TE AWAMUTU COURIER Printed on Mondays, Wednesdays, and Fridays FRIDAY, 11th FEBRUARY, 1949. THE SPIRAL OF PRICES

Te Awamutu Courier, Volume 78, Issue 7018, 11 February 1949, Page 4

TE AWAMUTU COURIER Printed on Mondays, Wednesdays, and Fridays FRIDAY, 11th FEBRUARY, 1949. THE SPIRAL OF PRICES

W’HEN in August last the Government decided to restore exchange parity the reason advanced was that a serious endeavour must be made to halt the spiral of prices. In 1933 the rate had been raised from £llO to £125 to buy £lOO sterling. The natural effect of this monetary value variation—and indeed it was deliberately intended as a means of restoring spending power in terms of New Zealand currency for the primary producers—was to correspondingly inflate market values and it followed almost as a natural consequence when other factors were operating in 1948 that the Government would find in this one measure the hope of relief from price and cost disparities. Thus when, on August 19th, Mr Nash followed his Budget statement with one of the most dramatic moves in recent New Zealand history by declaring the restoration of sterling exchange parity, he should specify the purpose.

“The choice has to be made between two main alternatives,” he explained. “One was to follow the upward spiral of prices—and increased incomes followed by further increases in prices. The other course was to find a way of reducing costs. A large, proportion of the high prices and costs is due to increased prices for imports.”

The motive was as worthy as the action taken by the Government; the restoration of exchange parity was even overdue. But as a guide to all influences which tended to unbalance spending pow’er the lesson to be taken from this one action of the Government could have been better heeded by the people.

“Everyone,” Mr Nash explained, understands the truth that the endless and futile, chase of income after prices brings only disillusion and disappointment. They will, therefore, share the Government’s conviction that it is better to increase the purchasing power of existing incomes and bring down the cost of living.”

A moment’s consideration reveals

the wisdom—the sheer necessity to stay the inflationary trend. But, apparently, no matter how some people may applaud they are unready to share in the processes. Other factors which spread the disparity between costs and prices are as violently active as ever they were. The wage demands and the appeals for industrial concessions are keeping the. Arbitration Court more than occupied; other avenues of pressure are used to the uttermost; the selfish interest outpaces any regard of the public interest. Thus to-day any advantage which might have accrued for the whole community works positively only in the one direction of lowering the normal currency calculation of the national income The lowering income of one group—the. primary producers is offset by demands for increased income to some groups of wage earners. In balance only the incidence of costing is changed and the net result on prices is unchanged. Yet it remains true that unless the inflationary trend can be halted and some better balance in exchanges of purchasing power and services or goods can be restored entirely graver and more perplexing problems will arise. Very certainly the signs should be heeded; reports from overseas may not yet be alarming; but red lights are appearing which selfish leaders should not ignore.