THE FINANCIAL OUTLOOK

Otago Daily Times, Issue 23945, 21 October 1939, Page 10

THE FINANCIAL OUTLOOK

It is not surprising that the sharp comment offered by Mr Goodfellow on the loss of financial reputation suffered abroad by New Zealand during the past two or three years should have instantly drawn the fire of the Prime Minister. In Mr Savage’s vigorous disclaimer of the Government’s responsibility for the position accurately described by Mr Goodfellow, the country will be pleased to note evidence of the Prime Minister’s restored health and renewed political interest. But it does not follow that what Mr Savage has had to say will be accepted as a sufficient answer to the charges of incompetence and mismanagement brought against the Government by Mr Goodfellow. It' is common knowledge that the credit of New Zealand overseas is at an unprecedentedly low ebb. Mr Nash could have told his colleagues that much, as the result of his London experiences. And no amount of subterfuge on the part of Ministers will suffice to cover the facts as they are known, or to minimise the Government’s own part in creating conditions which are slowly clamping trade and industry right throughout the country. Mr Savage presumes to dismiss Mr Goodfellow’s suggestion of the Government’s need for expert financial guidance in the nonsensical counter-assertion that “this socalled financial guidance landed us where we are with about £100,000,000 of loan money falling due during the next ten years, for the borrowing of which the present Government is in no way responsible.” The argument is about as false as the ring of a spurious coin. In a hundred years of its history the Dominion has been developed on loan moneys. The responsibility of Mr Savage’s Government is not that it borrowed in the remote past —though it ought to be the last to deny that it is not doing its share now to add to the sum-total of indebtedness —but that it failed signally to recognise its present obligations in respect of debt service. When the Labour Party took office it inherited an accumulation of some £40,000,000 of overseas funds. With prudent management it could have so utilised those resources as to avoid any possibility of the slump in credit that has since occurred. Difficulties in the matter of debt service need never have appeared. Yet a spendthrift administration has dissipated all but a fractional portion of the sterling reserves that were held four years ago, until today it has to be said that there is scarcely a place away from these shores where New Zealand money is acceptable exchange. Furthermore, a Government that has been compelled, for the satisfaction of its own insatiable needs, to resort to inflationary methods of finance, seems bent on following that course to the bitter end. Under the law as it now stands there may be virtually no limit to the creation of new money. The Reserve Bank, converted into a mere department of State in terms of the recent amending legislation, is required to have regard to any representations that may be made to it by the Minister of Finance in respect of any of its functions or business, and to give effect “ to any decision of the Government in relation thereto.” The bank’s latest return, dated October 16, shows that advances have been made to the State exceeding £22,500,000, including more than £17,000,000 for purposes that are not specified. Mr Goodfellow’s case for the appointment of a financial advisory committee to Cabinet seems to be rather more than justified by the facts, and rather less than answered by the Prime Minister’s righteous assumption of administrative infallibility.