ECONOMIC CONDITIONS.

Otago Witness, Issue 3804, 8 February 1927, Page 5

ECONOMIC CONDITIONS.

.the trade outlook. fe : v WELLINGTON, Fbruary 2. Speaking at the annual meeting of the Equitable Building and Investment Company of Wellington, Sir Harold Beauphamp. surveyed the financial and economic conditions in the Dominion. He said: The export and import returns for each of the past five years ended September 30 last show that a very healthy trade balance has been converted into an adyerse one. The figures are:—• -

‘Excess of imports. The latest published trade returns of New Zealand for the 12 months ended November 30, 1926, show that the exports were valued at £46,257,365, as compared with £56,560,233, a decrease of £10,302,860. The imports for the 12 months totalled £50,143,218, against £52,324,472, a decrease of £2,181,254. The balance of trade is as under:-— 1020. 1925. Exp0rt5£46.257.305 £50.560,233 Imports 50,143.218 52,324,472 These figures show that for the 12 months ended November 30, 1926, the imports exceeded the exports by £3.885,853, while in the year ended November 30, 1925, the exports exceeded the imports by £4,235,761, so that on the 12 months we were to the leeward by £8,121,614. It has been pointed out that the contraction of spending power within the Dominion is the probable cause of unemployment. The imports are shrinking, but the shrinkage must be very much greater before the balance of trade is in our favour. These Tecent unfavourable trade balances are largely due to the importations of motor vehicles tyres, motor accessories, and motor spirit* During the 12 months to October 31 last, „,,JW ods hiotor vehicles numbered 23,179 as against 21,099 in the preceding 12 months, and the number of motor bicycles and tricycles was 4957, against 4021. The total value of these importations was £4,056,083, against -£4,195,644. In addition, the tyres and motor accessories, etc , im- £ < ? r noA C « ere v , a ! ued at £1,149,550 against £1,080,546, making the totals £5,205,638, against £5,276,190, which, you will admit, is rather an extravagance for a population of 1,400,000 all told. The import of motor spirit is, of course, in addition to --the figures I have quoted. For the first seven months of the fiscal year the figures arc:—

Exp0rt5£22,755,937 Imports £28.048,356 There yet remains practically the whole of the export season, and-over this period the figures should compare more favourably than those of last season. More sheep have been shorn and the'quality of wool is excellent, and prices, as already shown in recent sales, exhibit an appreciable upward tendency. If dairy values come back to normality, and if the promise of the lamb and mutton market be fulfilled, our exports during the next five months should total nearly £25,000,000. Our imports over the same period will probably be a little less, than those for the last corresponding period. Nevertheless, the large figures of the ‘ early part of the year have set such a handicap that it appears that on March 31 next the balance of the country’s trade will again be on the wrong side of the ledger, though not quite to the same extent. In the meanwhile, the national debt and the debt of the local authorities have been expanding, as will be seen by the following figures:— . Debt at,. March 31. 1921. 1926. General Government — £206,324,319 £238.855.478 Local bodies 26.186,960 45.720.791 Total .. ..£232,511,279 £284.576,272

In .five years the national debt has increased by £32,531,159, or an average of over £6,500 000 per annum, and the municipal debt has increased in four years by £19,533,834, or an average of £4,883,458 per annum. In addition, the cost of government is also on the increase, due in great measure, of course, to the higher price levels ruling now as compared with former years, but due also to the greater range of activities now undertaken by the Government. In the light of the figures 1 have quoted there seenis little likelihood of ■ any concessions in taxation being made. The country’s interest charges must be met and the cost of government be paid. Recourse must be had to taxation, and the mam source is the income tax —particularly if there be any restriction of imports, as that means reduced revenue by way of Customs ■ duties. As the world has apparently entered on a cycle of years of lower price levels, our people must frankly recognise that the national income will be reduced accordingly. The only-way in which the fall in values, can be offset or compensated is by increased production. This does not offer much -promise, as new lands are not being brought, into cultivation to any extent, whilst, on the other hand, many farms are being; abandoned, and. in certain districts, land .. has deteriorated to such an extent as to cause serious concern. A commission was set .up two years ago to deal with this matter, but the country has so far not received the benefit of its findings. Tile troubles and difficulties with which farmers have had to contend, principally through unwarrantable inflation of land values, are not confined to this Dominion. This is proved by extract from a book lately published by a leading financial authority,' Inter alia, he says: — “In 1923 the United States Department of Agriculture instituted an inquiry through bankers and farmers as to the number of farm owners who. had lost their farms- through foreclosure or voluntary relinquishment. The reports from 15 corn and wheat-producing States show that, on an average, over 5 per cent, had lost their farms through foreclosure or. bankruptcy, while .nearly 4£ per cent, had turned over their farms to creditors without legal process, making a total of about 9j per cent, who had: lost their farms with or without legal proceedings. In addition, more than 15 per.ceqt, were in fact .bankrupt, but were holding on through leniency of their creditors.” '

