WORLD SITUATION

Otago Daily Times, Issue 22742, 30 November 1935, Page 10

WORLD SITUATION

AN INTERESTING SURVEY AUSTRALIAN BANKER’S VIEWS In his presidential address at the annual meeting of the Bank of South Wales in Sydney yesterday Sir Thomas Euckland said that there had been a further reduction in the note circulation of the bank of £156,000, due to the replacement ifi New Zealand of the notes of the trading banks by those of the Reserve Bank of New Zealand. The total note circulation had thus been reduced to the small figure of a little over £140,000. Deposits, which amounted to £90,403,000, showed a decrease of £1,437,000. Last year the deposits showed a substantial increase of more than £5,500,000, reflecting in some measure the increase in wool prices during the previous season, and possibly some investment from capital abroad. Referring to the world situation Sir Thomas Buckland said: — In view of the importance to Australia of world economics, some survey of world conditions is desirable. In any estimate of the situation it is to be remembered that these conditions may be quickly affected by changes in the international political position, which is at present insecure. During the year the process of recovery in world conditions has continued. Prices are rising slowly, industrial activity is increasing, and confidence is growing. But the improvement has not affected all countries equally. Broadly speaking, in most of the countries of the “ sterling group,” using this term in its widest sense to cover countries pursuing a similar policy, industrial activity either exceeds or closely approaches the level of 1929 But in countries which still remain nonlinally or really on the gold standard, and particularly in those which have had to resort to exchange restrictions, the level of industrial activity, although higher than in 1932, is still low. International trade shows littje sign of returning to its former level. The volume of world trade is still 23 per cent, below that of 1929, and its value measured in gold is only one-third of what it was in that year. _ ' These considerations seem to show that until world recovery is on a wider bgsis, it would be unsafe to assume that substantial improvement in world conditions is to be expected in the near future. Some of the recovery, too, has been associated with the new armament race upon which the world seems to be embarking. Such a policy of public works expenditure may stimulate industrial activity, but it is more wasteful in the end than much of our own oft-criticised public works. It is, indeed, difficult to see bow a further substantial measure of world recovery on a broader and better basis can come without a return of international trade to something like its pre-depression level. The many national trade barriers are against an increase in trade, and without some easing of the present restrictions, there can be no substantial improvement. Particularly is this the case with exchange restrictions and clearing agreements which afford the most complete hindrance to trade short' of prohibition. Countries with a system of clearing agreements have found that it tends progressively to narrow trade. The trend hitherto has been one of increasing efforts towards self-sufficiency, and if one could think that this trend were permanent, there would be nothing to do but to follow it. But the measure of self-sufficiency attained has been procured at an enormous cost, depressing severely tbe standard of living of the countries concerned. It is therefore impossible to believe that the trend will continue. One cannot imagine that the industrial countries of Europe will continue to produce wheat, for instance, at the ruinous price amounting in some cases to several times the price on the world market. This diversion of agriculture is already helping to cause an acute shortage of jobs in some important countries, with a consequent serious lowering of the standard of living. It appears that the best hope of reversing this trend lies in some agreement upon the related question of monetary stability. One of the factors leading to the restrictions has undoubtedly been fear of currency depreciation. For this reason there is a fairly strong body of opinion, chiefly in the countries still really or nominally on the gold standard, holding that no loosening of restrictions can take place without a return to the stability of exchanges, which they contend the gold standard gives. On tbe other hand, there is an even stronger opinion that a return to the gold standard would _ giv° not so much stability as a rigidity, which would in no way help the situation. The reason for this opinion is to be found in the extraordinary maldistribution in the world's monetary stock of gold, which is not likely to right itself by a mere return to gold. It is possibly due more to the refusal of creditor countries to lend than to anything else, and in so far as it is due to this cause, it can'only be corrected by a resumption of international lending. But this is not only a question for the lender; in a large measure it is also a problem for the bor rower. With the present uncertainty it is as difficult for borrowers to ask for money as for lenders to part with it, and no greater certainty can exist until world trade is allowed to expand by the re moval of at least the worst of the trade restrictions. Industry and trade is finding itself in a dilemma which _ can be solved only by a return of sanity in world economic relations. Sir Thomas added that despite attempt to formulate an Australian-New Zealand trade agreement, nothing specific had been done. Nevertheless, trade between the two countries continued to expand and mutual profit must come from the visits of members of each Government to the other. OPERATIONS IN NEW ZEALAND Dealing with the bank’s operations in New Zealand, Sir Thomas said: The unsatisfactory wool prices and marketing difficulties of the 1934-35 season resulted in increased end-of-seaeon stocks. The price improvement of recent months was only in its initial stages at the close of the New Zealand wool sales in April last. The outlook for the current season is bright, since there are prospects of the continuance of the satisfactory prices non current, while New Zealand is one of the few wool-producing countries where an increased clip is expected in 1935-36. Further, the outlook for crossbred wool is eti couraging, in that higher prices may mean that crossbred will be substituted to some extent for the finer types. Although the dairying industry is not enjoying particularly favourable seasonal conditions, and output during the present season is expected to be somewhat smaller, prices for dairy products have reached high levels in recent months, ana prospects point to their continuance above last season’s rates.

