THE SHEEP INDUSTRY.

Otago Witness, Issue 4042, 1 September 1931, Page 15

THE SHEEP INDUSTRY.

BURDEN OF TAXATION.

UNNECESSARY RESTRICTIONS

WELLINGTON, August 26. The annual meeting of the New Zealand Sheep Owners’ and Farmers’ Federation was held to-day, the president, Mr H. D. Acland, presiding. Mr Acland said he felt that there were many matters vitally affecting the industry which required the very careful consideration, not only of delegates, but also of the Government of the day, in the interests of the Dominion- as a whole. Last year they had reason for grave concern over the large,drop in the money value of their wool, meat, pelts, etc. Their worst fears - had been justified as he believed that no other branch of primary production had been affected by the present depression to the same extent as was the case with the sheep-owning industry. Since last year deflation of prices had continued until to-day they found that the ratio of production costs to money received for their products had reached an impossible stage. The effect of this was reflected through the whole of our economic life.

“ The sheep-owning industry is faced at the moment,” said Mr Acland, “ with two major problems:—(l) Internal costa of production; (2) overseas prices for our produce. “ The first is immediate to us in New Zealand and capable of local solution, but the second is entirely outside our control. With regard to internal costs, it is imperative that all costs must be quickly anl drastically reduced, and by costs, I mean wages, transport, stores, rates, taxes, rent, and interest. The court has already made a reduction of 10 per cent, in wages on all awards, but rent and interest with rates and taxes must also be materially reduced. If this is not done, then these items of costs will be auto-

matically reduced for the reason that farmers and the community generally will be quite unable to pay them on present prices from overseas. The Federal Government in Australia, in reducing interest on all bonds from 6 and 5| per cent, to 4 per cent., recognised that this was the only alternative to default or repudiat lon - Sheep owners are in this position in New Zealand at the present time. Rent, rates, and taxes must, of necessity, also be . reduced in the same way if disaster is to be avoided. Local authorities have, in some parts of the Dominion, already defaulted owing to their inability to collect outstanding rates, while the position of many others is at the moment very obscure in this respect. “ The awards directly affecting our industry are those for shearers and "shed hands and mustering. As you are aware, an application is now being made to the court for a reduction in regard to shearers and shed hands. As the law stands at present, legislation will be required before an amendment of the award for musterers can be obtained. Unless some relief is given in this respect, however, there is a grave risk of many high-coun-try runholders in the South Island throwing up their country, the mustering costs under existing award rates being prohibitive, taking, in some cases, nearly 50 per cent, of the gross wool clip to meet the costs for mustering alone. This, of course, affects the South Island only, and does not apply to the North.

“ The considered policy of this federation, extending over a great many years, that the principle of statutory fixation of production costs under compulsory industrial legislation is against economic law, and must fail on falling markets, is being fully justified at the present time. We have always contended that this principle has been a menace to the genuine worker, that it has lowered the standard of Jiving for many, especially those in the countrj’ districts, and is largely responsible for the unhealthy growth of the big cities in New Zealand. The ultimate burden of any. award, w’hether pastrycooks.

bricklayers, hairdressers, shearers, or slaughtermen, is borne by the primary producer, their awards being allied with what we call protection fi.e., restriction of imports). This has artificially kept up the cost of production of primary products and really lowered the standard of living, and is doing so still. It has imposed an immense burden of taxation and costs upon the community, and especially on all primary producers, and there is no doubt that at the present time it is pieventing thousands of men from obtaining genuine economic employment. “ So long as Parliament, which is, after all, only a reflex of the opinion of the electors, insists through the Arbitration Act and restrictive legislation on making the production of things in New Zealand more and more difficult and expensive, it is absurd to complain of poverty and lack of genuine employment. If present conditions continue New Zealand must soon be forced back to sound economic conditions, because the entry of borrowed money is certain to stop abruptly. These conditions must, of necessity, be much harder than any during the last 30 years, as during that period we have lived on overseas loans to an enormous extent. It would appear that there will be no overseas loan money available to continue public works, and it will not be possible to obtain a sufficiency of this from the New Zealand taxpayer. Australia, as I have already said, has, in effect, defaulted on her Federal issue bonds, and 1 am afraid that New Zealand may be compelled to follow suit. “As the Dominion depends on its export of primary produce for its income, its prosperity or otherwise is determined by the relative costs of production balanced against the total of money received from outside the Dominion, in return for our primary product. Economic law must be allowed to have full scope if primary production in this country is to be maintained. “ In 1927 New Zealand lamb was selling at lOJd on the London market, wether mutton 62d, and ewe mutton 4|d. In March-April, 1931, New Zealand lamb averaged about 6d lb on the London market, wether mutton 4d and ewe mutton 2|d to 2Jd Deduct twopence per lb from the figures and compare the net

