THREE YEARS IN NEW ZEALAND.

Otago Witness, Issue 3698, 27 January 1925, Page 14

THREE YEARS IN NEW ZEALAND.

EX-CANTERBURY FARMER’S VIEWS. The following interesting article written by Mr A. R. Flint was published in the Derby and Chesterfield Reporter, England, in its issue of December 5 last. Mr Flint, who was formerly a member of the Town Council, Derby, came to New Zealand and purchased a farm at Willowbridge, and while there was for a period vioe-presidont of the South Canterbury branch of the New Zealand Farmers* Union. He returned to England a few months ago. Mr Flint writes: “Returning from New Zealand after three years in the dominion, I find some difficulty in completing any summary of opinions formed during that period. I might generalise and say: That as a place of residence it contains districts possessing the finest climate for both health and pleasure to he found in the world; that it is inhabited by people with whom it is a delight, to associate; that the general standard of life is far higher and better than that in Britain; but whilst I am convinced of its ultimate progress, I must always express my fears as to its financial prosperity in the immediate future. In my opinion Now Zealand stands in very real and proximate danger of a financial crisis, as I shall show later. “It is only right that I should qualify any opinions I may express by admitting frankly that most of my axpenence is derived from knowledge of conditions in, South Canterbury, for though I have toured most of New Zealand and resided for 6pmo months in Auckland my practical farming and business experience has been confined to the province which specialises in agriculture and the fa* lamb trade. I must also anticipate the criticism involved by the fact of my return by stating that JL would have been glad to remain in

the dominion had not other considerations arisen than those of my personal desires. On the other hand, so far as my knowledge of the Canterbury province is concerned, I had the best facilities I was intimately connected with the work of the New Zealand Farmers’ Union, vice-president of that body for my own district, and a member of the South Canterbury Executive,

“The whole prosperity of New Zealand must necessarily depend upon the farming industry and its exports of wool, fat lambs, butter, and cheese. Agriculture is merely a local industry for the home markets. Except during the war boom period the prices of these products have never been higher than their present average. The experts agree that it is unlikely that these prices will be maintained. Any consideration therefore of New Zealand’s immediate future must be made upon this assnmption.

“The tenant farmer is almost unknown. Most of the land is freehold or leased in perpetuity. There are also long term Government leases. The farmer is the nominal owner, but in the large majority of cases owns merely the “equity, or in plainer language owns his farm subject to a mortgage debt. The latter is usually of an amount very near to the total value of the land. Before the war land could be purchased at prices which allowed a fair profit to the farmer on its productivity. During the war and just afterwards a boom set in. The New’ Zealander ceased to farm for farm produce. Ho farmed for unearned increment —namely, in order to sell his land at a protit. As prices rose, both for products and for land, so confidence increased, until vendors were willing to part with land for deposits 01 a ridiculously small proportion of the purchase price, leaving the balance upon mortgage.

“Many of these so-called farmers made nice fortunes, and retired, whilst young and active men, to live in idleness in the towns, forgetting entirely that their pro fits existed only upon the paper upon which their rnorgages are recorded in the Land Transfer Office.

‘Tho extension of credit did not, however. end with the mortgages. r J ho farmer in New Zealand does the bulk of his business with the large stock agent companies, and so-called co-operative societies, some of them big concerns operating throughout Australasia, but many of merely local concern. They are known colloquially as ‘the firms.* They act as auctioneers, sell stock on commission, buy and sell grain and seeds, keep stores for sale ot groceries, hardware, etc,, and act as land agents. In the latter capacity, anxious to obtain commissions and extend their business, they have introduced a system of tied trading, which is absolutely obnoxious to English traditions. 1 have seen a man become “owner” of a £7OOO farm with only £SOO capital, a stun not half enough to buy tho stock and implements required upon it.

'•what happens is this: The vendor is anxious to grab his unearned increment, and will take it on paper, with a mere trifle in cash. The ‘firm* wants the commission on the price and the business oi the purchaser, so it puts down any balance required on chattel mortgage—or bill of sale—stipulating that the purchaser shall do the whole of his business through the ‘firm.* The farmer placed in this unfortunate position pays—usually—6 to per cent, on hia mortgage and 7 per cent. io the firm. Tho latter statement again is ‘on paper.’ As a matter

of fact, he pays infinitely more. A man wilh cash to pay down can walk into the premises of any of these firms and buy any of their goods at a very substantial reduction on their ordinary prices; further, he can, of course, go the round of them and pick the lowest quotation or best quality. The tied man, however, has to take the prices quoted, and take the article offered. In many cases he has to sell stock or produce at unsuitable times, or at prices below those he might obtain elsewhere were lie free to go to other firms and to sell to other firms’ customers.

“It will readily be perceived that his nominal 7 per cent, may be multiplied considerably. “In my own district opinions wor.e often offered as to the number of farmers so tied. I questioned the members of the Farmers’ Union Executive, and their estimates ran from 60 to 00 per cent. Of the balance

very few farmers, though not tied to the firms, are free from heavy mortgages on their land.

“in general, therefore, it may be concluded that the average working farmer in New Zealand, far from being the real owner of his farm, is slaving to pay interest on mortgages of far higher amount than the pre-war value of the land, and in the majority of rases of higher amount than the actual present value of the land to-day. lie is also handicapped with a high cost of living, and consequent high cost of labour, the reasons for which I will endeavour to show later.

“Behind the ‘firms’ are the banks, the sinister figures lurking in the background. The ‘firms’ of local New Zealand interests all work on heavy overdrafts. Their principal assets are their advances to the farmers, not a very liquid security at the best of tim<3s. At any moment the banks can say ‘stop,’ and plunge New Zealand into financial crisis.

“Accustomed to the rigid honesty and fairness of English banking, I have no high opinion of the institutions operating in New Zealand Lot me illustrate.: —I went into the hank who held my account and asked terms for cable transfer of money to England. They quoted me par, apparently believing that I was ignorant lhat the exchange should he substantially in my favour. Again I went to a bank to change New Zealand for Australian notes. I was charged twice the rate of exchange charged to me by “Cooks” upon the same day and for a smaller amount. I could multiply with other instances. They give no interest on current account, absurdly poor rates on deposit, and some of them do not hesitate to disclose information as to their client’s affairs .without his permission. In no sense liaa one the feeling of professional confidence which is so marked in business witl our English bank managers. They have been making large profits A comparison of their share values for the past few years will prove this. Those are the people who hold the financial destiny of the New Zealand farming industry.

“It is not difficult to conceive circumstances which might make it desirable for them to precipitate a financial crisis. The present situation is so unsound that when a fall in prices comes action of some kind will be necessary. The prudent financier w’ill already he prepared. If he is, and consequently has his assets liquid, a financial panic would be his opportunity. In such a panic a man prepared to buy for cash has tremendous opportunities tor profit. No doubt in such case the banks would lose heavily on the overdrafts of many clients. But the financiers who control the banks might well think it to lheir advantage to let this happen, for two reasons. The first reason is the sound business reason of shaking New Zealand values down to a proper level, and the second the temp cation to take advantage of the intervening panic prices which would lie inevitable. For the sake of the farmer it is to he hoped that these circumstances will not arise. It may very well he that the losses involved by such action would exceed the gains. It may even be that the financial controllers of Now Zealand’s future have i patriotism too big to permit it. It may also that the present prices of New Zealand’s produce .-nay continue and increase. If they do not do so the situation is obviously one of grave danger.