As I stated when discussing the meat agreement in relation to the Australia ! meat industry, the conclusions reached were not wholly satisfactory. Since, however, the industry in New Zealand has reached a much higher stage of develop ment than in Australia, the former coun try has less to gain than the latter from an agreement permitting of steadily-ex panding exports. A considerable improvement in secondary production is noticeable, particularly in clothing, boot, and shoe industries. The total output of secondary products for the year ended March, 1935, was estimated to be from 10 per cent, to 15 per cent, greater than the previous year. Factory employment is higher, and some in dustries report a shortage of older apprentices and skilled workmen. Among the well-established industries, engineering shops, boot and shoe factories and textile mills are employing more hands or working overtime. At the same time, the number of boys and young men in the higher classes at technical schools discloses a sharp decline compared with the past few years. There has been a substantial increase in wholesale trade this year compared with last, ns shown by the augmented sales tax receipts. Total sales tax revenue for the first six mouths of the current financial year, April to September, %vas 16 per cent, higher than for the corresponding period of the previous year. Sales tax receipts present a picture of the changing volume of wholesale transactions, and are one of the best measures of domestic trade. Wholesale prices have risen slightly each month during 1935. The general level is now slightly higher than last year, and is only about 6 per cent, below the 1928-29 level. Sales of retail goods are reported to be higher this year than last year. Tn some quarters turnover is said to be almost o’O per cent, larger than in 1934 and to have reached the highest figures since 1930. Boot and shoe stores are selling an increasing amount of good quality footwear. This is an indication of the popular demand for better quality products. Most striking is the increased activity in the motor trade. The total number of new vehicles registered during

