THE FARMER’S BUDGET

Otago Witness, Issue 4042, 1 September 1931, Page 26

THE FARMER’S BUDGET

BALANCING ON GUARANTEED PRICES MR M'COMBS S PROPOSAL. (From Our Parliamentary Reporter.) WELLINGTON, August 26. Mr J. M’Conibs (Labour member for Lyttelton) had proposed to expound, during the Budget debate, a scheme for the balancing of faimers’ budgets. In view of the political developments of last week he refrained from putting his intention into effect. He has, however, submitted his scheme for publication. It is as follows:—

Contrary to the usually accepted theory, 1 want to state emphatically, and prove it, that the crisis which New Zealand is facing to-day has largely been created within New Zealand, and could have been avoided and may yet be remedied. The Prime Minister’s method of balancing the national Budget has upset every other budget in the Dominion, including local body budgets. Had attention been given to balancing the farmer’s budget, the manufacturer’s budget, and the worker's budget, the national Budget would have automatically balanced. It is true our exports are down £11,000,000 as compared with the previous year. Wool accounts for £8,000,000, but 107,417 less bales of wool were exported,, although 1,693,850 more sheep were shorn. Obviously, a large quantity of wool is being held for higher prices,, and when this wool is sold and exported it will offset part of the £8,000,000. If we assume; however, that the total reduction is £11,000,000, it does not necessarily follow that the total national income is down by that amount. The farmer’s income has been reduced, and the nation will have to reduce its imports by that amount. Not a single sovereign less, and not a single bank note less, will come into the Dominion; and had we set about to produce the goods which would otherwise have been imported there would have been no diminution in our total national income. It is a mistake to think that wealth comes to us from overseas. All we do is to exchange goods for goods, and in doing so w'e do not add one single penny piece to the wealth produced. The national wealth is all produced within the Dominion. The volume of our overseas trade is not an indication of wealth; indeed it may be a mark of our backwardness as wealth producers. The latest comparison shows New Zealand with an overeas trade amounting to £69 17s Id per head, with the United States only £l5 6s 2d. Some of those who think that wealth comes to us from overseas might foolishly conclude that New Zealanders are four times and a-half wealthier than the inhabitants of the United States. It is true that our sheep and dairy farmers will have less to spend, but they are only a small part of the wealth producers of the Dominion, although a very important part. Practically the whole of our agricultural products are consumed in the Dominion. The same is true regarding beekeeping, fruitgrowing, and market gar dening. The total number of farmers directly affected by export prices include those engaged in sheep farming, dairying, and mixed farming. Only 21,000 of these regularly employ paid labour, and 34,000 work their own farms without any paid labour, making a total of 55,000 directly affected by export prices. These farmers are facing very grave difficulties, and the Government has done practically nothing to .help them. Three-fifths of them are not .directly affected by reductions in wages, and the other two-fifths are not greatly helped. A J per cent reduction in interest, or even a 1 per cent, reduction, will not get them out of their difficulties. What the farmers want is the balancing of their individual budgets, and this the State can and should do. It should also balance the workers’ budgets, but I will deal with that later. We protect our secondary industries at our ports, but our primary producers are thrown to the wolves of international finance. Our primary producers can be protected. Other countries, by means of subsidies, seek to give some protection to the primary producers. Australia pays 4d per lb on locally consumed butter. The dried fruit industry is similarly protected. Australians pay lid per lb for sultanas which sell in New Zealand at 6d. The sugar industry is highly protected. In New Zealand the wheat industry is grudgingly protected. The problem which our exporting farmers have to face, and which the Government in the national interests should help them to solve, is how to restore the loss of £11,000,000 purchasing power, and I offer this suggestion tentatively, knowing that the details will have to be filled in. The per capita drop in the national income is only £7 6s Bd, and this sum will be reduced when all the wool is sold. Unfortunately, wrong political methods and false economic policy have multiplied that loss considerably. First, there was the reduction in wages of £12,500,000, which more than doubled the reduction in purchasing power brought about by reduction of exports. This caused a reduction in output in all our factories occasioned by reason of the reduced demand, and our losses were again doubled. Last of all, there was loss to trade and industry occasioned through panic. Thus, an original loss of £11,000,000 has been turned into a loss of between £50,000,000 and £60,000,000. The reduction in wages, which, we were told/ would cure unemployment, has trebled the numbers of those registered. In Australia the wage reductions were more drastic and the result to trade and industry was even more disastrous. Employers promised and Premiers urged that wage reductions would result in increased employment, but the theory was wrong—reduced wages resulted in reduced demand, and reduced demand meant reduced output. Trade and industry languished, and more and more men were thrown out of employment. Now there is a huge army of unemployed in Australia, numbering more than a quarter of the working population.

The latest returns give the numbers at 27.6 per cent. There is no reason why we should tread the same Stupidity street as Australia. England is determined not to do so, and there is no reason why we should not retrace the steps we have already taken. Let us unitedly face the loss of £11,000,000, or whatever it is, and be done with it, and thus avoid its multiplication. Our fanners should be guaranteed a reasonably stable price for their produce,—a price based on a seven-year moving average. Establish a Ministry of Export, composed of seven members, three of them to be Cabinet Ministers, the Minister of Finance representing the Treasury, the Minister of Lands, - and the Minister of Agriculture, together with representatives from the Meat Producers’ Board and ths Dairy Produce Export Control Board. Let a fund be established, out of which the exporters of specified commodities shall be guaranteed fixed prices based on a seven-year moving average index number. The seven years would cover an ordinary trade cycle. Six years used to be the estimated interval between the depths of a business depression and the summit of the ensuing boom, but whether that is so or not, a seven-year period would ensure a fairly steady price to the farmers. With a steady or steadied income, farmers could get all the finance they required. This is how the proposal would ■work: If the average price of a certain grade of wool were one shilling, and in a particular year it dropped to eightpence, the fund would have to pay out an additional fourpence. This would be refunded in subsequent years when the price exceeded the average of seven years. If the price went to Is 6d. in a particularly good year, the average price paid to the farmers in that year would be increased, and the effect of the high price would last for six more years. The Ministry of Labour in England in connection with Unemployment Insurance is authorised to borrow against future income, the bonds being guaranteed by the State. We could go a step further in connection with the proposed Ministry of Export. We could authorise it to issue bonds in a bad year to be redeemed in better years, the State to guarantee and to pay the interest. The money in the last analysis would have to be spent within the Dominion on articles manufactured in the Dominion, instead of being imported. The internal increased production would thus offset our loss in exports and imports and employment would be found for our people. The interest charges would be very much less than what is now collected in unemployment levies and taxes, and we would avoid the five-fold losses which I have already mentioned. Trade and industry would again flourish. The national Budget would be balanced, because everybody’s budget would be improved. Instead of a balanced Budget based on stagnation and despair, we would have a Budget broad based on increased production created to meet the increased demand.