THE OTAGO DAILY TIMES Thursday, June 15, 1944. THE MENACE OF INFLATION

Otago Daily Times, Issue 25562, 15 June 1944, Page 4

THE OTAGO DAILY TIMES Thursday, June 15, 1944. THE MENACE OF INFLATION

The warning which the Acting Prime Minister, who is also Minister in charge of Stabilisation, has issued within the past few days against the danger of inflation is not without justification, and is not ill-timed. The Government is confronted with appeals, almost amounting to demands, from different sections of the public service for an upward revision of the salary scales. The representations that have been made to it show clearly enough that the salary scales that are in force bear no real relation to the present costs of most commodities. Those who seek the revision are not by any means irresponsible people and they refuse to accept the cost of living figures, which the Government from time, to time publishes, as accurate and reliable. In so doing they express a feeling that is more prevalent in the community than, perhaps, it should be. The Government is at least to be credited with having, through its stabilisation policy and its price-fixing tribunal, taken what steps it could to maintain the cost of living at a reasonable level. Where it has failed is in its not having had the courage to adhere rigidly to the stabilisation plan. Groups of workers who possess an advantage from being politically organised have been able to exert a pressure on the Government which it has, upon the grounds of expediency, failed to resist, and the fact that it has made concessions here and there strengthens the case of those who are now pleading for the payment of increased salaries and furnishes them with a distinct grievance. The Government has in fact followed a course that is inflationary in its tendencies, and it is to be judged from Mr Sullivan’s present pronouncement that it has become more fully alive than at any previous time to the gravity of the danger which would attend a complete breakdown of the stabilisation policy. As the Minister says, the supply of money that is available in the country to purchase goods is increasing while the supply of goods is decreasing. This two-fold process has been in operation throughout the whole war period. The pressure of extensive purchasing power upon a limited and shrinking market of commodity goods has been continuously heavy. In proof of his statement that there is an urgent danger of inflation, Mr Sullivan refers the public to the latest statistical summary issued by the Reserve Bank. It is to be feared that this publication is not very widely circulated, but the information contained in the summary to which the Minister has directed attention—an analysis of the volume of money in circulation in the Dominion—is most instructive. It shows a steady increase in this volume from 1935, when the Government came into office, until 1939, when the country became involved in war, and a much more rapid increase since the latter year. Actually, while the volume of money in circulation at the close of 1935 was 39.9 millions it was no less than 137.1 millions at the end of last year. A very considerable factor in the production of this enormous expansion of nearly 100 millions in a period of eight years was the extent of the Reserve Bank advances, which have been inferior only to the volume of overseas transactions in the contribution they have made to the amount of money in circulation. The conditions created by the remark-' able increase in the circulation of money are precisely those that are most favourable to inflation. The Minister has omitted to prescribe any line of action that might be followed by the public to serve as a barrier against inflation. Fortunately, while there is a great deal of wasteful and reckless spending, there are influences in operation that are of great value in so far as they help to preserve ' a measure of economic balance in the country. The deposits in the Post Office Savings Bank now total over £ 100,000,000 and those in the trustee savings banks aggregate more than £20,000,000. The investments in national savings bonds and national savings accounts exceed £21,000,000. These figures supply substantial evidence of the presence of a hard core of common sense in the popular mind. So far, the amount of the investments in war loans on the part of those who are in enjoyment of larger earnings than they ever received before has been less extensive than might reasonably have been expected. They will have further opportunities, however, of placing their funds at the disposal of the State for the furtherance of the cause of freedom and of thereby interposing an obstacle to the landslide of inflation.