“BORROWING AND SPENDING”

Southland Times, Issue 23823, 22 May 1939, Page 6

“BORROWING AND SPENDING”

LABOUR’S POLICY CRITICIZED

DECLINE IN PRODUCTION ALLEGED

(United Press Association) WELLINGTON, May 20.

While he did not want to increase the Government’s embarrassment at the present time, said the Leader of the Opposition (the Hon. Adam Hamilton) today, he felt compelled to reply to what he described as mis-statements made by the Prime Minister (the Rt. Hon. M. J. Savage). Now that the Government had used up the reserves it was going to borrovj so that it would have money to spend but its policy would continue to under* mine the standard of living in New Zealand, said Mr Hamilton. The real foundation of the standard of living was production and not paper money. Production had declined and money secured by borrowing would not prevent a decline in the country’s wealth which came from exports; The Government had been leaning heavily on the peoples’ savings but deposits in the Post Office Savings Bank had declined and Mr Savage now had to appeal to “bloated capitalists” for a loan and also to ask overseas bondholders for more money. The Government’s policy had not only materially reduced the purchasing power of the New Zealand £1 but had brought about a decline in production and so threatened a major disaster and real reduction in the standard of living. Mr Hamilton said the Government had spread the taxation net in directions hitherto undreamed of so that all must pay tax; and now all must save so that the Government could borrow and spend. Mr Savage talked about the standard of living but that standard had’ been enjoyed before Mr Savage arrived in New Zealand and was based on the volume of production of foundation industries. DROP IN PRODUCTION During the last three years production had dropped to an alarming degree. In the year 1935-36, 2,090,745 acres were in crop and by 1937-38 this had dropped to 1,785,329. This decline struck at the very basis of the standard of living in New Zealand for that standard was based on goods produced and not paper money. The Government’s policy was pointing the way to the destruction of the foundation of industry, and as a result the cost of living was pressing severely on the family man. The purchasing value of the £1 had declined during the past year, Mr Hamilton said. The excess of exports .over imports in 1936-37 was £12,612,000 and in 1938-39 had dropped to £3,458,000. This drop was a reflex of the drop in volume of production and was causing the Minister of Finance (the Hon. W. Nash) real worry. The Government having got into real difficulties through over expenditure, Mr Savage had now changed his policy from the creation of credit to borrowing. Mr Savage had found that his policy had strained the public credit to the utmost. The Minister of Finance had been leaning heavily on the Post Office Savings Bank to get money to finance public works and other schemes, but the Savings Bank funds had declined. In 1936-37 about £4,000,000 was put into the Savings Bank over what was taken out In 1938-39 more than £4,000,000 was taken out in excess of what was put in; and this was the most striking commentary of the financial trend in Nev/ Zealand.

In three years, the Labour Government had dissipated all big reserves in the Government departments ar.d exhausted the London reserves. After three years of fairly good export prices and record taxation the Government was financially bankrupt and had to appeal to the “bloated capitalists” in New Zealand for a loan and would ask overseas bondholders for another loan. The Government’s policy had not only materially reduced the purchasing power of the New Zealand £1 but was also developing a major disaster by bringing about a decline in production which threatened a real reduction in the standard of living.