There is no doubt that the price of land must be still further reduced. Other factors in farm costs must also receive attention, as, for instance, reduction in tariff where possible; but the paramount need is reduction of land values. No land is worth more than the figure at whiah it is productive—in other words, ia only worth what it will produce. It is stated that second-class land to-day cannot be farmed at a profit. Another change of which we must take note is the alteration in the relative proportions of primary and secondary industries. In earlier years, New Zealand was essentially an agricultural and pastoral country, with a large country population and imall cities. To-day the position is changing rapidly. Manufacturing has grown and new industries have been established, and ’ these have been highly protected in jnost cases. It is interesting to note factory production has practically doubled during the past eight or nine years, as the following figures will indicate : —

March 31. 1916. 1925. Factory production x . £43,962,585 £84,101,313 Materials used .. .. ..£30,698,077 £52,161,423 The fixed capital invested in these industries was shown by latest available figures to be £49,852,505, so that secondary industries in New Zealand are not now a negligible factor. Fortunately these industries deal mainly with our own products, so that . there is not a . great deal of activity in foreign materials. Consequent upon the growth of the secondary industries, there has been a drift to the towns and the needs, of the people as a whole have greatly increased in scale. The demands for higher standards of living and wages commensurate therewith, and the protection afforded by Customs duties, have created a vicious circle, of which the result is abnormally high costs. The finished article of one factory being the raw material of another, the high prices go on mounting. Whether some of our industries are worth protecting to the extent they now get is questionable. The evidence and findings of the Taxation Committee recently appointed will be looked for with great interest. Wages, I think, are based on an entirely wrong princiole, as they have been advanced from time to time bv the Arbitration Court practically at the behest of the workers. The court assumes a certain family responsibility, and, in view of the cost of living, fixes wages accordingly. The great majority of workers have not the family responsibility which the court contemplates, nor is it recognised that the only sound basis is the worth of the work done, and what the industry can afford. Adoption of the methods ruling in the United States of America would greatly benefit trade ,in New Zealand. In that countrv the highest wages in the world are paid, but efficiency is relatively higher than that in any other country. Another point to which attention may be given is the transfer of much land from sheep raising to dairying.-Many holdings now are in consequence too large for profitable working, and benefit/- both to individual and the nation, would accrue from an intensive use of smaller holdings. In conclusion, I would say that the great needs to-day are :— 1. ' Economy—both individual and national —to the greatest degree consistent with progress, but not further. 2. Reduction of costs. , This involves research into our industries.. with special reference to their efficiency, and research also into the question of tariff and wages. Reduction of manufacturing costs will tend to, decrease, imports, reduce the cost of primary products, and thus doubly benefit the national balance of trade. 3. Adjustment of land values to bring them into line with the returns derived therefrom, and

4. Recognition by the public, by local bodies, and by the Government, that the national income has fallen, and that they must act accordingly, and. above all, pursue a tapering-off policy in the matter of borrowing.

Year ended. Exports. Imports. Excess of Exports. Sept. 30. £ £ £ 1922 43.530.560 32.641.477 10,889.089 1923 45,171,560 41,202,186 3,969,374 1924 J • • .« • 49,433,267 48,034.454 1.398,813 1925 • • •• 55.746,757 50.624.654 5,122.103 1920 X . >• 48.417,938 51,625.968 ♦3,208,030