INFLATION EVIL

Otago Daily Times, Issue 27382, 6 May 1950, Page 6

INFLATION EVIL

Legacy From Labour GOVERNMENT TASK Restoration Of Finances PA ’ WELLINGTON. May 5. Reviewing the factors which had prompted the Government to take the present decisions, Mr Holland said that ever since it had taken office a little more than four months ago it had been giving the closest study to the overall state of the country’s affairs. His earlier survey on February 1 of the country’s finances had disclosed a highly unsatisfactory state of affairs which he had then said could and would be put right. “The present Government,” said the Prime Minister, “ has inherited an extremely difficult situation which affects every man, woman and child in the country. It is. I am the first to acknowledge, extremely difficult for the average citizen, so busily oc-

cupied ' with his or her everyday family duties and in the process of earning his daily living, to understand fully the complicated mechanism of what we call the financial system, yet it is of supreme importance to him. An unsound financial system has an immediate bearing on the everyday life of every person. It affects his standard and cost of living, the cost of building a home for his family, the cost of holidays and everything else that goes to make up modern life. For these reasons I shall endeavour to make what I have to say as simple as I possibly can. “ So that more and more people will interest themselves in these great problems and understand them, let me say some simple things—“l. These great problems do exist and will not be solved by pretending that they do not exist. “ 2. The Government was elected to do its very best for all sections of the people. “3. The people have the right to expect their Government to find the best solutions that are possible and to explain them fully. “4. The Government is not going to run away from its duty. “ 5. The people expect the Government to be strong and courageous in its decisions. “6. I am convinced that thp people want to know the truth, simple and clear, and if some eco- . nomic medicine is necessary the people expect it and will take it provided they have faith in the doctor and that the medicine is for their good, and that in prescribing the treatment the economic doctor is working to a carefully prepared plan that will lead to the recovery of the patient. “In other words, the people can take it if they really believe it to be necessary.

“ Half-measures are sometimes worse than no treatment at all,” Mr Holland added. “Many a victim’s arm has been amputated because a poisoned finger was not treated in time. The biggest problem facing the people in New Zealand today is inflation—the creation of paper money without a corresponding creation or production of goods and services. It is remorseless and relentless. It is the cruellest enemy of the working man’s pay envelope. It works day and night. It works underground. “The present Government is committed in its policy to deal with'this problem of inflation, and it is going to make most strenuous efforts to make the £ buy more. But before we can begin to tackle the cost of living we must first tackle and remedy the position which we inherited from our predecessors. We must halt the progress of inflation and get the country’s finances on a sound basis. We must do that first, and then we can get on with our own programme.”

Mr Holland explained that the public accounts were divided into three main sections, and of these the loan accounts dealt with expenditure on public works and the repayment of maturing loans. These should have been financed by a combination of borrowing and taxation, but the previous Government had used a large amount of created money for this purpose. In this way £26,000,000 additional money had been pumped into circulation during the last financial year. The Government was pledged to stop this inflation as quickly as possible because it was the basic cause of the steady reduction in the value of the people’s earnings and savings and the prime cause of the steadily-mounting cost of living. . “ It would be just as easy for us to create paper money as it was for our predecessors to do it,” said Mr Holland, “ but we know the evil consequences of such a procedure, and we are determined to take the people fullv into our confidence —to tell them the true facts and then to use sound methods of overcoming our problems.”