PROCESS OF DEFLATION

Taranaki Daily News, 17 June 1932, Page 6

PROCESS OF DEFLATION

POLICY OF EXTREME DANGER DOWNWARD TREND NOT FINISHED. RAISING OF EXCHANGE URGED, PROFESSOR BELSHAW’S OPINION. By Telegraph.—Press Association. Auckland, June 16- . Declaring that the process of economic deflation in New Zealand is still. far from complete and that as a policy it is fraught with extreme danger, Dr. H. Belshaw, Professor of Economics at Auckland University, and a member of the economists? committee, in addressing the Economic Society, urged that the exchange rate should be raised to not less than 30 per cent, and maintained at that level until overseas prices became more stable.

In emphasising the gap which still existed between export prices and internal prices, Professor Belshaw said that on the basis of 1928 the continuance of deflation would require further reductions in award wages of 30 per cent., and in interest and rent of 20 per cent. Nevertheless the burden of fixed charges and taxes would still remain unduly heavy, and the continued fall in internal prices would result in the persistence of low profits, or no profits, and heavy unemployment. Further, the Government’s adjustable expenditure would require to be reduced from £14,000,000 to £4,000,000. Clearly the Government was faced with an impossible task in balancing the Budget at such a level of national income. It would be unwise to expect relief from a rise in export prices. He added that he expected the exchange rate to go up when the pool was abolished, and .suggested that an exchange control board be set up as a preliminary to establishing a central bank.