INTERNAL COSTS

Southland Times, Issue 21331, 27 February 1931, Page 9

INTERNAL COSTS

ECONOMIC CONDITIONS

ADDRESS TO CHAMBER OF COMMERCE SITUATION REVIEWED "Huge problems face New Zealand. The cost of government and taxation must bo greatly reduced, and the cost of production reduced with the least possible prejudice to the workers’ standard of living,” said the president of the Invercargill' Chamber of Commerce (Mr D. J. Wesney) during the course of an address on present day economic conditions to members of the chamber and prominent citizens yesterday afternoon. “New Zealand,, by her geographical position, and her place in history, and the fertility of her soil and climate,- is destined to become one of the world’s primary producing countries," he continued. "New Zealand’s progress lies in the direction of reduced production costs, cheaper land, encouragement of intensive farming, the efficient marketing of her produce abroad, and an immigration policy, in keeping with the development of the country. “To accomplish this, and for the well being of the generations still to come, much self sacrifice will be necessary. The return to economic levels will no doubt mean hardships, but every section of the community must bear its share. The Arbitrattion Court is a bar to wage reduction. Work must be found for the lads who are leaving school life, from whose ranks we expect to find the leaders and citizens of the future. Capital and labour should get together. Country should be paramount, and national welfare kept apart from the disturbing influences of party politics, whilst the fostering of our industries and the fullest development of our national resources should be our aim.’’

During the course, of his address Mr Wesney gave a comprehensive review of the position as it. affects imports and exports, and also dealt with the problems facing the secondary industries of the country. The total exports for the year ended December 31 amounted to £44,940,692 compared with £55,579,063 for the preceding year, a decline for the year of £9,976,736. “Of this decline,” said Mr Wesney, “£7,694,844 is on wool, -£1,373,861 is on butter, £579,025 is on cheese, £295,355 is on sheep skins, £166,980 is on hides, £142,375 is on hemp, and £139,760 is on timber. Frozen meant has increased by £1,071,000. “The relative values of the chief items for the past two years in interesting; figures for the previous year being given in parentheses:—Wool (bales) 581,225, 688,642; value, £7,664,362, (£15,359,206); average per bale, £l3 3/9 (£22 6/9) ; butter (cwt.) 1,884,237 (1,653,797); value, £11,854,056, (£13,227,917; average per cwt. 125/9, (160/-); cheese (cwt.) 1,812,981, (1,779,093); value £6,438,438 (£7,017,463); average per cwt. 71/- (78/9); frozen meat (cwt.) 4,031,231 (3,336,200) ; value, £10,954,243 (£9,883,226); average per cwt. 54/4 (59/3).

“Export for 1930 were £10,638,371 less than during 1929, due mainly to a sharp drop in prices, the all-groups export-prices index, showing a fall of 21.4 per cent as compared with the previous year. Of the individual group indexes, wool shows a phenomenal decrease of 46.7 per cent; hides, skins and tallow, 18.7 per cent; dairy produce, 13.0 per cent; meat 3.6 per cent; and miscella'neous, 8.7 per cent. That the decline in value is not due to a falling-off in the volume of exports is evidenced by considerable quantity increases in butter, lamb, mutton, sausagecasings, dried-milk, apples, sheep-skins, tallow, and gold, while smaller increases were recorded in cheese, beef, and cattle-hides. Wool is the only major item showing a decline in quantity, due, however, not- to a fall in production, but to the holding-back of stocks on account of the low prices ruling. “Imports for year ending December 31 were:— ■ ■ ■ ■ ' 1930. 1929. £43,025,914. £48,797,977. Showing a decline for the year, of £5,772,063. The excess‘of exports are:— ; 1930. 1929. £1,914,778.' ’ £6,781,086. “It will therefore be noticed that the excess of exports has fallen by £4,866,308. These figures are far from cheering, and are not nearly enough to meet outside obligations, for interest, etc. The values given for exports are estimated values at the time of shipment, and it is probable these are over-estimated, so that the actual prices may not be really as good as shown. It is gratifying to note, that at the present time, wool, butter, cheese, and meat prices are showing an upward tendency. Wealth From The Soil. “Showing how dependent New Zealand is upon the fruits of the soil, it is interesting to note that the cow and sheep together account for 94.2 per cent, of our national income. Whilst high prices ruled during recent years, and acceptable as they were to our primary producers, they have been contributing • causes to the present low prices for wool, in as much as they necessitated advances in prices of the finished article, and made possible the manufacture of cheaper substitutes. It would therefore appear that increased production in all our primary products is essential to offset the low prices ruling? “With the advent of increased supplies of wool, produced in Argentine, .South Africa and Russia, all of which are situated much nearer to the European markets, both New Zealand and Australia may expect increasing competition, and may be compelled to seek an extension of their markets. “The ability of the Home market to absorb not only our increased output, but the surplus previously sent elsewhere has been a surprise to those intimately in touch with this side of New Zealand trade. Fo> five months ending December 31 last Britain absorbed 133.898 tons of butter as compared with 113,031 tons for the same period in 1929. Her average daily consumption during this monthly period rose from 714 tons in 1928 to 827 tons in 1930, but in order to attain this the producer suffered a 30 per cent, reduction in the price he received, the average price in 1928 being around 160/- to 164/- and in 1930 112/- to 114/-. How then are we in New Zealand to solve this problem of uneconomic prices? We can only try to do so by examining every stage in our production in order to reduce their costs and endeavour to make ends meet. I have already indicated how this may be done from the outside, but the dairyman must also see whether he cannot make reductions also. I suggest, speaking as ‘the man in the street,that there is an improvement that may be effected by strict attention to herd testing. Anyone reading dairy journals cannot fail to be struck with the very great difference in butterfat production as between tbe highest and the lowest herds, and while all cannot probably reach high water levels in production, still it is evident that a very large proportion of the dairy cows of New Zealand are a cause of a higher cost of production per pound than the country can afford. Primary and Secondary Industries. “To-day increased attention is being given to the need of supporting our secondary industries by urging consumers to purchase good ‘Made in New Zealand,’ ” Mr Wesney continued. "This is sound advice where our own raw materials enter into the production of these commodities. In the first place it is our bounden duty to assist the primary producers, and to encourage the growth and development of rural activity as we depend upon the exports of the fruits of the soil for our national income which can only be achieved in competition with other countries. In order to meet these demands it is necessary to increase production, and above, all to diminish costs which are ai present strangling the industry. Retail price#’ are falling almost to 1913 prices, but costs of production remain 60 per cent, higher than they were before the war; these, unless brought down will seriously' affect the farmers, causing cither abandonment of their farms or reduction of their land values by 50 per cent. It is certain that unless costs are reduced the future of

