RISING PRICES

New Zealand Herald, Volume LXXVI, Issue 23488, 27 October 1939, Page 11

RISING PRICES

PRINCIPLE OF CONTROL , i NO "REPLACEMENT VALUE" MACHINERY BEING IMPROVED STATEMENT BY MINISTER The principle that traders should be allowed.to sell at "replacement value" on a rising market is definitely rejected by the Minister of Industries ajid Commerce, the Hon. I). G. Sullivan, in a reply to a request by the Auckland Chamber of Commerce that the price stabilisation emergency regulations should he modified to meet recent increases in the landed cost of imported goods, and that "replacement value" should he adopted as a basis. The chamber wrote to the Minister on September 19 to this effect, and afler considerable delay it has received a reply. In this Mr. Sullivan points out that in a statement issued on September 28 he made it known that the Price Investigation Tribunal would consider applications to increase prices where it could be shown that landed costs had risen. Not Unreasonably Rigid After enumerating the chief causes of increases in the cost of imported goods, Mr. Sullivan continues: —"The Government has laid it down as a general policy that such extra costs may he added to the September 1 prices if it is considered that the industry or trade is not in a position to absorb some or all of these extra costs. "It was realised by the Government that if approval had not been given to some increases in prices, then merchants might have been faced with the necessity of selling goods at lower prices than those they themselves paid. The Government had no intention of forcing people out of business through an unreasonably rigid control of prices. On the other hand, it had no intention of permitting profiteering to take place. Abnormal Circumstances "Jt is noted that it is suggested that the regulations should be modified so as to permit of replacement costs. You will appreciate that the application of this principle would have meant that the prices of all the stocks in New Zealand of imported goods would have been raised quite considerably, and consumers would have had to pay considerably higher prices for goods which had not cost one penny more to merchants and retailers. The merchants and retailers would have reaped a handsome profit had this been allowed, ami the Government did not consider that the application of the replacement cost principle was justified under the abnormal circumstances brought about by the war." In a postscript Mr. Sullivan adds: "Under the regulations and the administration of them, all additional costs of whatever kind may properly be taken into consideration." Reply by the Chamber The Auckland Chamber of Commerce, in a reply, states: —"'When the war is over and prices fall, traders will have to sell at reduced prices the commodities they have purchased at the high prices of the war period. 'lbis offsets the ' handsome profit' referred to in your third paragraph, which alleged handsome profit is in any case mostly illusory, as high prices mean reduced quantities sold, so that the fixed overhead costs of a business have to he spread over fewer articles handled. Replacement cost is therefore quite equitable as a basis for charging, and on a long view confers no ' handsome profit' at all on the dealer." The reply adds that the Government's present scheme is inherently too unwieldy and cumbrous. It might be replaced bv laying down some simple principle, such* as'that of replacement costs, and having complaints by the public investigated by a competent tribunal in association with people having some practical business experience