AUSTRALIAN ECONOMISTS FEAR INFLATION THROUGH MOUNTING WOOL PRICES

Otago Daily Times, Issue 27303, 1 February 1950, Page 5

AUSTRALIAN ECONOMISTS FEAR INFLATION THROUGH MOUNTING WOOL PRICES

From C. R. Mentiplay, New Zealand Press Association Special Correspondent Rec. V. 50 p.m. SYDNEY, Jan. 31. Mounting wool prices without any indication of a slump in demand are beginning to cause embarrassment to Australian economists, who feel they will destroy the operation of the system of normal checks and balances. Recent Australian sales have shown advances of well over 25 per cent, on previous offerings, which themselves were disposed of at record levels.' Last week, prices at the opening London sales were 15 to 25 per cent, above last year’s closing values. It is now expected that growers’ cheques for the season will total £250,000,000, or about £55,000,000 more than last year’s figure.

Many economists believe that the re> suit will be inflation, and that the only method of counteracting the undesirable effects is for the Government to step in with some drastic scheme. Business men, bankers, and industrialists claim that now is a more favourable time even than last September for a revaluation of the Australian £. They say that the primary producers could not well begrudge this step, which would extend favours now enjoyed exclusively by them to other branches of the community. The Federal president of the Australian Primary Producers’ Union, Mr W-.'P. McAnaney, said recently that farmers generally might accept a limited degree of movement in the value of the Australian £ towards parity with sterling provided certain safeguards were observed. His system of safeguard, which includes the binding of unions to present wage rates and a quick return to the present ratio on the collapse of export prices, is not acceptable to industrialists, who are pleased, however, that at least one farmer is not unequivocally opposed to revaluation.

In spite of the fact that the Joint Organisation has reduced its holdings of war-time clips from 10,407,0001 b m July, 1945, to Ijust over 1,000,0001 b at the end of last year, prices continue to mount. World consumption in the current season is estimated at 500,000,0001 b above production.

Many limiting factors have failed to affect dominant position as regards fine merino wools, and, in spite of some English and American reports, woolbrokers say that prices must go still higher. The Sydney Herald’s financial editor scouts suggestions that the recent demand has been stimulated by currency considerations, but suggests that some wool buying may be in anticipation of appreciation of the Australian £, which, at the present rate, tends to subsidise exports. “It will be remembered,” he says, “ that the woolgrowers lost nothing by the appreciation of New Zealand currency, as higher amounts of overseas currency were paid to offset the change in the rate.” The main embarrassment, according to economists, is that the London balances cannot be used to buy the American-made goods which are urgently reauired to increase local production. It is suggested that the Australian authorities will await the result of the British election before finalising the dollar loan or revaluation policies.