amounts received by the grower. Wool in 1924-25 was 22.42 d per lb, 1926-27, 18.67 d per lb, and in 1931, 5.67 d per lb. At the Amberley (Canterbury) ewe fair five-year-old ewes in 1929 were worth 30s, in 1931 they were sold for ss. The Lyttelton ferry service took us to Wellington in April, 1929, for the price of one five-year-old ewe, but in May, 1931, it required the price of six similar ewes for the same service. This means that tor all our requirements as producers, whether for rates and taxes, store or labour, we have to give six ewes to obtain , he same service purchased by one ewe in 1929, and over four bales of wool to-day instead of the one bale we paid for the same service in 1925. If present prices continue it is manifest that there will have to be a general readjustment of all financial contracts, whether public or private. Last year, the Dominion had to carry a great increase in taxation on falling incomes. Obviously, if this process continues, taxation must ultimately take practically the whole of the income. “ Further direct taxation, therefore, seems out of the question, and yet the Budget now before Parliament has apparently been balanced this year only by imposing additional taxation and by taking the last of the reserves set aside over a series of years. _ The fallacious system of the land tax is becoming very apparent owing to the fact that huge sums are outstanding owing to inability to pay, and the policy of this federation oyer many years—that the right principle of taxation is ability to pay—is more than justified. “It is frequently stated that the main difficulty farmers in New Zealand have to. face at the present time is the high prices paid for land, but under existing conditions the question of land value need hardly b e considered, as properties with a free title and no mortgage or bill of sale on their stock and plant cannot produce sufficient to pay working expenses, and in some cases the gross receipts for the produce from the land have been insufficient to pay land tax and local rates without any question of wages, working costs, or living expenses of the nominal owner. “ Politicians of the predatory type (who have proved themselves to be the worst enemies of the community) confidently assert that maintenance of high money wages will cure all our evils by maintaining purchasing power at a correspondingly high level, but unfortunately they do not show us where the means to pay the high money wage fixed by statute is to be found. Under present conditions, industry generally is unable to absorb profitably all available labour. We cannot place labour in cold storage without excessive inunity, as this unused labour and its decovered, but an added burden is laid on industry generally in direct ratio to the number of workers unused in the community, as this unsued labour and its dependents immediately become a charge upon the balance of industry and the rest of the community. A readjustment of costs sufficient to enable the industry to pay its way is essential. Demand creates price, and we must apply this to service in the same way that it applies to the product of the service when it is placed on the world’s markets. Unnecessary restrictions of all kinds on industry must be removed and the community given a free hand to adjust its affairs along economic lines. “ Heavy sacrifices have already been made by capital, and this is evidenced by the lowered values of investments and writings off of interest by mortgagees on farm land. Mortgagees in most eases, unfortunately, mean beneficiaries in trust estates, etc., i.e., the widow and orphans who depend upon the life savings of the husband or father. We can only hope that our Government will recognise its responsibility and take steps to ease the burden of taxation and lower the costs of services to the community to a point which will enable the country to meet its obligations. If this is not done, then private effort must fail, and the community generally must ultimately suffer still greater hardships. I appreciate that the Government’s difficulties are equally severe with those of private individuals and trading concerns, and our difficulty at the moment appears to be traceable to the action taken by the financial groups in Europe, Great Britain, and America, through the restoration of the depreciated pound to one of 20s value by re-establishing the gold standard. In other words, having got the whole borrowing world indebted during the war and post-war period, on the basis of a depreciated pound, the financial groups mentioned have since arbitrarily and without reference to the debtor nations practically doubled the amount of the debt contracted under the old conditions by this action. The effect of this has been the pauperisation of debtor nations through the inability of' their various industries to continue on a,, payable basis owing to the shortage of currency as compared with the amount available under the old currency value. I trust that the Parliamentary Committee now sitting will not lose sight of the necessity for some relief from our creditors outside New Zealand, in addition to giving attention to necessary adjustments within the Dominion. “ It is hard economic facts that have to be faced by us farmers to-day, and we must deal with them according to economic law, or go under. As New Zealand is dependent on its primary products for practically the whole of its outside national income, this cannot be allowed to happen; and the farmers’ budget must be balanced. If it is not. then the country's balance must be painfully short, and unemployment and destitution that is now being felt must get steadily worse. Parliament has apparently not attempted to balance its Budget along these lines, and so far from taxation costs being reduced, they are being increased, while, with respect to unemployment, the principle appears to have been laid down that everybody has a right to demand work at an arbitrarily fixed money ■wage, and if any person is not able to obtain a living, then such person is entitled to be supported in some reasonable degree of comfort by the State, which means, of course, by the balance of industry. In effect this is the same thing as a claim by the primary producer, that if the public cannot buy his products, then the Government must take them at a fixed price whether they are good, bad, or indifferent. “ One of the main reasons why there is so much unemployment or destitution at the present time is because it does not pay to hire the services of the unemployed. the work done not being worth the money price paid for it. As a result

