INFLATION DANGER

Otago Daily Times, Issue 25560, 13 June 1944, Page 4

INFLATION DANGER

WARNING BY MR SULLIVAN NEED FOR STABILISATION A statement by the Minister in Charge of Stabilisation (Mr D. G. Sullivan), published in the Standard, contains a warning against any undermining of the stabilisation policy. Mr Sullivan says that he has become painfully aware that at the present time the New Zealand stabilisation policy is meeting more opposition than at any time since its inception on December 15, 1942. “ It is an ironical reflection,” states Mr Sullivan, “ that in the field of stabilisation there are certain dangers attached to success. Just because there has been no significant increase in the cost of so many of the essentials of life, just because the housewife buys her butter and milk and bread and meat at the prices she was paying before the war, some people are saying, ‘The Government is trying to frighten us with the bogy of inflation.’ Money in Circulation “ Inflation is no bogy; in any wartime economy it is a very real and a very grave danger. The reasons are obvious. All the things that we normally use and consume are in short supply. A large part of the output of our factories and farms goes to meet the needs of our armed forces and the armed forces of our allies. Nor can we make up the shortages with imports, because shipping is short and because in any case few countries have much to spare for export. While the supply of goods is going down, the supply of money available to buy goods is increasing, because our wages biJ. is higher and because our export prices have kept up. “The amount of money in circulation in New Zealand to-day is £80,000,000 greater than it was at the beginning of the war. Our money supply to-day is like a river in flood, and our stabilisation policy is the stop bank which prevents the surplus water from spreading devastation and ruin. Just because the stop banks have been a success, some people are saying thet after all there is no real danger and the sacrifices necessary to keep the stop banks intact are unnecessary. “ Perhaps there may even be some of you who feel that I am exaggerating the urgency of the danger. If you have any doubts, may I recommend you to look at the analysis of our money situation which is contained in the latest statistical summary issued by the Reserve Bank of New Zealand?” Government’s Objective Referring to claims by some that stabilisation had been a failure and a sham because some things were much dearer than before the war, Mr Sullivan said that such people did not appreciate the objective. It was not part of the Government’s job to help people to buy luxuries in wartime. What it had tried to do, with a great measure of success, was to keep under control the cost of a reasonable war-time standard of living. “ There is one other line of criticism which deserves particular attention,” the statement concludes. “ I have been distressed to hear it said more than once lately that if stabilisation stands in the way of greater production, then it must go. There is no such alternative. If we abolish stabilisation there will be inflation, and anyone who says that inflation can help production is blind to realities. Everywhere and at all times inflation has retarded production. Finally, I repeat that the people who would suffer the greatest distress from inflation would be the wage-earners of the country.”