UNEXPECTED CONSEQUENCES.

New Zealand Herald, Volume LXIX, Issue 21133, 16 March 1932, Page 10

UNEXPECTED CONSEQUENCES.

A controversy now being pursued in the Australian Commonwealth Parliament illustrates the manner in which action taken with the best of intentions can produce consequences not foreseen, and consequences which prove difficult to handle when they develop. The late Government, in pursuance of its policy of restricting imports and encouraging local industry by prohibitive ta riffs, placed a duty of 5s 2d a pound on tobacco leaf imported for manufacture in Australia. The excise duty on the vuianufac-

turcd article was fixed at 2s 4d a lb. The result was an enormous increase in the production of Australian leaf. The present' Govern-

incut proposes to reduce =hc duty to 3s a pound, and increase the excise to 4s fid. This 'has been strongly opposed by country members, who have predicted ruin for tobacco growers if the new rates are sustained. Defending the Government's proposals vigorously, the Minister of Customs said the drop in revenue consequent on the low excise rate, if continued, would wreck the Federal finances and the economy plan. Moreover, tobaccogrowing had been stimulated to such an extent that, had the average ,\i<! i been obtained this year, there would have been gross over-produc-tion and grave loss to growers. At least 16,000,000 pounds would, he predicted, be produced next year. The consumption was (4,000,000 pounds, and of this at learnt:4,ooo,ooo pounds must be imported leaf, used for blending. Therefore there was a prospective surplus of 6,000.000 pounds with no export market offering. Speaking of the growers, the Minister said, "in their own interests the extension of the industry should be steadied." The position summed up is that the enormous duty on foreign leaf—which was also subject

to excise as part of the finished product—reduced its use to the absolute minimum. The increased quota of domestic leaf, escaping with a low excise levy, made serious inroads into the yield of revenue, while production was stimulated to the point of dangerous over-produc-tion. Yet the impassioned protests of growers and their Parliamentary representatives prove how great is the resistance to the removal of such aids once they are granted—a point that should not be overlooked in considering the effects of high exchange rates. The final moral is that the ultimate consequences of State action should be carefully considered before a policy is adopted.