Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, SATURDAY, NOV. 26, 1932. CONTROL OF WOOL

Poverty Bay Herald, Volume LIX, Issue 17947, 26 November 1932, Page 4

Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, SATURDAY, NOV. 26, 1932. CONTROL OF WOOL

There is much to interest New Zealand in the report of the committee of inquiry appointed by the Commonwealth Government to investigate problems of the wool industry. The place that the industry occupies .in the nation’s economic life may be judged from figures showing that over a series of year’s in which Australia’s total exports averaged £144,000,000 the value of the total wool exports averaged £02,000,000. In Now Zealand tvool occupies roughly about 30 per cent, of the total export value, and it is quite easy to understand liow great a factor this is in the general trade prosperity of the Dominion. The Commonwealth Committee, in a very wide and complete survey of the wool situation, does not disguise its anxiety, but strikes a hopeful note. There are hopeful signs, it says, that the world depression has reached its lowest point. It is reasonable to anticipate a restoration of demand as prosperity returns and a level of prices in the future somewhere between the pre-war and post-war averages. The fall in wool prices, however, has been so heavy and so sudden that the industry is left in a very parlous state. “Wool, the historic foundation of Australian development,” the report states, “has fallen in value to unprecedentedly low levels. The gold price of wool in 1932 has been round 5d a pound. The price received has been higher, solely because of the. depreciation in sterling and Australian currencies. Nevertheless the value of wool exported in each of the last two years has been less than half tne gold value in 1927-28. This accounts for Australian adversity.” The industry, it is pointed out, cannot continue on this basis. Australia generally has so far escaped a drought, but this extraordinary good fortune may not continue. The need is imperative for prompt and effective action to relievo the industry. The recommendations made fall under two heads—those for immediate relief of coats, and those for organisation of the market and for the improvement of prices. The committee rejects all proposals for a loan or bounty tc» growers. It recommends the establishment by the Woolgrowcrs ’ Council of a Commonwealth Wool Executive, formed of one representative from each State, a chairman, and two representatives of wool selling brokers; and that in order to regulate market supply the Commonwealth Government should take power to prohibit export of wool upon request by this executive. Tho matter of market control, however, it is recognised, is one that should bo approached with great caution. Tho policy hitherto, the >eport points out, has been to avoid a carry-over—a system substantially sound. The present position, however, is one not only of low prices but of instability and the committee thinksit desirable to establish special machinery for speedy action, instabilivy, Professor Brigdcn, one of the members of tho committee, points out, is the. bugbear of the trade, and the risks of changing prices have to be. paid for. Tho greatest menace to (wool, prices at all times is the tear of the buyers that if they bought wool at a certain price to-day their competitors might get it cheaper to-morrow, next month, or in three months' time. To secure stability would mean taking risks on a large scale. There would have to be sufficient funds to hold wool if necessary till the next season. There was need for caution, Professor Brigdcn said, but there is nothing in the law of supply and demand to requin! the clearing of tho wool clip each season and despito tho experience of the United States Farm Board in its effort to maintain tho price of cotton he thinks tho .idea of control, without any attempt to dictate price, is worthy of serious consideration. The Commonwealth Prime Minister has approved of the establishment, of a Wool Executive, but proposes to invite to a conference all interests concerned, .including Wtato Governments, brokers, bankers, and shipping companies, in order to thrash out a concerted plan for tho relief of woolgrowcrs. That conference will consider not. only control but the exchange question and methods of reduction of costs. The reference in the report to the exchange question is rather interesting to New : Zcnlanders at the prosnt time. The committee emphasises that the detcr-

initiation of the rate of exchange should continue to be the function of the Commonwealth Bank Board, nut urges the board to maintain the present rate for the wool season ending in Juno 1933, and that should there bo a further fall in wool prices it should increase the rate. The Government, it recommends, should more positively indemnify the Bank Board against loss in accumulating and in holding an adequate balance in London in the interests of the nation, and should give tho board more effective independence of action in these interests. In other words, it emphasises the value of a central bank and declares that that bank should have freedom of action in the matter of regulating exchange. In his addendum Professor Brigdcn points out that, the economic problems involved in tho exchange controversy are obviously too complex to be generally understood. They are comparable to a difficult question of law, concerning which bush lawyers might be positive but learned judges less assured. In the circumstances the practical way out was to leave a decision to some authority and to abide by the result. There was a danger, he asserted, of the rate of exchange being maintained at an artificial level. Powerful anlltiences were all in a contrary direction. The natural exchange rate was not determined at any time by the current balance of trade but by the effect of policy as to reserves which were thought to be adequate to maintain stability and solvency and by the policy of overseas borrowing. Tho Bank Board’s interpretation of a proper rate of exchange had to be made within wide limits of judgment. If reserves were allowed to be depleted and exchange depended on current balances of payments it was likely to fluctuate alarmingly, 1o the detriment of business and endangering confidence in Australia both at home and abroad. In dealing with woolgrowers’ costs the committee urges the reduction of rail freights and of other State charges "such as the excessive and unwarranted charges levied on shipping”; a reduction of business charges and interest rates, and abolition of land tax. There is explicit dissatisfaction with those institutions whose business lies in financing the woolgrowers. That feeling is effectively expressed in the sentence: “We consider that these institutions should offer to share .in the general reductions more quickly than they arc doing, and that this is no time to make profits out of the wool industry.” The woolgrowers’ hope of economic salvation lies in cheap money which is being made available ir. many countries but not so far in Australia and New Zealand. The report has been well received throughout tho Commonwealth and it is hoped prompt action will be taken to givo effect to the committee’s recommendations.