the eight months ended August, 1935, was 83 per cent, greater than for the corresponding period of 1934. Retail prices have shown a slightly rising tendency this year, according to an “ all items ” index. They are also a little higher than last year, though still about 17 per cent, lower than pre-depression prices. Although at present the ratio of advances to deposits in Ne%v Zealand is considerably higher than it was a year ago, the parallel with the Australian banking situation ends there, for there is no evidence of any deterioration in the cash position. A fall of fNZIO.Sm in the balances of the trading banks with the Reserve Bank during the year ended July, 1935, is accounted for by a rise of £NZ9.2m in their London funds, and since luring the year ended March, 1935, New Zealand had a small favourable balance of payments, there is no reason to anticipate a noticeable diminution of London funds such aa» that experienced in Australia. Government accounts are now in a sounder position than they were a year ago, but the burden of taxation is still a heavy one. Greater relief was expected than was received from the 1935-36 Budget, and the resulting feeling of disappointment did not improve business confidence, more especially as the relief afforded by the State to its own mortgagors by way of interest reductions is to become an annual change °n the consolidated revenue fund and so on the" general taxpayer. In the present circumstances, there is little virtue in the Government s policy of reducing the public debt. An increase in this debt, if consequent on an increase in Treasury bill finance, would promote recovery. The resultant increase, in consumers’ income and its influence towards recovery 'would more than offset the increase in the total yearly interest payable on the National Debt, and the net charge on the taxpayer would be less than that occasioned by a policy of heavy taxation 'and debt reduction. • TASMANIAN FRUIT TRADE Tasmanian fruit realised satisfactory prices in England last season, reports the National Bank of Australia. There is a good demand for f.o.b. forward purchases at about fid per case above the prices offering this time last year. The sale of surplus stocks of jams and canned fruits in England will enable practically the whole of the Tasmanian berry and small fruit crops to be absorbed by local preserving works. A REDUCED LAMBING From information furnished by inspectors of stock in the various districts the average lambing for the current season in the North Island is estimated by the Journal of Agriculture at 83.68 per cent., compared with 89.88 per cent, in 1934. With 9,697,231 breeding ewes in the North Island, as shown in the 1935 sheep returns, the number of lambs this season is estimated at 8,114,361.

DAIRY PRODUCE (United Press Association) (By Electric Telegraph—Copyright) LONDON, November 28. Butter.—Dpll. Danish, 1255; choicest salted New Zealand, 98a to 99a; Australian, 97s to 98e; unsalteds, about 7s premium. Cheese.—Quiet. New Zealand white, 52s 6d to 535; coloured, 555. Australian white. 61s to 525; coloured, 51s 6d to 52s 6d. Messrs A. S. Paterson and Co., Ltd., are in receipt of the following cable advice from London: — Butter. —Heavy arrivals December have depressed market, causing buyers to hold off. Market weak, declining. New Zealand, 97s to 98s; Australian, 975; Danish, market steady on Continental inquiry, 10is; landed cost, X2ss. Chees.e. —Market easier. New Zealand white, 535; coloured, 555; Australian white, 50s; coloured, 525. Messrs Dalgety and Co. has received the following cablegram from the head office, London, dated November 28: — The butter market is weak, and the cheese market is slow. Danish f.o.b. butter, 104 s to 105 s; New Zealand finest butter, 98s to 995; Australian finest unfealted butter, 100 a to JOSs; Australian salted butter, 98s to 995; Australian g.a.q. butter, 965; Australian cheese, white, 52s to 535; Australian cheese, coloured, 53s to 545; New Zealand cheese, white, 53e to 545; New Zealand cheese, coloured, 55s to 565; Canadian cheese, white, 58s to 60s; Canadian cheese, ( coloured, ' 58s to 60s; Canadian cheese, *c.i.f„ not quoted. DEVONPORT STEAM FERRY COMPANY INTERIM DIVIDEND DECLARED. (Special to Daily Times) AUCKLAND, November 29. The directors of the Devonport Steam Ferry Company, Ltd., have declared an interim dividend of 2J per cent, (unchanged). SALE OF SECTIONS An auction sale of 16 section in block VIII, town of Ranfurly, took place at the Lands and Survey Office yesterday. The area of each section was one rood, and the upsets ranged from £2O to £25. Sections 1. 4. and 5 were disposed of to Mr S. J. Lonie: sections 2 and 3 to Mr John I. Fraser: section 7 to Mr Duncan M'Killop: section 9 to Mrs T. Mitchell; section 35 to Mr A. M. M’Lachlan: and section 36 to Mr R. G. Spence. The sections were disposed of at the upsets, aud the purchasers reside in the township. Sections 32, S 3, 34, 37, 38, 39, and 40 were not disposed of, and remain open for sale at the upsets.