ECONOMIC TREND

New Zealand Herald, Volume LXXV, Issue 23205, 26 November 1938, Page 17

ECONOMIC TREND

,— " CHANGE FOR WORSE "'---! -i REVIEW BY BANKER POLICY "IN DOMINION U DEPLETION OF FUNDS M The view that the position in the" economic sphere had changed for the worse during the year was expressed by the president of the Bank of New -tSouth Wales, Mr. It. W. Gillespie, at the; annual meeting of proprietors in Sydney yesterday. "There is no call for undue pessimismy* l * he said, "but there are everywhere indications of' ~ some recession from the high activity'sof the previous year. As far as Aus- ~± tralia is concerned it has shown in lower prices for our export, products, with a consequent reduction in national income."

Continuing, Mr, Gillespie said there ? were, however,' features that led them - to believe the setback would be neither as severe nor as prolonged as the-last' 1 depression of 1929-32.'- But there was, r i on the other hand, such a disturbed _ political situation both in Europe and the Far East that any prediction would be futile. If they were to cling pre- Q cariotisly to peace they might expect ™ a general reduction of activity in spite.,, of the increase in armaments expenditure; if a general war broke out, no"-' one could foretell its economic reper- ~ cussions.

Deterioration in Dominion Discussing the outlook in New Zealand, Mr. Gillespie said the economics position of the Dominion had showa-i.r some deterioration, of which the^ T gradual weakening of the banking posi-'2. tion was symptomatic. The banks had " proved willing and able to meet aU reasonable credit requirements, but increasing stringency in the cash and oversea funds position might compel -ftr: more selective policy.

There could be little doubt, however, that transfers of capital abroad as result of the unattractiveness of investment in the Dominion had been larga., and had accentuated the decline ra' London funds. It was unfortunately apparent that the Government's'infer--; nal policy, by inflating costs and prices, and stimulating imports, was obstruct"? ing the normal means of correcting. depletion of funds. ' 'But I must express severe condemnation of any suggestion to improve the position by a measure :.'of exchange control," said Mr. Gillespie.. i "Such a policy would do immense dam-, age to the country's credit standing? and lead to a progressive reduction in oversea trade, with increasing embarrassment to- the economy." j Dairy Prices Criticised ' Mr. Gillespie believed that the lower export income which seemed probable in the current year would make it difficult for the New Zealand Government. ' to carry out its'heavy spending programme. He criticised the Government's action in raising the guaranteed prices of dairy produce when London prices had improved, as this jeopardised the principle of the scheme of equalising returns, to producers over years -of high and low prices. ' _ It would be difficult to continue buclj; a scheme indefinitely at the present high levels of the guaranteed prices.vA* deficit was likely in the dairy industry; account at the end of the financial vear and Mr. Gillespie contended that if, it would appear, recurring deficits were inevitable, the scheme resolved itself into a subsidy provided by credit expansion. xlsi