the labour cannot be disposed of at a profit, and in consequence most unemployment or relief labour is really a levy on capital resources which are being gradually diminished. “ The position with regard to unemployment appears to be ridiculous at the present time. Farmers are being asked to give certain classes of employment on terms where the farmer is to find food and lodging which he cannot afford, while, on the other hand, for work that is essential to be done in the ordinary course of farming production he is- forced, under statute and awards, to conform to conditions and suffer restrictions, and pay on a cash basis, in many eases 100 per eent. higher than the product of the labour will warrant.

“ The maintenance of standards of money wages on the present basis, as advocated by union secretaries and Labour members of Parliament, can only be done at the price of further unemployment and destitution, as it simply amounts to a demand that the incomes of Arbitration Court workers shall be main tained on a preferential basis at the ex pense of the rest of the community. “ With regard to interest, I may point out that in 1905 the ruling rate of interest on farm mortgages was round about 4J per cent., less a mortgage tax of 6s 3d, so that the mortgagee got at that time a net return of about 4 per cent. There is very little land mortgage money available to-day. as land for primary production for export is, in many eases, a liability and not an asset, owing to excessive land and general taxation, and high local rating.

“The second problem that I referred to —that is, prices for our products overseas—is one that New Zealand producers cannot influence to any appreciable extent. There is at the present time a world movement in the reduction of the money paid for all products. “ That matter is exciting very much attention in Europe at the present time, and it would appear to be really a currency question? dut to what is known as the gold standard, the effect of the restoration of which has been to cause an anpreciation of gold and, in effect, sudden appreciation of the currency. If this is the case, then an appreciation of the currency is just as much a social injustice as is depreciation or inHation.

“ The position the farmers m New Zealand find themselves in at the moment is that we are being called upon to repay debts contracted when the £ was of the value of 12s in the £ which to-day may be regarded of the value of 30s. Not on'y is this so with regard to farm mortgages, but it applies equally to all mortgages and debts incurred by persons who have built houses and have a mortgage thereon. It means that their equity has. in many cases, been completely wiped out, and all their savings have disappeared. In other words, a large proportion of the thrifty people of the community are to be deprived of their life savings. I say definitely that no Government could, or should, allow- such a thing as this to happen.

