DOMINION FINANCE.

Otago Witness, Issue 3972, 29 April 1930, Page 66

DOMINION FINANCE.

THE FINANCIAL YEAR.

A SURPLUS OF £150,000.

It was indicated recently in the press that the Minister of Finance (Sir Joseph Ward) would make an announcement regarding the finances at an early date. The Prime Minister has now released the following statement for publication: — I am now in a position to announce some preliminary figures of the results for the last financial year. The returns are not yet absolutely complete, and the accounts are all subject to audit; but the preliminary figures I have indicate that the year ended on March 31 last closed with a surplus of approximately £150,000. Taking all the circumstances into account, I think it will be agreed that the position disclosed is a satisfactory one. It will be remembered that., on taking office, the Government was un-. fortunate in falling heir to a deficit. The Government, however, did not hesitate to do its duty, and notwithstanding strenuous opposition in the House, prompt steps were taken to remedy matters. In this connection, when the Government’s taxation proposals were under discussion, it was maintained by the Opposition that they were entirely unnecessary, and a surplus of £1,000,000 (or more) was freely predicted in and out of Parliament. Now that the year is over it will be seen that the additional taxation was in fact absolutely necessary. A State with its large resources can bolster up an unhealthy position for a much longer period than is possible in the case of a private business, but the ultimate result must be the same in either case. A Government’s term of office depends in the long run on its management of the public finances, and solid progress cannot be made unless the State pays its way. In any case, we as a country cannot afford to have a deficit very often, while we are dependent upon overseas investors to provide a large part of the capital for developmental epurposes. EFFECT OF EXTRA TAXATION.

Putting on additional taxation is never a popular thing to do, but the facts have proved that the Government was acting in the true interests of the Dominion in putting forward proposals last year to ensure a balanced Budget. The revenue received during the year amounted approximately to £25,350,000, which is about £lBO,OOO in excess of the Budget estimate. The Customs revenue exceeded expectations, and was nearly £500,000 in excess of the estimate. A substantial falling off in the last few months of the financial year was anticipated, but it did not eventuate. Income tax exceeded the estimate by £130,000, and land tax by about £lO,OOO. Against these increases the estimates of stamp and death duties failed to materialise to the extent of approximately £210,000. Petrol tax and other revenue earmarked for highways showed an increase of nearly £70,000 over the estimate, but this item, of course, is offset by an equivalent additional amount transferred to the highways account or distributed to local authorities. Then the writing off of £8,100,000 of railway capital, effected by legislation passed last session, resulted in the interest receipts from the railways being £310,000 below the amount allowed for in the estimates.

EXPENDITURE £25,200,000.

In round figures the expenditure amounted to £25,200,000, including £17,230,000 under permanent appropriations and £7,970,000 under annual votes. Under permanent appropriations is included the expenditure on interest and debt repayment, pensions,’ subsidies to hospital boards and to local bodies, and other permanent items payable under various Acts of Parliament. Debt charges all told absorbed £10,695,000, and other payments under the Acts amounted to £0,535,000.

Details of these payments are not available at present, but the expenditure will, of course, be fully analysed in the Budget. The position in regard to departmental expenditure included in the annual votes is very satisfactory. As stated in the Budget, the estimates for last year were most carefully overhauled before being finalised. Even so, a rigorous control over expenditure during the year resulted in savings under most of the votes, and these savings in the aggregate amounted to about £220,000. TRADE AND BANKING.

Having such a relatively large external trade, this Dominion is very much concerned with the state of trade in other countries, and particularly in Great Britain, where the greater part of our exports is sold. Happenings in the realm of international finance and the general economic conditions operating abroad have in the last few months brought about a marked change in t.,e economic position and the outlook of the Dominion as a result of falling prices and delay in realisation. The value of our exports has declined considerably, and during the last financial year was hardly sufficient to pay for the year’s imports, which showed an in. crease of about £4,000,000. During the two previous financial years, however, there was an excess of exports amounting to approximately £22,500,000, so that over the longer period the trade balance is satisfactory. The published banking figures for the March quarter of 1930 show an excess of deposits of £355,000, as compared with £8,985,000 for the same quarter of the

