NEW ZEALAND’S ECONOMY

Te Awamutu Courier, Volume 77, Issue 6568, 20 September 1948, Page 6

NEW ZEALAND’S ECONOMY

GIVES REASON FOR CONCERN COMMENT BY FINANCIAL TIMES “Although outwardly New Zealand continues to experience a period of prosperity, there are several weaknesses in the economic structure which give reason for concern.” This paragraph is taken from a special article in the Financial Times (London) on the economic outlook in New Zealand, published a few days before the elevation of the New Zealand £ to parity with sterling. “National and private incomes in the Dominion are at unprecedentedly high levels,” continues the article, “but there is little evidence that the Government .is taking measures to protect-the country against the effects of a possible recession. , “In spite of the measure of stability conferred on primary producers by the recent seven-year agreements with the British Government for the purchase of surplus meat, butter, and cheese, the possibility of the country having to face sooner of later a diminished return for exports cannot be wholly discounted, and businessmen and others have been urging on the Government the desirability of building up reserves for use in cushioning the effects of any reduction in prices. “Concern is also being expressed over the dwindling value of the country’s sterling reserves. The Minister of Finance, Mr Nash, has himself pointed out recently that the country’s sterling funds will now purchase less than half what the same amount would have purchased in 1939. “The disparity will be offset to some extent by increased prices for primary produce next season, but in spite of this there is a very real danger of_ the country’s assets proving insufficient for her full requirements. Farmers’ Funds “Under its 1 stabilisation programme the Government has retained part of proceeds of the sale of primary produce, and it is estimated that by next season funds so held will amount to approximately £50,000,000. “The president of Federated Farmers has recently urged the Government to invest at least half of this amount in sterling for use in the event bf a recession in prices. He pointed out that during a depression it is a shortage of overseas purchasing power which is the root cause of a country’s troubles.

“During recent years the country has lived up. to almost every penny of its export income and at the same time, in its internal policy the Government has followed the course which would be justifiable only if there was an assurance that present prosperity will continue. Clearly there can be no such assurance. “The case made out for a transfer to sterling of half the farmers’ stabilisation funds has been described by the Prime Minister, Mr Fraser, as ‘preposterous,’ but apart from that the-case has not been answered. Requests by the farmers for information of how their funds have been invested have also been ignored. Whatever the purpose for which the funds are now being used it is clear that in the event of a recession they will be of no assistance to the farmers, but a definite source of danger to the country’s economy if they are retained in the country and eventually pumped into an already swollen internal currency. High Taxation “Not only is the Government living up to every penny of the country’s export income, but it is maintaining an excessively high level of State expenditure. This is dangerous and undesirable from several viewpoints. In the -first place, it necessitates a maintenance of -taxation at ' levels which were unheard of before the war. While most other countries have received substantial tax concessions since the end of hostilities, New Zealand has received very few and certainly -none which have brought any real measure of relief to the average taxpayer.

“Heavy tax imposts on industry have had the effect, apart from making the State a partner in evjry business undertaking, of limiting development at a time when such development is urgently needed and also is reducing the incentive to increase production.

“One of New Zealand’s outstanding needs at the moment is a larger volume of goods and services to counter the excess purchasing power in the hands of the people, and clearly this can only be brought about by a greater effort on the part of both industry and workers in industry. The high level of State expenditure is also having a serious effect on productivity. Many State undertakings, while they may be desirable from the point of view of development, are of doubtful economic value under present conditions. Their prosecution is making an inordinate demand on the limited manpower resources, depriving industry of badly needed labour. “The opinion is widely held in New Zealand that the Government 'should make a thorough examination of its undertakings with a view to deferring to less prosperous times those which have few claims to urgency. Leaders of the Government have had to admit a falling off in production in recent years, especially in factory production, but they have not admitted that this is due in any way to the 40-hour week. Nor will the Opposition leaders make such an admission. Apart from the 40-hour week, however, there is evidence of a general slackening of effort. “It was recently estimated that the production rate a man had fallen by 25% since pre-war. This is an alarming figure and adds emphasis to the view, often expressed here, that New Zealand’s great need, politically and economically, is to get back to a basis of reality.”