“ The present crisis might have been avoided if gold were quoted in terms of goods instead of quoting the general level of prices of goods in terms of gold. If this is correct, then we have been facing an appreciation of the currency instead of a deflation. If gold continues to get scarcer then prices of commodities must fall and the mortgagee or rentier must ultimately possess everything unless existing contracts relating to interest and debt payments are readjusted.

“ Our public debt interest on loans raised since and including the war period has also been practically doubled, as a result of the world-wide hardship caused through this demand for a return of 20s for every 10s lent to the world’s debtors during the period mentioned. “ I trust our Government will endeavour to have a readjustment made which will result in a fair and equitable basis of settlement of our war and post-war indebtedness. as unless we receive consideration in this respect it must be obvious that there is grave risk of default in the near future, as we cannot continue to pay interest and sinking fund on the old basis of debt value when we are only receiving approximately 30 per cent, of the prices we were previously paid overseas for our wool. The main cause of our present trouble being, I believe, a currency one, it should be capable or adjustment. “ The position so far as the sheep owner is concerned eannot continue, and as Lord IFAbernon has stated, there must be a review of all contracts, otherwise the she?p owners in New Zealand, the local bodies with debentures, and the Government must u'timately paso into the hands of receivers for the mortgagee, the debenture holders, and the Government

stockholders. The interest payable to the London bondholders at the present time is about £8,900,000. Three years ago our wool clip was worth about £15,000,000 and our lamb cheque about £9,000,000. We could then pay this interest with just over half of our wool cheque. Today our wool cheque is under £5,000,000 and our lamb cheque about the same. tn order, therefore, to pay the interest to the London bondholders we have to give them tire gross proceeds of the whole of our Dominion wool clip -and about threefourths of the proceeds of our Dominion lamb output. leaving practically nothing for ue to live and carry on the country with.

rf lf it is correct that the prices of New Zealand primary products have fallen by about £30,600,000, then this is equivalent at 74 per cent, to writing off £400,000,000 from the value of the farming lands of New Zealand, and this must have its repercussion on the values of all other property in New Zealand. Itseems to me that a remedy must ba found, and found quic-kly, in order to save the sheep farmer and the primary producer of New Zealand.

“So far as local conditions are concerned, Parliament may have to give careful consideration to the position of mortgagees relative to foreclosure. Our trouble here, and in Europe, is that politicians have tried to solve economic and international problems by political and national methods, and have failed, and. speaking generally, the politician is largely responsible for the present unsatisfactory position.

“ Dealing with Crown leaseholds and educational leases, you will remember that in 1895, as a result of the very severe winter in the South Island, an Act called the Pastoral Tenants Relief Art was passed, giving to a commission power to deal with the leases of Crown tenants and to make remissions of rent and extensions of term. The preamble .to this Act stated that exceptional loss of Jive stock bad been incurred by persons engaged in uastoral pursuits by the exceptional severity of the past winter. A somewhat similar Act was passed in New South Wales in 1901. known as the Western Lands Act. This Act appointed a commission to deal with the leases of the western district in New South Wales, and it contained a clause stating that no extension of any lease held by way of mortgage would be granted until a common agreement had been arrived at between the mortgagor and the mortgagee, and approved by the commission, the object of this clause being to prevent the mortgagee of either the leases or the stock obtaining the full benefit at the expense of the shcepowner of any concession granted. If such powers do not already exist under statute in New Zealand, then the Government should pass a statute to deal with their tenants, educational endowment lessees, and mortgagors under the State Advances Department, so as to prevent all the equity and life savings of many thousands of thrifty people in the community being wiped out altogether. It is urgently necessary that the primary industries should be removed from, the jurisdiction of the Arbitration Act. as those primary producers who are under awards cannot maintain the necessary staffs for the successful working of their properties under awards as now existing. If the temporary exemption for primary industries was considered necessary in 1928, it is doubly so at the present time, when we have the incongruity of the sheepowner being compelled under awards of the court to pay impossibly high rates for some sections of farming labour, while he is being begged to employ labour under the Unemployment Board’s proposals at any price that can. be fixed by mutual agreement.