previous year. This decline in the relative position was brought about by a slight fall in the volume of deposits and a considerable increase in advances. The change in the banking figures, of course, is largely the effect of the change in the trading figures. The rise in imports and advances, however, indicates increased activity in busi ncss. The exceptional conditions ruling outside the Dominion have given rise to high rates of exchange, which rates are by no means a true indication of the present financial position of the Dominion. In fact, the position is quite a sound one, and but for outside influences would have been regarded as quite normal. SPECIAL LAND TAX. As additional taxation was unavoidable last year, the Government endeavoured to place the additional burden equitably, and at the same time to create as little dis turbance as possible in business and trade, in order that the economic progress of the Dominion should not be hindered. As it was considered that the large farming incomes had not borne their fair share of taxation in recent years, a special land tax was imposed on large rural estates with an unimproved value of over £14,000. Large farming incomes were also made assessable for income tax, but subject to a set-off of the amount paid in land tax. In order to ensure that the special land tax should not impose undue hardship in particular cases provision was made in the legislation for a special Hardship Commission, to which landowners were at liberty to state their case. This commission was given an entirely free hand by the Government, which has accepted its decisions in all cases. As a result the special land tax has been wholly, or partly, remitted in a number of cases. In matters of taxation, as in many other things governed by arbitrary rates, absolute justice can never be completely attained; but the provision for appeal in the case of special land tax at least prevented undue hardship being imposed on particular individuals. After deducting remissions amounting to nearly £lOO,OOO, the special land tax brought about £250,000 additional revenue. The data obtained from the income tax returns of large farming incomes have not yet been fully analysed, but it is clear that the contention contained in last year’s Budget that large farming incomes have not in recent years carried their fair share of the taxation was in accordance with the facts.

This is proved by the fact that a considerable amount (definite figures not being available) was derived from in-, come tax on farming incomes after deducting land tax, both ordinary and special. This means that, previously, some farming incomes were contributing less than half of their fair share of taxation. It will thus be seen that the Government was quite justified in placing part of the necessary additional taxation on this section of the community. ADDITIONAL PRIMAGE DUTY. To provide the balance of the additional revenue that was required to bridge the gap between the estimate of revenue and expenditure for last year the primage duty on imports was increased from 1 to 2 per cent. Primage of course, is purely a revenue duty, imposed upon practically all imports, whether dutiable or not; so that the additional revenue through this channel meant spreading the burden equally over the whole community. The additional impost on individual classes of goods from a retail point of view is practically negligible, but, even so, the Government did not desire the tax to remain upon food any longer than was absolutely necessary. Accordingly, it was provided in the empowering legislation that the additional primage duty on foodstuffs and also on manures was to be lifted automatically on March 31, 1930. Accordingly, all such goods are now subject to the normal 1 per cent, primage only. In regard to the additional primage duty on other classes of goods it is prescribed in the Customs Amendment Act, 1929, that this may be terminated at any time now by Order-in-Council.

It is not usual, however, between parliamentary sessions to make any forecast as to what will be done regarding Customs taxation, and I do not intend to make any pronouncement concerning it at this juncture. The matter will be dealt with when the whole of the financial proposals for the current year are finally under review.

DEFENCE EXPENDITURE REDUCED

With a view to ensuring that the financial year will close satisfactorily, and in the interests of the taxpayers, it will be necessary for all items of expenditure to be overhauled with a view to possible curtailment. Accordingly, as already announced, it has been decided to suspend all territorial camps pending a careful consideration by the Government of the whole system of land defence. The Government’s proposals on the matter will be submitted to Parliament in due course, when the whole matter will be open for discussion. In the meantime, no further camps will take place.

SUPERANNUATION AND SALARIES

As indicated in my last Budget, the financial position of the State Superannuation Funds was found to be very unsatisfactory, due to the neglect in the past to give effect to the actuarial reports and certificates in respect of subsidies. A special committee of inquiry has been set up and is now exploring the position fully. In the

