nnmbers." , Excessive Borrowing.

In the last 20 years the public debt of New Zealand has increased from £72 6s lOd per head of the then population to £179 12s lOd per head of tho present. It must not be forgotten that in the period now under review the greatest war in the history of civilisation ran its . blighting course, leaving an aftermath of unprecedented public debt on every country of the British Empire. It should, also, be remembered that a considerable amount of our public debt is represented by Government undertakings which contribute revenue to meet at least a portion of interest charges. In addition to the public debt, local body indebtedness is increasing at a greater ratio per capita than population. According to the Local Authorities Hand Book of 1929, debts contracted as at March 31, 1928, amounted to £45 13s 8d per head of the then population, as compared with £lO Is lOd in 1898.

"No doubt the greater proportion of the local body expenditure is justifiable, Mm one aspect or another," Sir George , Elliot remarked. " Some of it, however, might with advantage have been postponed, for, however desirable particular amenities may be, the old proverb, ' cut your coat according to your cloth,' is worthy of remembrance. Furthermore, an increasingly expanding expenditure is getting out of step with the wealth of the country per head of population. The Penalty o! Extravagance.

" It, is a lamentable fact that, as in Australia, we in New Zealand are losing all sense of proportion where public expenditure is concerned; and even in private life what was considered extravagance a few years ago is now taken as ft matter of course. Rates and taxes in New Zealand aro steadily increasing; beyond a certain level, however, they cannot go without bringing about calamitous results to the taxpayer as well as to the tax-gatherer." " It would be easy to close one's eyes to the indications that point to continuing low prices for our exported products, but only harm will bo done by an ostrichlike refusal to faco the position," said the chairman in a concluding reference to the general outlook. "We aro not the only people who aro feeling the pinch. All around us similar conditions arc being experienced. Indeed, we are in better trim than many ether countries. . . We might with advantage take an example from other countries. I.i several of the South American States, where prices for exported goods are showing big reduction, important public works have been stopped and a policy of retrenchment adopted. In Australia retrenchment is tho order of the day. Escaping from Depression. "In New Zealand, if low prices for primary products continue for any length of time, land values, now excessively high, must ho prejudicially affected; a reduced standard of living would then become not, merely advisable but obligatory, since salaries and wages would of necessity be lowered. Nevertheless, if individually and collectively the community will strive conscientiously to adjust itself to altered conditions by en deavouring to adopt more scientific methods, to pay more attention to detail, to increase output and work a little harder, overhead expenses will ho lessened, and what is lost in price may be gained by increased and less costly production—and in time the pendulum will swing tho other way. 'New Zealand has many advantages; fertility of soil, congenial climate, a healthy population of pure Britisli stock, are all assets of incalculable value. It remains for us to utilise these advantages to the full, and in so doing we can, whatever happens, faco the future with confidence." following tho chairman's address, Mr. 11. W. Gibbs said the times may bo troublesome, but during his long experience in the bank, extending well over fifty years, the country had passed through many worse. " The ups and downs come periodically and wo must face them philosophically," he added. " With tho ample warnings being given in all quarters there will be no excuse , if wo in New Zealand are taught napping. By shortening sail in private expenditure on non-essentials, and more particularly in public extravagance, both State and municipal, I am satisfied there will be no occasion for *wdue pessimism as to tho results."