FINANCE

Observer, Volume XLI, Issue 13, 27 November 1920, Page 21

FINANCE

T/ffOOL growers and others now realise the difference between having one wealthy, generous and accommodating customer like the British Government, and a vast number of impoverished customers. The wool sale at Ohristchurch on November 15th settled the price of wool. Very little fine wool is produced in the North Island, for crossbred sheep are mainly pastured here. The Imperial Commandeer price for medium crossbred wool was 15d. per lb.. and the price obtained at Christchurch .last week was 6M. Der lb., or less than half. The Christchurch sale has sent •n-owers and brokers into something like a panic, and all the North Island wool sales have been cancelled. The next wool sale will again be d at Christchurch on December Bth.

Christchureh has silso indicated the values of sheepskins, and while a drop was anticipated from commandeered values, the prices actually realised were much below expectations. This is easily explained. There is a disposition to take an ■ultra-optimistic view, and to believe that doing so helps the i-itv-a-tion. Is it not better to try and get at a correct estimate of the prospects than to fool with so called optimism for the sake of appearance and a little cheap advertising. V'ool and sheepskins are down, and -vhile we may all hope that there will be a recovery, mere hope will not help us. Let us face the facts and meet the position, which is the only si.re wav Of overcoming difficulties.

It can be stated Avith some dtflniteness that crossbred avool earmot improve in value for some tine to come. It is quite true that vory fine tAveeds are made from the roaJ.se wool, but unless such fabrics are offered at very low prices, '.here cannot be any Avidesp'read demand for them, and Avithoiit such a demand values cannot improve. In theoi'Sing on the prospects of wool, the basic fact that the majority of the consumers are impoverished must not be overlooked. The principal customers for avool are the peoples of Europe and North America, and the people of Continental Europe are more or less in a state of poverty. They cannot pay high prices, and they cannot buy at all unless they are given extended credit.

Wool that is stored is a menace to an improvement in values, and the Aviseheads in the wool trade iecommeiid storing and holding the wool. Bankers and brokers are to advance against this stored wool under a Government guarantee, md it all sound so nice and easy. In view of the Christen urch prices, advances could not exceed 4d. or 4£d., or, say. two-thirds of the apparent value of the wool. The grower or holder of the wool would then have to add to the cost of the wool the interest on this advance, insurance, storage and handling charges, which must vary according to the length of time the wool is held. Will tho wool make more +*hau 6£d- or ?d. s * x cr twelve months hence? If not, then there is going to be further loss to the grower. It is reasonable # to suppose that some of the Insurance Companies will have to pay for wool that has gone up in smoke, because the moral hazard will be present.

With wool and sheepskins depressed, and the outlook for frozen meat nnsatisfactory, there should be an immediate decline in the prices of mutton and lamb, but particularly the former, in butchers' shops. If

the reduction in price does not come about very soon the Board of Trade should institute inquiries. Lamb is expected to sell fairly well, for it is believed that considerable quantities can be placed in the United States before the new Republican President takes charge of affairs, when an embargo is likely to be placed on wool and meat in the interest of the sheep men of the United States. Freezing companies are reported to be" offering 10d. per lb. for fat lambs, and 6d. per lb. for fat wethers in the Wairarapa, which gives some indication of the values.

Many of the retail shops in Wellington are holding sales and cutting prices by about 15 per cent. ; at any rate, that is the announcement in the papers. Drapers and clothiers appear to bo holding continuous sales, and various factors have contributed to this. The season so far has been execrable, cold and wet weather has been experienced for some months past, and the pretty light cotton dresses that one usually sees at this time of the year are conspicuous by their absence. Then there is the fall in the prices of raw wool, cotton, and silk, and attacks on profiteers by the Board of Trade, all of which have helped to shake big prices.

The principal cause for the drop in values of merchandise is the faot that consumers have struck. The people are only buying what is absolutely necessary, and trading returns are shrinking. It would not be far from the truth to say that every establishment in New Zealand dealing in merchandise is doing a smaller turnover now than a year ago. Comparatively little stuff is going into consumption, while goods are pouring into New Zealand. Many of the stores of wholesale firms are bulging with goods, while the bonded stores throughout the Dominion are chock a block with goods. Indent agents are now finding it difficult to get orders, and the belief that was widely held a few months ago that anything will sell, provided prompt delivery can be given, has given place to anxiety to get rid of goods with the least possible loss. Some traders are holding, hoping that the prospects will improve, but the banks are discouraging this, and they are also discouraging heavy imports. Merchants and traders are being taught some very useful lessons in banking and finance, and a good many are beginning to realise that entertaining an optimistic opinion does not make the outlook any better.

We need have no fear of any sensational changes until the New Year is two or three months old. About March next the first indications of unemployment or working fewer hours will be apparent. Slackness has already shown itself in Australia, for it is reported that many of the boot factories in Sydney ai'e curtailing their staffs or workins: short time. Unemployment will quicken the nace towards normality, and straighten out the views of workers, which views are just now at variance with economic laws. In the production of goods the cost of labour is the principal item, and until there is some reduction in this cost there" can be no substantial fall in prices. Unemployment will also, have the effect of stimulating and galvanising the worker, and the "go-slow" method of Avorking will bo forgotten.

Freights are falling* everywhere but in New Zealand—that is because the business people of the Dominion are impotent. Their way of meeting a .situation is to deputationisc the unfortunate Government, and look to the Government to help them out or fight their", battles,; while they scoop in all the profits they can. In other countries the business people beg the Government to keep off the grass, for the reason that Governments and Government officials fire inherently incompetent to deal with business affairs. We know that in New Zealand,,but we have not the

courage or the disposition or the energy to tell the Government to attend to its own business of governing the country. Freights are falling, but they will not fall in New Zealand unless a Japanese or an American line enters into competition with the powerful P. and O. Company, which now has New Zealand under its huge thumb.