BUSINESS REVIVAL

Taranaki Daily News, 28 December 1929, Page 13

BUSINESS REVIVAL

CAUSES OF EXPANSION AN ECONOMIC EXAMINATION. STILL NEED. OF CAUTION. fr—- “ For the immediate future it appears that business activity will continue to increase,” states a bulletin on the- trend of business in New Zealand, prepared for the Canterbury Chamber of Commerce by the Department of Economics of Canterbury College. “In addition to the normal seasonal expansion which occurs every summer, there is much evidence of recovery from the low levels of activity that characterised the year 1927 and 1928,” states the bulletin. “The marked activity in the import trade is almost certainly a reflection of increasing local demand. Both the railways and coastal shipping are handling larger volumes of goods, and increasing registrations of commercial motor vehicles indicate that road traffic is increasing also. The expansion of bank advances suggests that less hesitancy is being shown in using funds for local business purposes. A marked increase in the loans of the State Advances Office has stimulated building activity, while land transfers and mortgage registrations and discharges are definitely higher than they were. The number of bankruptcies is much lower than a year ago, the balance of migration has improved, and the trade union unemployment percentage for August last was appreciably lower than a year earlier. PROSPECTS FOR THE SUMMER. “It is characteristic of the upward movement of a trade cycle that confidence begets confidence, and that increases in business activity stimulate further and cumulative increases. There can, therefore, be little doubt that the momentum of the revival now under way, together with the normal seasonal recovery, will maintain business at a fairly high level throughout the summer. “But it must not be forgotten that revivals in business are apt to overreach themselves and lead to unpleasant consequences. Nor should weneglect our dependence on overseas market conditions and the present plain portents in those markets. Already prices for our chief exports have fallen, and in spite of higher production, our income from exports is likely to be appreciably lower for the coming season than for either of the last two seasons.. Some recession of business activity is anticipated also in the countries with which we are most closely concerned. The British bank rate, raised to GJ per cent, at the end of September, and lowered twice since, still stands at 5J per cent. Events in the security market have shaken confidence somewhat; money is likely to be tight and dear for some time to come, and prices are falling. In the United States remarkable collapses have occurred on the Stock Exchanges, and business has been affected thereby. In Australia the financial position is difficult, and the outlook uncertain, and difficulties are likely to be increased owing to the heavy decline in prices of fine wools. EFFECT ON. NEW ZEALAND. “New Zealand cannot remain unaffected by these events. The buying power of purchasers in our markets is likely to be appreciably lower this season than last, the output of rival sellers is greater and their competition keener. Our power to borrow money, on which we have leaned so heavily in recent years, is likely to be curtailed by credit restriction and high interest rates. Meanwhile high rates are ruling in Australia, and it will be interesting to see how far scarcity of money there will continue to attract funds for investment from New Zealand, and so lessen the amount available here.

“These considerations suggest that the business revival now upder way is likely to be short-lived. In fact, part at least of that revival has been stimulated by expedients essentially temporary in nature. The increase in State advances, which has stimulated building, cannot be continued indefinitely, and must be checked should borrowing prove difficult; the measures adopted, to meet the unemployment problem have increased spending power and demand for goods, but they have not touched the basic causes of unemployment,, and.they can be continued only so long as the money lasts. Moreover, business expansion will itself use up the money on which

it depends. It .appears most therefore, that business will continue t 0 expand for some .months yet, but \ that expansion will be checked as the effect# of reduced income from exports' and tighter monetary conditions are felt to* ward the end of the export season.”