LESSONS OF TO-DAY

Taranaki Daily News, 24 July 1931, Page 5

LESSONS OF TO-DAY

TRADE POSITION REVIEWED

NEW CONDITIONS TO BE MET.

VITAL NEED TO BALANCE BUDGET.

good name must be preserved.

A comprehensive review of the economic position of New Zealand to-day and the prospects for the future was contained in the presidential address by Mr. L. M. Moss at the annual meeting of the Taranaki Chamber of Commerce in New Plymouth last night. Mr. Moss went very fully into the trading figures of the last few years, from which he drew several important conclusions, and subsequent speakers emphasised the need for a re-adjustment of standards and the necessity for balancing the budget at the end of the present financial year, in order to preserve the Dominion’s credit abroad. In riioving the adoption of the annual report and balance-sheet the president said he regretted he had to record a continuance of the restricted trading conditions referred to by his predecessor a year ago. The severe contraction in the value of the exports upon which the trade of the Dominion depends was shown in the returns for the year ended June

30th, 1931. The total of £37,000,000 was the lowest for many years, and might be contrasted with the average for the preceding 10 years, which was just over £50,000,000. When allowance was made for the inclusion in that total' of part of the previous season’s output, the decline in the Dominion’s export trade for th© year was approximately 30 per cent, below the average leyel for the previous 10 years. The wise control exercised by the banks and their customers in securing an early and effective reduction in im- • ports to the low figure of £31,000,000, had in considerable measure offset the heavy fall in exports, the visible trade balance being ! £3,571,301, as compared with an unfavourable' balance of £1,239,864 a year ago, showing a net improvement in the position, in 12 months of £4,811,105. To this should be added wool unsold jn New Zealand estimated at 200,000 bales. These figures showed that the efforts made by the country to restore its position in spite of the • low export values, had achieved a substantial measure of success. This favourable result, together with the widespread efforts being made to, harmonise internal prices with the new levels of export value, gave solid ground for confidence in the future of the country.

ECONOMIC LESSONS RE-LEARNED.

New Zealand, in common with other countries, had had to re-learn during the past year th© importance of economic principles, which, since the war, had been buried from view under the mass of borrowed money and artificial export values. There was confident ground for believing that a real effort was now be ing made to understand the effect of economic laws on everyday life, and that this better-informed public opinion would reflect itself in more prudent control of national, local and business affairs. Strong and courageous leadership, backed by a well-informed public opinion, would be required for many years to ensure that each section of the com-

munity conformed to the re-adjustment that is taking place. This re-adjustment could only be permanent in a British community by ensuring that it was evenly and fairly distributed. The proposals of the Prime Minister for a general reduction in interest rates was a further and very necessary step in the process of meeting the new conditions. It was in the interests of every section cf

tlie community that that reduction should be voluntarily adopted and speedily put . into operation. The relief thus afforded to farmers and business men alike would be cumulative in its effect, and would go some distance towards restoring that activity which alone could solve in,any permanent measure the unemployment difficulty. RELIANCE ON EXTERNAL LOANS. The extent to which New Zealand had relied on external loans, was shown in a return furnished to the House of Representatives, covering the decade ■ 1920-21 to 1929-30. During that period, the total loans raised amounted to no less than £100,190,419, with a yearly average of , over £10,000,000. This total included external aud internal loans, also conversion loans. The loans raised jn- London totalled £54,202,411, or an average of aproximately £5,500,000 per year. The cost of raising the London loans aggregated £3,306,012, so that the actual amount. received by New Zealand was £51,501,775, or an average of £5,150,UOO per annum. The interest paid on the external debt was £54,901,497, equal to a yearly average of £5,490,000. Trade figures for the same period showed exports totalling £499,516,265, and imports £474,696,621. Without taking into account freightage on imports or exports, dr any balances arising from tourist traffic, and private remittances, it would be seen that, during those 10 years, the Dominion’s exports fell short of the total of, its imports, plus interest on external debt, by £30,000,000. This deficiency was covered, of course, by loans raised in London. It should be remembered. that, during the 10 years, public debt repayments were made to the extent of* £27,000,000, which must be deducted from the total of £100,190,419, the total loans raised externally and internally. THE POSITION SUMMARISED. Summarising the position, it seemed that in the past 10 years the country had required on the average £3,000,000 a year of borrowed money to meet national commitments, including debt redemption, and had spent in addition £2,000,000 a year of borrowed money on new national undertakings. The speaker quoted these figures to show that . restriction in Government expenditure was not now a matter of opinion but of , necessity. The inflow of new loan money : was not now available to cover deficits. In view of this, it was to be hoped that the recently-appointed railways board 1 would use its independent position to postpone the huge expenditure on the South Island Main Trunk Railway, until there was sufficient population to make such a line pay its way, aud to prevent further expenditure on such : lines as the Taupo Railway, where settle- • ment had already been provided for by the construction of an excellent main highway. Such duplication would never be undertaken by private finance, and could not be defended on economic grounds. It merely added to the heavy burden which the railways deficit had already placed on the national finances. If a, good road had not induced settlement, it was difficult to see that large Mpenditure on a railway running parftj/el to the main road would do so. Any attempt to divert public moneys t© swell purposes in the future must be sfl’ongly resisted, if for no other reason Ithan tlw fact that overseas investors flow closely watching the Dornin- i jo/f’s PttWlc expenditure. tim need for restriction in Gov-

