Thames Star FRIDAY, NOVEMBER 18, 1938. TENDING TOWARD INFLATION.

Thames Star, Volume LXVI, Issue 20466, 18 November 1938, Page 2

Thames Star

FRIDAY, NOVEMBER 18, 1938. TENDING TOWARD INFLATION.

"With mane* towards nona; with charity for all; with firmness In ths right, as God gives us to sse the right. v —Lincoln.

Basing ihis opinion on two obvious facts, the decline in New Zealand's sterling exchange and the

continued flow of imports in excess of the current means of payment, Mr. H. V. Hudson, editor of the Round Table, has expressed anxiety about the risk of inflation in New Zealand. Now Mr. SaVage has replied with the generalisation that "currency will be based on NeAv Zealand's production"; he has not answered Mr. Hodson's points at all, nor has he indicated any prompt action to correct the financial drift toward inflation beyond a statement that plans are in hand for an increase in New Zealand's production. Meanwhile inflationary influences are becoming more marked week by week and the Reserve Bank returns have become a forbidding national barometer. The figures on November 7 haKe shown that in a year sterling exchange held by the Reserve Bank has declined from £17,148,967 to £6,633,031, while the proportion of reserve to notes and other demand liabilities has declined from 86.083 to 39.733 per cent. In the last week the reserve declined by nearly £1,100,000. Meanwhile the bank's advances to the State, other than for the Primary Products Marketing Department, have increased by £5,000,000 in eight weeks. The total is now £8,050,000; a year ago it was £700,000. At the end of last March the Government was so well supplied with cash that it was able to pay off the bank's advances for housing and show nothing owinsr excent for produce marketing. If this drift continues at the present rate the Government's opportunity to disclose its insulaM/nn proposals will be granted much earlier than anvbodv expected. Tt will be for Mr. Savase f 0 show how with a reduction in New Zealand's imports—and that reduction is urgent and imperative—the standard of living ran be maintained at the leVel existing during recent times. Last week the Prime Minister remarked that it should be possible to arrange for an exchange of goods and services without tariffs at all, in other words by barter agreements. Since then, however, he has placed all his emphasis on an increase in internal production, and has announced that a special committee is at work to devise means of expanding New Zealand manufacturing industries, which will entail a further increase in tariffs.