The Timaru Herald MONDAY, AUGUST 26, 1929. MOVING TRADE BALANCE.

Timaru Herald, Volume CXXV, Issue 18353, 26 August 1929, Page 8

The Timaru Herald MONDAY, AUGUST 26, 1929. MOVING TRADE BALANCE.

Hatisfaet ion lias lipen <>.\|ii essotl ill political circles that the revenue for the lii-nt quarter of the current financial year shows a substantial increase compared with the corresponding period last year. Revenue drawn from Customs duties, for instance, has been swelled by an increase of something like £271,000. From the point of view of the State treasury, this increase is very timely in view of the need for funds to carry ott in the early months of the financial year. But a closer examination of the causes that yielded the increased Customs revenue and of the movement of the Dominion’s trade balance, rather discounts the optimism created by the buoyant revenue. Trade returns just issued by the Customs Department show a substantial increase in importation. Normally, imports exceed exports from June or July to November or December. This year exports* in June were exceptionally heavy while imports were abnormally low. The July returns, however, show a sharp contraction in exports amounting to £036,086, while imports showing an expansion for the month of £793,376, have reached the highest total since 1920. The record valuation of imports in July was £5,143,689 in 1920, but excluding that extraordinary* period which was followed, as everyone remembers, by such dire consequences, the present return shows a higher figure than that of July 1925, which was £4,326,039. The month’s contraction in exports has brought the total for the y r ear to date below that for last year, while the apparently favourable balance is now* nearly £3,000,000 less than that for the corresponding period of last year. The position is, however, substantially more favourable than in previous years, as appears in the following summary:

As will be seen from the above table, in the January-July period of 1925, the trade balance favoured the Dominion by £11,134,505. In the two following years, there was a substantial shrinkage in the excess of exports, but for the corresponding period in 1928, there was an excess of exports over imports of £16,439,217. Taking tHe first seven months of the current year, we find that exports compared with last year show a decline of £579,817, while imports have increased by £2,415,119. Here we have an explanation of the risingrevenue drawn into the Consolidated Fund, and in view of the bearing of importations upon the national Budget, through Customs duties, it is noteworthy that 'imports during the first four months of the current financial year exceeded by over two millions the corresponding total last year, showing an increase of nearly 17 per cent. Well-informed observers of the movement of the Dominion’s oversea trade in relation to the country’s national finance are saying, however, that the present trend of oversea business should be watched with the utmost care. There has been a big swing of the trade balance in an unfavourable direction. The position from the Dominion’s point of view is nearly three millions less favourable than at the close of the corresponding period last year. Comparative statistics showing the trend of the country’s oversea trade for twelve months ended July 31 emphasise the necessity for vigilance: 1927-28 1928-29 £ £ Exports .. 56,044,234 55,698,664 Imports ~ 43,814,422 47,301,385 It is obvious the overseas trade returns, in view of the country’s rapidly increasing debt obligations, need close attention since the unpleasant fact remains that the drift to leeway compared with the corresponding twelve months last year approximates three and three-quarter millions. THEN AND NOW. Although Parliament has not been very long in session, the Prime Minister has changed ground so frequently as to warrant the accusation that he wears a political coat of many colours. In the course of his speech on the Budget amendment submitted by the Leader of the Opposition, Sir Joseph Ward condemned the removal of the tax on farmers at the end of the war, and in justification of his criticism he alleged that “this class of the community has not been paying its fair share of the cost of the war.” Obviously the Leader of the ! United Party is trading on the! bad memories of the great bull, ' of the people. If the responsibility for providing an easy means of escape from war taxation is placed on the rmlitl shoulders, Sir Joseph Ward must carry the “big end of the stick.” It will be remembered that the present Prime Minister, as Minister of Finance in the National Cabinet, was entrusted