ernment and local body expenditure had not’ been exaggerated was shown by the limited response to the New Zealand 5 per cent, loan offered in London two months ago. The subscriptions totalled only 3*2 per cent., while Kenya was able to secure all its money in London at 4J per cent. In Canada an internal conversion loan of £50,000,000 at 4 per cent, was over-subscribed to the amount of £70,000,000. In the United States an 800,000,000 dollar conversion loan at 3 per cent, was over-subscribed seven times. The same trend was evident in New Zealand local body loan operations. The Auckland Harbour Board, one of the Dominion’s strong local bodies, had -been compelled to renew a 10-year loan of £127,000 at the high rate of 6J per cent., although it made strenuous efforts on the English market to secure better terms. • DOMINION’S CREDIT AT HOME. In seconding the adoption of the annual report and balance-sheet Mr. T. C. List said he would like particularly to refer to one section of the president’s review—his reference to the fact that people in the Old Country were keepino- an eye on New Zealand, and carefully watching the expenditure of money on unprofitable undertakings. As one who was in England recently and in touch with the financial world he could say that all Mr. Moss had said was justified, and more. The people, of England were very fond of New Zealand, but candidly they were just a little apprehensive regarding the present rate of expenditure by a country that comparatively speaking was so sparsely populated. They had a great regard for the Dominion, but the speaker wag afraid New Zealand was tending to “outrun the constable,” and the day was approaching when financial

interests at Home would say that the Dominion must reduce its expenditure if they were to provide money for loans at the bld rate. That • there ; already was a tendency at Home in the direction indicated was borne out by the figures quoted by the president. It hurt one’s pride to know that a colony like Kenya' was able to get loans cheaper than New Zealand. Probably the .'adverse reception accorded the last loan in London would be a sound lesson and serve to make the people of the Dominion accommodate themselves to the fact that in three- or four years New Zealand would have to do without London’s help altogether, and live on its own resources. Many people had the idea that there was a lot of money in London. And so there was; but it was available chiefly for short-dated loans, and longdated loans were not popular. It was hard to realise, but nevertheless : true, that in London there was/now only a quarter of the money available for overseas investment there was before the war, when England was able to. lend £188,000,000 per annum to her colonies, but last . year* the amount was only £39,000,000. 'J EFFECT OF AUSTRALIA. New Zealand was undoubtedly having the rate of exchange against her aggravated by her . proximity to Australia and by having her monetary system interwoven with that of Australia, continued the speaker. He had heard people, particularly farmers, say that to have the rate of exchange adverse to a country was not without benefit to the farming community. This might at first sight appear to be true, but it was really a myth, for if the rate of exchange was adverse, the farmer paid for it in the end.

Turniim to the prospects for next

year, Mr. List said that according to the Prime Minister’s own statement there would be a shortage of £2,250,000 in the Budget. Relief to the extent of £500,000 would be effected by the nonrepayment of war loans- this financial year, but ‘ people must make up their minds that they had to find the balance of £1,750,000. The suggestion had been made that the country. need not balance its Budget this year, but such a course; would be a grave mistake, and only make the exchange position worse. It was true the . Government would have great difficulty in finding the money without dealing harshly with the industrial and commercial, community, but-it was a position that had-to be faced' with strength and determination. One returned .from England to New Zealand feeling that the economic position of ’the world was so serious that it was futile to have a conflict of opinion and action between the two: political divisions of moderate-thinking people of the country. (Hear! hear!) The people should get down to the factthat extravagance must be reduced, and they must accommodate themselves, to the new economic order of things. The unemployment problem was; aserious one, and a fearless Government was necessary that would recognise the . fact that industry could not be cony trolled by a system of fixed wages. The. Government must be persuaded that to overcome the present trouble it must enlist the help of industry, and provide an alternative to the present methods of finding work by day or by the week that was not of an economically productive nature. THE CASE DIAGNOSED. “You have certainly successfully diagnosed the case and prescribed the cure,” said Mr. P. E. Stainton, in adding his

