DANGEROUS ROAD

Otago Daily Times, Issue 23428, 17 February 1938, Page 12

DANGEROUS ROAD

GOVERNMENT’S POLICY AUSTRALIAN CRITICISM MOUNTING COSTS AND PRICES (Special to Daily Times) AUCKLAND. Feb. 16. State borrowing, the guaranteed price, short hours and high wages, and the lavish expenditure of money raised through taxation by the New Zealand Labour Government, were subjected to critical comment last night by Mr W. K. McConnell (secretary-economist to the Sound Finance League of Australia). who, with Mr W. V, McCall (a member of the Federal Parliament) has just completed a tour of three weeks in New Zealand. Mr McConnell said that, whatever arguments might be used in favour of an inflatismary policy in times of depression. inflation should be closely guarded against in periods which brought practically normal conditions, such as the present. There were always inflationary processes at work in prosperous times, and the Government should be concerned rather to check them than accentuate them.

“The Government’s policy has unquestionably caused marked increases in costs,” Mr McConnell continued, “ and in turn caused increases in prices. Those bring, among other things, an increase in the farmers’ costs of production, and thus any guaranteed price must be altered to suit changes in costs. The guaranteed price to farmers must turn ultimately on overseas prices, and at present overseas prices and shipping costs in New Zealand bear no relationship whatever.

“ The lavish expenditure by the Government of money from taxation and various forms of loan, always tends to accentuate inflationary processes, as at present. If the Australian Governments, both State and Commonweaxtn, were collecting taxation at the same rate as the Government of New Zealand, the Australian Governments this year would collect £160,000.000, instead of only about £110,000,000. “ If the Australian Governments were borrowing in various forms at the same rate as the Government of New Zealand, they would be borrowing about £60,000,000, instead of £16,000,000 this year. If such policies were being pursued in Australia, they should hardly fail to develop very unhealthy boom conditions.”

His observations In various parts of the Dominion disclosed that the pohcy of guaranteed prices, shorter hours and high wages for workers had brougm about a clamour for greater protection by manufacturers, a clamour to which the Government would have to accede. Mr McConnell said. That in turn would bring about further demands from both farmers and workers; hence it would have at least the immediate result of increasing prices. Thus the three sections would bid one against the other, he concluded, and if the Government were to continue to please each section in turn what the economist called a vicious spiral would become inevitable. With good fortune the Government of New Zealand might please each in turn If nothing else happened, a change for the worse in overseas prices rebutter and wool would place the Government in a difficult position. The only road of escape would be to abandon an impossible policy.