with the financial arrangements in connection with New Zealand's share ill the World War. To-day, the country owes something like £70,000,(.101)' to the people and instil at ions of New Zealand who responded to Sir Joseph Ward’s appeal for funds to discharge the Dominion’s tremendous obligations. It was Sir Joseph Ward who conceived flic extraordinary idea of “doing something” to entice investors to provide funds for war purposes by offering them exemption from income tax on their war bond investments. This policy prevailed, and it would be interesting to be informed just what, measure of relief was afforded (lie big financial institutions and the people who took up war bonds, and just how much that short-sighted policy has cost this country. During the course of the debate in the House of Representatives on the New Zealand War Purposes Loans Bill, Sir Joseph Ward solemnly argued that “the easiest way to raise a big loan is to make it as attractive as possible to the very big capitalists”; indeed, the Finance Minister in the National Cabinet declared that it was futile to talk of patriotism when a country ' needed millions. Nevertheless most people will agree that at a time when the nation is fighting for its life, extraordinary measures are warranted. Sir Joseph Ward’s proposals raised a perfect storm of criticism, but lie obstinately persisted in enacting exemption from income tax, which gave the 1 investors of millions relief from war taxation (which they had not asked for!), and a remunerative rate of interest. Meeting ,he insistent cry that the principle of 1 issuing war loans free of income tax was wrong, and made the measure a rich man’s gift, Sir : Joseph Ward said: “As a matter ! of fact, if interest on the loan ; was fixed at 5£ per cent., and ■ income tax charged, the net 1 result to the big investor would be a return of £3 8s fid for every ■ £IOO invested, and if the rate ' were 5 per cent., he would get i £3 3s 6d. There was nobody,” : Sir Joseph Ward added very sharply, “outside an institution I need not name, who would argue that the loan could be raised oil those terms.” At that very moment, however, there was somebody outside an institution he would not name, and that somebody was Mr Bonar Law , (Chancellor of the Exchequer). I Strangely enough Hir Joseph , Ward bluffed the House, although . almost simultaneously the Bri- . tish Chancellor of the Exchequer I raised a Victory War Loan of 5 * per cent., which although subject , to income tax, succeeded beyond 1 the wildest dreams of the * Imperial authorities —as much as a thousand millions being subscribed! In New Zealand, Sir [ Joseph Ward provided such* * amazingly generous conditions , for his war loan operations, that , the large financial institutions . and wealthy investors (payers of [ 7/6 in the £ income tax) virtu- , ally received £7 4s per cent, per , annum for their investments in ' Dominion war loans, while in the Homeland, the wealthy investor ! who took up the Victory War Loan bonds at 5 per cent., subject , to income tax, drew about £4 0s ( fid per cent, per annum. In New i Zealand, the Minister of Finance, I defending the issue of the New , Zealand War Purposes Loan at ' 4£ per cent, free of income tax, declared that “nobody outside an : institution he need not name ' would argue” that a loan could , be raised that was subject to income tax, but the British Chancellor of the Exchequer in announcing the Victory War | Loan at 5 per cent., subject to | income tax, reminded the Britisli ; investor that “he will invest on ’ better terms than have ever been granted in the past, and I venture to express the belief ou better terms than he will ever have again in the future.” In one case the Chancellor of the Exchequer retained the right to tax incomes derived from war loan investments; but in the other case, Sir Joseph Ward provided an easy means of escape for p yers of income tax for the full term of their loan bonds. In Britain the wealthy investor drew a net return of only £4 0s 9d per cent, per annum on war bond investments; in New Zealand, where Sir Joseph Ward directed war loan finance, the rich war bond investors virtually received, through escape from income tax, no less than £7 4s per cent. And to-day, the enormous sum of £70,000,000 is involved in the scheme, and is still owing to waxbond holders. For twelve to fourteen years, investors in New Zealand war bonds, under Sir Joseph Ward’s provision to give exemption from income tax, in the case of the richest ones, have been reaping a golden harvest without having to give a

moment’s though to increases in income taxes that have been imposed on the community from time to time to pay tbe cost of the Mar. Mho, then, has escaped carrying their full share?

Jan.-July. Exports. Imports. £ £ 1925 40,475,829 29,341,324 1926 32,909,529 28,194.133 1927 33,523,313 25,450,500 1928 41,071,193 24,581,976 1929 40,491,376 26,997,095