NATIONAL RECOVERY

Otago Daily Times, Issue 22716, 31 October 1935, Page 9

NATIONAL RECOVERY

GOVERNMENT'S ACHIEVEMENT MR COATES SUMS UP NEED FOR DRASTIC MEASURES PAST (Special to Daily Times) AUCKLAND, October 30. A full review of the steps taken by the Government toward national rehabilitation was given by the Minister of Finance, Mr J. G. Coates, in opening his campaign in his own electorate, Kaipara, at Riverhead last night. In spite of the fact that the meeting had been arranged at short notice,' there was an attendance of over 100, and Mr Coates spoke for two hours and a-half without a single hostile interjection. At the conclusion of his address a vote of thanks was carried unanimously. ' "We have come through the most difficult crisis this country has ever experienced," said Mr Coates. " To-night there is a different story from that which I told you in 1931. We have won our way through, and during the last two years have achieved Budget surpluses with restorations in pensions and civil servants' salaries. Four years ago we asked for a free hand to reconstruct the finances and economic condition of the country. We have done that and we now ask you to consider the future. The progress of the last four vears lias not been achieved by guesswork. Our plans have not been haphazard; they have been clear-cut, definite and effective. It was inevitable that sacrifices should fall on all sections of the community, but the measures taken were essential to our rehabilitation. Some people say the Government ' called in the doctors.' We did call in expert advisers and asked them to examine all the factors in our economic and financial position. They assisted us to investigate various problems, and we then framed our policy. Any sensible business man would do the same." Mr Coates quoted figures showing the collapse that occurred between 1928 and 1931. Export prices' during that period fell by 43 per cent., but the fall in internal prices was only from 7 to 10 per cent. The estimated national income fell from £154,000.000 to £102,000,000, the value of all production from £128,000,000 to £85,000,000, the value of farm production from £83,000.000 to £50.000.000, and the value of exports from £56,000,000 to £35,000,000. The position had been complicated by- the, •uneven distribution of the fall in prices. The remedial measures taken by the Government were* largely directed toward putting the farming industry on a sound basis, but other sections of the community were not overlooked, and the policy was directed in the interests of the country as a whole. The main problems which had to be solved, were economic reconstruction and financial reorganisation, budgetary stability, relief of unemployment and the safeguarding of the markets. "The scheme of economic reconstruction involved two main lines of action," said Mr Coates. "The crux of the problem was to remove the disparity between costs and export prices. With the laitter down by 43 per cent, and costs only by 10 per cent, farmers' profits shrank to vanishing point. A reduction of costs by about 40 per cent, was necessary to bring about recovery. The gap was too great to be bridged by cost reductions alone, and if the conditions had been left to take their course chaos would have resulted." One of the steps taken, continued Mr Coates, was the raising of the exchange rate. The virtue of this was shown by the fact that on the most conservative possible estimate the national income in 1933-34 was higher by £14,000,000 than it would have been with the exchange at par. To sustain the same revenue at 'par tax rates would have to be increased by about £2,000,000 a year. Those who were advocating a reduction in the exchange rate would be well advised to think where the cost would fall. The indent agent might possibly reap a harvest, but the shopkeepers and others with stocks in hand would have to bear the burden of the losses. What was really wanted was stability for some years ahead. The high exchange had not reduced imports. For the year ended August, 1935, the imports were valued at £34,700,000, or nearly £0,000,000 more than in the previous year. The surplus of exchange during the same period was no more than sufficient to meet Government interest due oversess. There waa also a reduction in the exchange funds held by the commercial banks and the Reserve Bank together of about £5,000,000 in New Zealand currency. If allowance were made for the salt of gold overseas the increased exchange was in no way contrary to the spirit of the Ottawa agreement. At Ottawa the right of each country to determine its own currency was freely recognised, although the whole Empire had agreed to work for reductions in the price of money and the cost of credit. Mr Coates dealt at some length with the restoration of budgetary stability and commented on the restoration of the cuts to civil servants. The Government fully appreciated the great sacrifices they had made and would restore cuts in full at the earliest possible opportunity. The unemployment problem was also touched on by Mr Coates, who said it was folly for any party to try to borrow its way out of the difficulty. Finally he reviewed the future policy of the Government as outline 1 in the National manifesto. " Our watchword is stability with progress," he said. " 1 do not believe it to be honest to attempt to capture votes by making extravagant promises which are incapable of fulfilment. We can, however, say with confidence that the need for drastic measures is now past, and once u.jre carefully but definitely we can move forward."