THE OTAGO DAILY TIMES TUESDAY, MARCH 22, 1932. EASY MONEY.

Otago Daily Times, Issue 21600, 22 March 1932, Page 8

THE OTAGO DAILY TIMES TUESDAY, MARCH 22, 1932. EASY MONEY.

Public servants in different parts of New Zealand who are protesting against the recommendation of the National Expenditure Commission that there should be a fresh reduction of salaries of State employees by 10 per cent, are painting somewhat dismal pictures of the disaster which will follow such action if it be taken. It was asserted in one resolution that the reductions will aggravate the economic position, embarrass the business community, and “ eventually result in economic chaos.” This is a clear instance of an extravagant use of terms. A2O per cent, cut in Australia has not been attended with the dire results of which public servants in New Zealand are apprehensive. There is, of course, no reason to doubt that another wage reduction will impose hardship upon many State employees. The Government does not fail to recognise this. Its aim must be, however, to assure that the burden which the country has to bear is evenly distributed; —in other words, that the losses that must be caused through the huge decline in our national income shall be carried proportionately by all classes. The alternative to wage reductions, the Prime Minister said recently, is retrenchment in the public service which, be it added, is still over-staffed. If there is an alternative which would avert the painful necessity for wage reductions or dismissals, and at the same time restore the stability of the national finances, the Government and the Royal Commission have failed to discover it. So, too, have the governments and financial authorities in Great Britain and Canada, since the principle of wage reductions has been generally applied throughout their State departments as well as in those in Australia. The representatives of the public service associations in New Zealand, who interviewed Mr Forbes last month, did in fact submit a scheme which, they declared, would relieve the Government of the need for reducing wages. The cardinal proposal in this scheme was one of currency inflation. The Government, in short, was asked to increase the supply of paper money to an extent sufficient to cover the deficit that is anticipated. This is not the first occasion, nor will it be the last, on which the alchemy of inflation has been suggested as a painless corrective for the hard facts of insufficiency of national revenue. Inflation has been prescribed for the relief of unemployment and for the assistance our hard-presse'd farmers. The retiring president of the Canterbury Agricultural and Pastoral Society recommended it last week as “ the one method of defence and protection at the present.” It is an engagingly simple process. Bank notes would be issued against the somewhat incalculable value of the present and potential assets of the country. There would be no increase in the credit of the country, which alone could back the issue of this easy money. Domestic prices would be forced up, but the prices of our primary products on the overseas market would remain as before, depressed and liable as ever to fluctuations over which the Dominion has no control. The relief would be temporary, and we should soon be faced with the need for issuing further notes or undertaking reductions in expenditure which, because of the temporary and costly expedient adopted to avoid them, would have to be drastic to the last degree. It is curious that the disastrous consequeneefe of mortgaging the credit of the State should have to be constantly pointed out to residents in a country which is already suffering as a result of over-optimism regarding its re-, sources; but perhaps it is natural that people should be short-sighted when they fix their attention merely upon their own immediate interests.

Wool Week