Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, WEDNES., ABRIL 19, 1933. ABNORMAL LAND VALUES

Poverty Bay Herald, Volume LX, Issue 18067, 19 April 1933, Page 6

Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, WEDNES., ABRIL 19, 1933. ABNORMAL LAND VALUES

With all the efforts that have been made by the Government to alleviate the dillieulties of the farmers, the main factor in a problem that is becoming more acute every day has not yet been touched, for laud values, the basis of the whole industry, remain at a fictitious level, and until they are written down to a standard more consistent, with the present-day returns from land rehabilitation is a virtual impossibility. Hitherto, attempts to ease the situation have been largely confined to measures to reduce working costs, whereas the real handicap is the excessive cost brought about by the gross over-capitalisation of the industry as a whole. With the progress that lias been made in all branches of farming in recent years, the subdivisions and the erection of new buildings, a substantial increase in capital values is understandable, but why unimproved values should have advanced from £213,000,000 immediately before the war to the peak of £345,000,000 in 1929 is economically incomprehensible. There were, of course, a number of factors contributing to the increased valuations —•

the release of capital after the war, the opening up of more country, and tho general demand for land for settlement, in which tho Government of the day participated, and, perhaps, a tendency to , increase tho apparent value of securities upon which it was desired to raise loans or levy rates and taxation. The law of supply and demand might be regarded as some justification for the upward variations that were made from time to time, and there is no doubt that the higher prices for produce lntd an appreciable effect. It is found, however, that between 1919 and 1931 the unimproved valuo of land increased by 20 per cent, whereas the total value of production increased by only 15 per cent, and was duo, not to any higher unimproved value, but to capital improve merits and the cultivation of larger areas of laud. The capital value of land in the Dominion was £421,383,000 in 1918; in 1931 it had risen to £007,800,000, an increase of more than 50 per cent. In tho same period, returns from land increased from £85,000,000 to £98,000,000, or only 15 per cont. The whole of that increase, of

course, does not represent a proportionate increase in profit, sineo other

costs were rising all the time, notably interest rates, which rose from an average of per cent to (5i per cont, and local body rates, which were doubled. On a production basis, which, adjusted on account of variations in costs, is the only satisfactory method of assessing the capital value of land, the capitalisation of land in Now Zealand to-day—assuming that the 10.18 values were correct—should stand at a figure below £500,000,000. In other words, tho country as a whole, is over valued to the extent of approximately £200,000,000, and until that sum is written off it will be impossible to start and reconstruct, on a business-like basis. In tho commercial community and among other industries this position tins been freely recognised, and in quite a number of instances nominal capital has* been re dimed by half, enabling a fresh start to bo made under the altered economic conditions. In other cases, where similar action has been necessary, but has been delayed, the situation has become more difficult, and so it will be with the farming industry unless the crux of the problem is faced without delay. Admittedly, any reorganisation is confronted with far-reaching complications, but, the fact that the task is an involved one is no excuse for evading it. On the contrary, the longer it is postponed the more complicated and more perplexing will iit become, and (lie harder will be the task of rehabilitating the industry. It is no good disguising the fact that hitherto the whole policy of the country has boen to try

to bolster up tho farmer until csnil

tions on the overseas markets im-

prove, but it is becoming more apparent,every day that internal action is imperative, independently of what assistance might bo given by an alteration in world conditions. The legislation that has been passed in tho last year or two has not professed to do more than relieve the situation; There has been absolutely nothing constructive about it. In sonic ways it has been absurd and paradoxical. By the interest and rent reduction measures the capital of those who have financed the primary producers has been written down, in effect, by 20 per cent, and by the policy of exchange inflation the farmers’ returns

have been written up by 25 per cent; yet tho position is little better Than it was previously. Both these stops

recognise the principle that there must bo a closer relationship between tho capital invested in the industry and the returns from it, yet the allimportant question of effecting a genuine and general reduction of capital is studiously ignored. It is frankly admitted that some land is not worth half of what was paid for it, and, perhaps, not half what the Government lias valued it at, and it is common knowledge that in many cases mortgages are only worth part of their face value. Admitting those things, why cannot the State deal with the industry as a business con-cern-ami mako some definite practical attempt to place it on a business footing? Until that is done farming must necessarily remain in its present parlous state, and, oven more important, the possibilities of its reviving when more stable conditions are reached throughout tho world will be greatly restricted. The whole difficulty, perhaps, is summed up in the fact that too much consideration is being given to the individual and too little to the welfare of the industry and the country as a whole, and the sooner tho process is reversed the better for everyone concerned.