A STABILISED INCOME

Timaru Herald, Volume CXLV, Issue 21088, 14 July 1938, Page 9

A STABILISED INCOME

Factors In Farming Economics Sliding Interest Scale I Suggested WELLINGTON, July 12. “A stabilised price undoubtedly has a considerable appeal; but stabilised income is more Important really to farmers,” said Mr W. W. Mulholland, in his address to the New Zealand Farmers’ Union. “In the consideration of a stabilised income two essential factors are costs and a reserve fund. Under the guaranteed price scheme a reserve fund was to have been established by the marketing organisation, and from it was to have been paid out in lean years the money required to maintain the price at a reasonable level. It would be just as effective in stabilising the farmers’ position, if he himself held his share in the reserve fund. "If, in addition, the rate of Interest were arranged on a sliding scale connected in some way with the farmer’s returns, the stabilising effect would be greatly enhanced. If, say, the interest rate fluctuated between 3 and 6 per cent., according to a farm price index or according to the price of the major commodity produced on the farm, it would not only tend to stabilise the farmers’ income, but would greatly improve the security of the mortgagee. I am not suggesting that this should be brought about by a Parliamentary enactment, but our more important State and private lending Institutions should investigate this aspect and could well make it a feature of their usual mortgage contracts. “But helpful though such a policy would be, it would not insulate New Zealand from the effects of a world fall in prices. The most effective actions to meet that event should be taken during the period of prosperity. To a considerable extent the height of the boom determines the depth of the succeeding slump. “At the moment, unfortunately, the Government’s general policy is tending to increase the boom effects of the present return to prosperity, when the wiser course would rather have been to have followed a course that would have tended to check too rapidly rising prices and costs and too free spending. The repayment of overseas loans has a deflationaray tendency and the making of the repayments which have been made was a wise and correct action on the part of the Government in the circumstances. Unfortunately, its effects have been neutralised by the internal devaluation of the New Zealand pound, by Government spending and artificial costs which have caused a tremendous flow of imports notwithstanding the using of some of our overseas funds for repayment purposes. “Early adjustment of costs to the economic conditions prevailing, particularly taking full cognisance of the conditions ruling in the export industries is one of the really effective actions that can be taken to prevent a fall in overseas prices having disastrous consequences within the Dominion. As reasonable flexibility in wage rates is an important factor in making the necessary adjustments possible, the recent declaration by a majority of the Second Court of Arbitration which seemed to mean that the Court was not concerned with the economic conditions prevailing when fixing wage rates was very disturbing.”