congratulations to the president for, his report. He believed the difficult' times were by iio means over,; and he was constrained to. repeat a remark.he.-'had heard‘ “that in 1934 and .1935. you;vyill look back on the year 1931 as a boom year.” ‘ .. " . ' . . ‘ / Mr. J. McLeod said/the president’s report was unquestionably . an excellent, lucid and/well thought out report. The. question before, everyone was to determine; just how, in' his small way, he could properly face the future. “1 am • not a pessimist,” said Mr; McLeod, “but I think the problems of the next two years' will; be. greater than those of to-day.” - One. of the most important things fdr 'New'-Zealand to- do was- to dissociate itself ’ from the financial unpopularity of Australia. ’ It was . vitally important that irrespective of political colour people must.'cbmbine to balance the Budget, and in so doing they must -bear the burden with as much equanimity’ as possible. ■ He believed, with Mr. List, that if the Budget were not -balanced this year-the rate'.of ex-, change would grow still more unfavourable, and instead of being 11 ‘per cent, adverse it would be 20 per cent; adverse. He thought ■the solution lay in popularising New Zealand industries in every way-- possible,’ which would have to include a revision by the authorities • of the existing' labour Laws; and having done all that was possible to help -the Dominion’s industries the people must proceed ’to make up the. deficiency by paying out. with as igood a grace as possible during the next, two years. Australia was going in for a five year plan,; which had. proved - dj'sas-

trbus. - New Zealand must do< the opposite, and': balance- :her Budget by March 31.- -.'

FALLACY OF HIGH PROTECTION.

• ( -«li* haven't the presidential;-privilege of waving', the, telescope at 'the horizon,” observed- Mr. .Gordon .Fraser, “but all the same I. like- to-add. my congratulations/to the ’president on his able review.; In/an'impassioned 'address rich in rhetoric .Mr, Fraser- spoke of the.fal-lacy-of high'protection of. the sheltered industries;, of the need for re-adjusting, wages, and’also expectations of .profits, to meet the new conditions;‘of the foolishness; of'continuing to’raise big loans abroad;.-of;'the necessity for/lodking at things from the viewpoint.of the farmer; and of; the absurdity; of-.preaching the. “back 'to' the' land” serm.on unless'there were ' reasonable ' facilities' for helping' the man back .to thi land and keep)nig. him there. Mr. ■ Fraser' brought his remarks/ to: a- conclusion • by;' suggesting that possibly the 'time had arrjved' for a revision of' the principle -in the -’borough .of New. P-lymojitli of .unipiproved valuation, • and-an' adoption.'of--.the ..im,proved valuation system.■. Mr. Benoni White -said-the only .solution' of , the . present difficulties was -to get men back, on to' the land. ' There were ,now only 40 men in 1 the ’ country: to keep themselves- and also -60 . men 'in town.' Closer, settlement ■ should be .the aim, said Mr. White; aiid' he proceeded to refer with satisfaction- to the chaih--bcr’s encouragement. of the boys’ andgirls’ agricultural .clubs’ movement. Had the movement been undertaken. 30- to 35

years ago, he said, the country;would not '-be to-day in the quandary/it was to-day. '

THE FARMER’S VIEWPOINT.

Mr. W. J. Freeth, of Pukearuhe, expressed appreciation at'the; opportunity afforded of meeting men of commercial interests who took such a keen-interest in the. fdrmer of the backbjocks.’;. The farmer was certainly .having 'a very strenuous time, but; to his . mind the problem, was not being tackled in the right way. He recognised, that; the present economic position might, cause > temporary baulk to-.young men-going on the land, but he could: Still see a great future for the young man who went on the land. As one who had lived through it, he realised that ‘ living against nature was a compensation in itself. They had a magnificent... lot of farmers in North Taranaki, but it was quite likely that a lot of- those, farmers would not be on their'farms in twelve months’ time unless finance was readily available. That he considered was the problem, they had to tackle. ■ These farmers must have assistance; to tide them over, and unless it were tackled they cojild neither expect to' others to go on the land or to keep on the land those at present there. It was remarkable how men ;could ipake good on the land. He gave instances of. the manner in which men had increased their production after starting with practically nothing, so that at present they could carry-oh with butterfat at Is pel* round.. Farmers must modify their expenditure and;live within their incomes. -.' - ~ ...