meantime, I am pleased to say that I have been able to do something during the past year in the direction of increased subsidy payments which ■■ were long overdue, an additional amount of £175,000 being paid over for this purpose. I am also glad to say that, in respect of the lower-paid P. and T. employees, an improved scale of salaries has been adopted and put into operation. THE PUBLIC DEBT. The public debt on March 31 last amounted approximately to £267,380,000, the figures again being provisional and subject to audit. This is a net increase of £3,190,000 for the year. It may be explained, however, that this unusually small increase was due to the fact that £5,380,000 of the new loan moneys raised' in the previous financial year (being part of the £7,000,000 London loan raised in January, 1929) was really part of this year’s finance. The new loan moneys received during 1929-30 totalled approximately £5,700,000, including £1,620,000 in London, being the last instalment of the £7,000,000 loan of January, 1929, and £4,080,000 obtained from local issues. As a partial set off against these new issues, there were re demptions of debt during the year amounting to about £2,510,000, leaving the net increase at £3,190,000, as already stated. Of the redemptions, some £406,000 represented funded debt payments to the British Government, and £1,160,000 the operations under the statutory debt repayment scheme; while £260,000 came from reparations, and the balance from other accounts. The most important debt operation during the year was the satisfactory arrangements made for dealing with the balance of the 4 per cent. New Zealand Consolidated Stock, which was due on November 1, 1929. On April 1, 1929, there was still £11,274,000 of this stock in the hands of the public. A further conversion offer to convert up to £5,000,000 of 4 per cent. 1929 stock into 5 per cent, stock at par to mature July 1, 1945 (with an option to the Government to redeem on or after July 1, 1935), together with a cash payment of £2 per cent, on November 1, was made to holders of the old stock in September, 1929. This offer was under written, and was taken up by the holders to the extent of £3,628,000. In view of the fact that the London money market at that time was seriously disturbed by the reactions from the boom on the New York Stock Exchange, coupled with tlie Hatry affair and the outflow of gold to the European market, the Dominion was fortunate in placing the stock in these terms, which.were favourably commented upon by London financial papers. The remaining £6,274,000 of 1929 stock was either purchased before maturity or repaid at maturity. The necessary funds for these operations were provided from New Zealand, £672,000 being provided out of debt repayment moneys, and the balance from the proceeds of local issues in redemption. The conversion and redemption of the £29,490,000 of 4 pei - cent. Consolidated Stock was the largest and most important financial operation in the Dominion’s experience, and when it is remembered that it had to be largely carried out over a period -when the London money market was adversely affected by international complications, it will be realised that the Dominion is to be congratulated on the successful termination of these large operations.

It may be added that the transaction resulted in approximately £1,170,000 of the debt being repaid, and in about £6,000,000 of the debt being transferred from London to New Zealand, which fact is of considerable significance economically.

While dealing with the Public Debt, I would like to refer briefly to the rise of the interest rates at which local issues are made. The rate was increased from 5J per cent, to •54 per cent, on January 9, 1930, and I have received many protests against the action taken. In this connection I need hardly say that the Government is desirous' of obtaining as cheaply as possible the necessary capital for carrying out its policy in connection with public works, land settlement, State advances, etc. It was found, however, that as a result of the high rates offered in Australia and the relative scarcity of capital the amount required by the Government could not be obtained at the rates previously offered. The local requirements of the Government were also affected by the large sums it was found advisable to provide for the redemptions of the 4 per cent. Consolidated Stock already referred to. The Government cannot control the price of money any more than it can control the price of butter or any other commodity for which there is a world-wide market. The Government, in order to carry on its programme, approved by Parliament, thus had no option but to increase the rate of interest on debentures and inscribed stock issued in New Zealand. LOANS DUE. Loans falling due in New Zealand during the current financial year include the following amounts held by the public:— £1,041,680, bearing interest at 5i per cent., due on July 1 next.

£326,900, bearing interest at 5 per cent., due on July 15 next.

£4,887,840, bearing interest at 44 per cent.; due on September 1 next. In regard to the first two loans, I have to announce that holders of the securities will be offered renewal for- a further period from the respective maturity dates to February 15, 1937, with interest at 54 per cent., payable on August 15 and February 15. Holders of inscribed stock

will shortly be communicated with direct from the Treasury, and applications for renewal of this form of security, as well as bearer debentures on issue in respect of these loans, may be made at the offices of the Treasury at Auckland, Wellington, Christchurch, and Dunedin, or at any branch of ;he Bank of New Zealand in the Dominion. The terms to be offered to the holders of securities in the £4,887,840 44 per cent, loan will be announced later. STATE ADVANCES.

One of the chief planks of the Government’s policy on taking office was to provide all the capital necessary to enable the State Advances Office to cope with the demand for loans. When the Government took office I found that there were several thousands of applications on hand, involving an amount of about £4,000,000. In these circumstances the Government gave the matter of State advances its immediate attention, and in a few months the accumulation of applications was overtaken. Since the Government assumed office on December 10, 1928, up to March 31 last about 11,800 applications for loans totalling £13,350,000 were received. The loans authorised in this period totalled approximately £9,540,000, including £5,195.000 to 4336 settlers, and £4,345,000 to 5170 workers. The loans actually paid over amounted to £8,070,000, including £6,920,000 during the last financial year. This last Rem constitutes a record for the office. This achievement of the Government, in addition to providing capital for the purchase and development of rural lands, enabled many farmers to rearrange their finances, and obtain the savings arising from long-term instalment mortgages with freedom from financial worry. The assistance thus rendered has undoubtedly aided in carrying out the Government's policy of closer land settlement.

Further, the expenditure of a large sum of money in providing comfortable homes for the people has very materially assisted in solving the housing problcjn throughout the Dominion, and has incidentally been the means of stimulating the timber industry and of providing work for a large number of people, including builders, carpenters, painters, plumbers, and other tradesmen. In this way the activities of the State Advances Office have indirectly been of considerable assistance to the Government in dealing with the unemployment problem.

