THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY, NOVEMBER 19, 1936 THE ECONOMIC OUTLOOK

New Zealand Herald, Volume LXXIII, Issue 22580, 19 November 1936, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY, NOVEMBER 19, 1936 THE ECONOMIC OUTLOOK

Sir James Parr's favourable estimate of the immediate outlook for New Zealand produce is well based on the strong march of recovery in Britain, the Dominion's largest customer. Sir James' judgment is particularly valuable because, as High Commissioner in London until a few weeks ago, itie was stationed at the world centre of trade and finance. On New Zealand's behalf, he has had to keep in constant and close touch with the commodity exchanges and, in negotiations with the British Government on food imports, has become well posted on the whole trend of supply and demand. His prediction of good prices for meat, dairy produce and wool in the next two years can therefore be accepted with confidence. The known and calculable factors support his estimate and, although the prudent will make allowance for the unknown and incalculable, they will feel entitled to proceed in the meanwhile on the present fair reading of the trade barometer. The prospect should prove heartening to primary producers, so far favoured by a good season and fast moving toward the summer flush. They have no present anxieties concerning the disposal of what should prove a record output from sheep and dairy farms and can reasonably expect more payable prices than for several years. The general trend of prices is steadily upward. There may be temporary disturbances and fluctuations, like that caused by the re-stocking movement a year ago, generated by the fear of complications with Italy over sanctions, but for some time the average has been climbing. The economic urge is so strong that so far it has overcome the periodic j alarums and excursions in foreign affairs. The measure of this recovery is shown by the Economist index of primary prices, which on August 5 was 42.4 per cent above the base level on September 25, 1931. And since then the general average has improved. It is worth noting that the appreciation of prices applies to most of the other great commodity staples

as well as those in which New Zealand is principally interested and extends also into the metal markets. More recently it has begun to affect manufactured goods and wages, although the era of cheap money persists. Sir James Parr notes some of the reactions in Britain's economy —the sustained activity in most industries, the impressive decline in unemployment, the increase in purchasing power, the building boom, the revival in the shipyards and the vast expenditure on rearmament. The last-named factor has not yet reached its peak and will remain active for some considerable period. Taken as a whole, Britain's domestic trade has seldom, if ever, been geared so highly. The first half ,of next year will receive an additional stimulant from the influx for the Coronation. In spite of internal prosperity, however, world trade has failed to recover in equal measure. Britain is taking a larger share of international business but, even so, her larger proportion still falls far short of the norm prior to 1930. It may be that economic nationalism has gone so far that a return to the old dimensions of international trading is not to be expected. Britain herself, the greatest world trader, has become more self-sufficient and is using the tariff and other protective devices to support her own primary and secondary industries. At the same time some observers do not regard with equanimity the manner in which her imports are outpacing her exports. Even allowing for a large increase in invisible exports, tfee balance appears to be growing lop-sided once again. On the other hand the .new currency agreement and the beginning of recovery in the gold bloc countries, as well as the great economies effected in the use of gold, the currency base, are very important favourable factors. These should help to continue the present upward move of the trade cycle, a move that is also helping to ease the political situation in many countries and so lessen international tension. ' At the same time Sir James Parr i has done well to sound a note of caution. It has yet to be proved whether Britain can sustain prosperity on brisk domestic business I while international trade remains stagnant by past standards. Moreover, two of the largest factors in the present revival cannot by their nature be permanent, the building and armament booms. After canvassing the prospects in a recent review, the Economist concluded: "There are the clearest indications ,

that the present boom is in a stage of maturity. There are some who say that booms could, and should, be eternal. But the prudent man will assume, until proof to the contrary is produced, that booms, like men, are subject to a morphology which human efforts can influence but cannot alter. That being so, the prudent man will already be making his preparations for the change in the economic trend that must come some day, and may come soon." Sir James Parr gives New Zealand two years at least of good prices. While the going is easy, he suggests that producers should build up a reserve against b

tad times. The advice is sound. The rainy day at present appears distant, it may never come, but it is as well to be prepared. That does not mean that present satisfactions should be sacrificed but simply that reasonable provision should be made against the uncertainties of the future*