farming is hopelees. Prices of our primary industries are at a low level in the world's markets and a return to the higher levels enjoyed in the past seems improbable, as nations with whom wo have not been In competition in the past are opposing us today. “Secondary industries are also 'feeling the pinch,’ on account of the high costs of production. Government aid has been sought to protect industries against importations, by means of tariff, but in spite of this, business is languishing, mainly because of high production costs. Other countries, not governed by arbitration laws, are rapidly deflating and in consequence are able to export their products to this country, and absorb tariff increases without difficulty. “Can the manufacturer continue in business if he is unable to sell his goods because the cost is too high, and the question for him to decide is, whether he can continue in business at a loss. Are the people of New Zealand prepared fo continue fostering importations from abroad, and watch its own industries gradually reach • total extinction ? The War a Factor. “Past records show that a period of falling prices has always followed in the wake of war. In the opinion of the American Banker/ Association, business depression is due lately to the sharp decline in the price level of raw commodities. This decline is part of the process of readjustment needed to restore the equilibrium which was upset by forced production necessitated in all countries to carry on the war. There is evidence that the present depression has about run its course. Judged by historic precedent we have now reached the low ebb, and with the resumption of construction, very gradual, but definite improvement may be expected. The United States is suffering relatively as severely as other countries, notwithstanding its hoard of gold, but the people of the United States are making readjustments necessary at the present time. Salaries and wages have been reduced throughout the country, and there is no outcry about the standard of living. Money wages have been reduced, but not real wages. So much for the United States they are recovering whilst we are thinking about it. Commodity prices have fallen in every country without exception. The time is overdue for a general stocktaking. There must be a readjustment of costs. All countries with the exception of Australia, New Zealand, and, to a lesser extent, England are in a position to effect voluntary wage adjustments because they are not handicapped with compulsory arbitration and fixed awards. “Australia’s position to-day shows clearly the difficulties and dangers towards which unsound finance leads. New Zealand is drifting in the same direction. The Prime Minister (the Rt. Hon G W. Forbes) in his recent statement dealing with the financial position, has outlined drastic measures to enable the Dominion to meet this drift Although some of the suggested reforms may not be palatable to certain sections of the community—the present is not a time for parlance —and it is hoped the Government will receive the support, of all thinking people, irrespective of individual political opinions. Unemployment.

“Unemployment is probably one of the greatest of world problems to-day, said Mr Wesney, “and with an unemployment list of 30,000,009, and an increase of population at the rate of 20,000,000 annually the world has some problem to solve. “Since the war, conditions industrially have changed. Some countries have established high protective tarriffs, with the result that international trading relationships have been materially altered. In Great Britain and the United States a contributing cause is undoubtedly the displacement of man by labour saving machinery. As Britain overcomes her present economic difficulties, so should unemployment in New Zealand diminish. It is therefore obvious that by supporting the industries of the Mother Country to the fullest possible extent, we will assist to restore prosperity there, and automatically improve our own local conditions. General Dawes, the United States Ambassador in London, in commenting ■ recently on world conditions, stated in his opinion May, 1931 would see a recovery in trade, and that 1932 would be a ‘boom year’ but prices would be upon a lower basis. Recovery in New Zealand will depend upon recovery in Britain, and the measure of that recovery. “In the meantime, unemployment is rife in the land, and with a general increase in trade, a lower cost of production, together with at least temporary assistance from the Unemployment Board, unemployment should steadily decline. Gold Reserves. “We are frequently faced with statements that the world’s trouble to-day is over-production,” Mr Wesney continued. “With the world’s population increasing by 20,000,000 annually, insofar as food stuffs are concerned, this appears impossible. If it were a fact, then indeed our outlook might be said to be dark. lam of the opinion that we are suffering from underconsumption, and for this trouble there are a variety of causes. There is for instance the scarcity of gold as a circulating medium, owing to which, we, as an agricultural producing country are forced to add, say, 30 per cent, to the average quantity of goods required in normal times to purchase the usual requirements of our daily life. “it is true that France and the United States hold more than 50 per cent, of the world’s gold. During 1929 these two countries added about £110,000,000 to their reserves, and most of it is sterilized, as the result of non-circulation, which has no doubt been a contributing factor to the disastrous affect on trade. If the depression is partly due to there being insufficient gold at present for all countries, then it appears that a quick return to prosperity is impossible, unless the United States cancel the war debts due to her, or the present overplus in America is divided up.”