INTERMEDIATE RURAL CREDITS.

Complementary to the State Advances Office there is the system of rural intermediate credit, which, broadly, was designed and constituted to bridge the gap between the long term instalment mortgages, and the day-to-day current account facilities offered by the banks. Accordingly, the Rural Intermediate Credit Board is empowered and intended to assist the man on the land by granting advances as cheaply as possible (the present rate of interest being 64 per -cent.) for clearing, fencing, draining, buildings, and other farm improvements, the purchase of implements, stock, seeds, etc., the marketing of produce; and, generally, the year to year finance of farming operations. During the last session of Parliament an amending Act was passed to make the system more workable, and among other things the maximum amount that could be lent to a farmer was increased from £lOOO to £2OOO. Following this amendment arrangements have been made by the board to grant special credit facilities, calculated to be of particular benefit to sheep farmers and grain growers. Under these special arrangements the board will fix the limit of advances for' individual farmers who will then be able to draw the money as they require it, interest being charged on the amount outstanding only. RELIEF OF UNIMPLOYMENT. The relief of unemployment is a matter which has been receiving the earnest attention of the Government ever since it assumed office. It was recognised from the start that a permanent solution of the problem was a mattei that would take time, involving as it does the stimulation and expansion of our industries, both primary and secondary, and particularly the former. In this connection every endeavour is being made to foster a farming spirit, to have more land brought under cultivation, to obtain closer settlement of existing farm lands, and, generally, to assist the farmers to increase the total production of primary produce. Pending the working out of these far-reaching economic changes, the Government has not neglected the question of providing immediate work for the unfortunate members of the community, who otherwise would be out of employment.' Immediately the Government took office arrangements were made to provide additional employment on Public Works in various parts of the Dominion. The necessary financial provision was made during the short session in December, 1928, when Parliament also authorised an increase from £300,000 to £400,000 in the total amount of subsidy which could be paid to local bodies in respect of relief works undertaken by them. Later a special committee of Cabinet was set up to organise additional work through the various State departments, and generally to deal with unemployment. The additional works provided have for the most part been on road and main highways construction and afforestation, while railway trunk lines completion, lands improvement, and irrigation works have been speeded up. These are all useful and necessary developmental works. As most of the work was undertaken on the co-opera-tive principle, and the men paid by

results at prices which would enajjle men of fair average ability, working industriously, to earn the Government standard daily rate of wage, the ta? payers have generally received value for the money expended and the workers ; reasonable reward for their labour. feince the present Government assume' office 26,635 men have been provider, with employment through the Government labour bureaux throughout the Dominion. Of that number 16,380 were placed on Government works, 6100 with local bodies, and 4146 with private employers. When men are sent to Government works they are given orders for their fares, and also for meals en route, and the cost is later deducted from thei earnings. It may be added that 3700 men hqv refused Government work offered ,t' them, while 9735 have left Governmei. relief works of their own accord. As is well known, in accordance with thundertaking given by the Governmqi; last year, practically every able-bodi.e man who was registered as unemploye at Government labour bureaux was provided with work in October and November, 1929, if he was willing to accept the same. The Cabinet Emplovmei. Committee still holds frequent meeting: and the position regarding uneinploymei in the various parts of the Dominic is reviewed, and instructions are issu r for the placing of additional men p Government works when other emplo ment is not available. The expenditu: by the Government in providing add tional work during the last financi: year (1929-30) amounted approximate to £1,300,000. This includes £900,0f expended by the Public Works Depar ment, principally on roads and hi«; ways; £200,000 by the State Forest Sei vice in accelerating the programme c afforestation; £lBO,OOO by the Railway Department; and about £20,000 by th Lands Department. In addition, sui sidies to local bodies on account of relit works amounted to £112,500; so tlm the total cost to the State for the yea was £1,412,500. The period in whip local bodies could raise relief of mien: ployment loans without taking a poll c ratepayers was extended last session t< June 30, 1930. During the last final' cial year 18 applications from loefe bodies to raise such loans, totallinapproximately £120,000, were sanctioned by the Local Government Loans Boar.c’ Subsidies to local bodies authorised dir ing the year amounted to about £117,00( and the amount which was actually pas over to local bodies was £112,500, r already stated. SPECIAL COMMITTEE'S REPORT.

Finally, I may say that the specie committee set up to investigate th. problem of unemployment has now sub mitted its final report, which is bein' very carefully considered by the Gov eminent. Definite proposals arising oh of the. work of this committee, and th investigations made by the Governmer. itself, will be submitted for the cor eideration of Parliament next session.