THE OTAGO DAILY TIMES SATURDAY, July 22, 1939. RELIEF FROM LONDON

Otago Daily Times, Issue 23867, 22 July 1939, Page 12

THE OTAGO DAILY TIMES SATURDAY, July 22, 1939. RELIEF FROM LONDON

The terms on which the New Zealand Government has obtained facilities in London to tide the Dominion over a very difficult period are substantially as anticipated in the English press during recent weeks. That Mr Nash has been ''successful" in his negotiations to the degree optimistically predicted by the Prime Minister can no longer be pretended. The British Government, which consented to arrange urgent accommodation for New Zealand when it became clear that the London investor was definitely not disposed to place confidence in the Dominion as a field for investment under ruling conditions, has made stipulations that will hold the Government of New Zealand to a defined course in its transactions in London, and enable a measure of benevolent but firm control to be exercised over its plans for the expansion of secondary industries within the Dominion itself. Under the operations of the Export Credits Guarantee Department, which was instituted to facilitate British trade with countries not in a position to obtain private credits in London, the New Zealand Government is to have £5,000,000 made available in sterling funds, " under approved conditijns." This, it must be presumed, means that the New Zealand Government may make use of this £5,000,000 only in a manner which the British Government considers satisfactory. To assist in the maintenance of trading relations between the British exporter and the New Zealand importer, a further £4,000,000 in short-term export credit facilities has been made available. It is intended that by taking advantage of these credits New Zealand importers will be enabled to make acceptable arrangements to meet the cost of goods for which import licences have been granted, thus correcting a glaring anomaly in the import regulations as they have been operating in New Zealand. But in view of the heavy requirements of New Zealand industry in raw materials, apart from the needs of importers of manufactured goods, it seems extremely unlikely, a„ the president of the Dunedin Manufacturers' Association has said, that the £4,000,000 will go very far. A major consideration, if it is not indeed the main consideration, in the British Government's decision to come to New Zealand's aid, is to assure that the Home exporter shall not be deprived of his Dominion market through import regulation and the inability of importers to meet payments in London. It is evident that the factor which has principally persuaded his Majesty's Government to lend its assistance has been Mr Nash's undertaking to do his utmost to relax import restrictions as circumstances permit. It is obvious, however, that to a country which has been spending up to £55,000,000 on imports annually, the credits now arranged will give only small relief, and while it is interesting to note that V Nash has now given a definite undertaking that the licensing of imports will not be adopted as a policy measure for fostering New Zealand industry at the expense of the English exporter, there can be little expectation that the credits now obtained will materially alter the present situation, under which importers are experiencing difficulty in obtaining sufficient goods tB meet even minimum requirements. It must, however, be assumed that with prudent administration, of which assurance Is given by the British Government's direct interest in the use that is to be made of the credits, both governmental and commercial, the loan agreement will enable New Zealand to continue in the meantime to meet obligations in London and obtain at least essential requirements from the United Kingdom. But satisfaction that this object has been achieved cannot be allowed to blind the Government or the people of New Zealand to the fact that the relief now obtained is necessarily of a short-term nature. In being obliged, in order to meet normal obligations abroad, to seek tLe good offices of the Home Government, this Dominion has been placed in a somewhat humiliating position—one that emphasises the rapidity with which her resources have been dissipated and her credit has been impaired by a policy of financial recklessness. The safeguards which the British Government has taken in making funds available, and the comments by authorities in Great Britain and in the English press, have left no doubt as to the want of confidence with which the present New Zealand Government's fiscal policies are regarded abroad. And coincidentally with these intimations from outside our gates that all is not well with the country's economy, has come a blunt indication from the Reserve Bank of New Zealand of the need for curbing the demands which the Government is making upon the resources of that institution. This is not the first time that the Reserve Bank has been impelled to draw attention to the effect of the Government's spending policies, and the

necessity for limiting public expenditure to revenues—and borrowings—is plainly stated. The reckless expansion of credit can only accentuate the present inflationary tendency, with an inevitable reflection in rising prices and, as the report states, " consequent' diminution in the value of all savings, wages, salaries and pensions." The Government can scarcely ignore these emphatic warnings that the country has been living beyond its income.