GUARANTEED PRICES

Taranaki Daily News, 20 April 1935, Page 9

GUARANTEED PRICES

NO RELIEF TO PRODUCER ' LABOUR’S SCHEME CONDEMNED. OBJECTIONS OF MR. W. J. POLSON. INFLATION OR MORE TAXATION. The proposal of the Labour Party to pay farmers a guaranteed payable price for their produce as a means of extricating them from their financial difficulties was criticised by Mr. W. J. Polson, M.P., when he was addressing the Okaiawa Farmers’ Union branch on Wednesday. Many farmers had an idea that it was possible to restore prosperity by guaranteed prices without this having any detrimental effect on the community, he said. If this was so he would support it whole-heartedly, but he could not see anything in the suggestion. One road was by means of inflation, but there was 25 per cent, inflation already and this would haye to be ever so much higher if it was to be of benefit. The other road was by taxation. Taking tjie case of inflation Mr. Polson adopted the figures of Is per lb for butter and wool (and 6d for meat as a.;, payable price for the New Zealand farmer, and the London prices as 6d,' 6d and 3d respectively. This would leave a* difference of 6d to be made up in regard to the first two and 3d in regard to meat, so that anything less than a big increase on London prices would be useless. If the Government bought 6d worth of exchange in London and paid the farmer Is it would amount to 100 per cent, inflation, and if •it did this it would Lave to sell Is to the importer for 6d. Mr. Poison said he understood the plan was to guarantee a special price to each form of product. ...... SEVERAL OBJECTIONS. Several objections to the scheme were outlined by Mr. Polson, who said the first was that it would cause a formidable rise in the rate of exchange. Secondly there would be a fluctuation of exchange, since New Zealand prices would be stable but the London prices would fluctuate with the market. This would cause great uncertainty and would damage the import trade. The national Budget would become a nightmare to any treasurer because of the high and fluctuating cost of transmitting money to London and the .fluctuations of imports and .tariff revenue resulting from the fluctuating cost of exchange; The present rata of exchange maintained the stability 'of internal prices!,, and. thus might be said to be the proper rate at which, to equate New Zealand currency with sterling. Further increases would be inflationary and dangerous. If Labour intended to sell exchange at parity for some purposes as was suggested it would Aiean a corresponding increase® in the cost of exchange for other imports and thus involve serious discrimination between sections of producers. A further objection was that a guaranteed price removed the incentive to change the direction of production in response to changes in demand, all prices being ostensibly guaranteed ,to cover cost. A man might be growing cabbages and the public would turn to cauliflowers, but the market gardener would still go on producing cabbages be- * cause he had been guaranteed a price. ■ y GLUTTED MARKETS. ' ■ It would also. cause an extension of glutted markets, leading -to a fall in prices which would increase the cost of the guarantee and pressure from abroad to put a restriction on production. The inefficient producer would be retained at the cost of the efficient because the latter’s output would help to depress prices' further. The task of determining what cost of production should be covered by the guaranteed price would be so "complicated as to be impossible. How could all the prices for the various grades of wool be fixed? asked Mr. Polson. . The final objection was that the inflation Created would increase costs and cause great hardship on. poor people. : Mr. Polson proceeded to deal with taxation—the alternative means. He said he understood the Labour plan was to reduce exchange to parity and provide a guarantee from taxation. Mr. Savage had frankly admitted he would tax those who had mohey to pay for those who had not. Last year the sterling value of New Zealand exports was £37,500,000 and the New Zealand value £47,000,000. As the New Zealand prices were clearly too low to meet obligations they would require to be inflated. An inflation' of 50 per cent, would mean increasing the amount to £70,000,000 in New Zealand money, and of this £33,000,000 would have to be found from extra taxation. If prices were not raised at all £9,500,000 would have to be raised in extra taxation. The present taxation from all sources was £17,000,000 and there was a ■protest from all sides that this was too high. A further increase was unthinkable. It would have to be trebled under guaranteed prices, and it was evident . either alternative of taxation or inflation was practicable. Mr. Polson said he was not going to. al- . low the primary producers to be led intq this false belief.