ECONOMIC TRENDS

Otago Daily Times, Issue 23362, 30 November 1937, Page 2

ECONOMIC TRENDS

FUTURE OF THE DOMINION INDUSTRIAL DIFFICULTIES LEADING BANKER'S REVIEW Conditions in New Zealand were reviewed by Sir Thomas Buckland, president of the Bank of New South Wales, in his address to proprietors at the annual meeting in Sydney on Friday. In New Zealand, as in Australia, he said, primary producers had enjoyed a good year. During the 12 months ended June, 1937, production generally increased, and the export price index rose 17 per cent. Since June, however, wool prices, while still at a satisfactory level, had fallen appreciably. The marketing outlook for wool was satisfactory at present, but it had to be remembered that any reduction of armament activity would adversely affect prices, as much of the present demand arose from the need for military uniforms. Those were made principally of crossbred wools, of which the Dominion was a major source of supply. Weakening Factors

The chief factors which were weakening New Zealand's ability to face a fall in export prices were the large public works programme and the system of guaranteed prices. That the Government should find it necessary to spend £17,000.000 on public works at a time when export prices were high was a striking indication of the straits to which its policy had reduced private enterprise. Moreover, that large expenditure would in itself distort the whole structure of production. After referring to the deficit in the Dairy Industry Account for the season ended July, 1937, Sir Thomas said that in a period of good and rising export prices, the New Zealand dairy farmer had received prices artificially higher than the world level. "In spite of this," he said, "and in spite of good production, conditions in the industry have not been altogether satisfactory. Farmers are complaining of costs increased as a result of the Government's policy in other fields, particularly in respect of higher wages and shorter working hours. The Government has tacitly admitted the truth of these claims by increasing the price guaranteed for the current season." Prices and Wages As a result of good export prices, higher wage rates and increased employment domestic trade had increased in value. The volume, however, continued Sir Thomas, had not increased greatly, as internal prices had advanced sharply. The value of retail sales, which was well maintained during the early part of the year, had slackened somewhat since about June. But, owing to a rise in prices of about 8 per cent, a decline in the actual volume of retail trade had occurred.

This had reacted upon the position of secondary industries. Labour legislation was raising costs of production in all directions, and placing industry in a very difficult position. "No doubt," continued Sir Thomas, "the Government is relying on the machinery created under the Industrial Efficiency Act to prevent any actual industrial breakdown, without realising that so long as costs are artificially high as a result of State interference, there can be no health in the body economic. Rising costs are leading to rising prices, which offset any benefit to the worker of higher money wages. As a result real wages have not risen nearly as high as the Government had hoped, and it may find itself pressed to increase money wages still further, with consequent aggravation of manufacturers' difficulties."