DAIRYING

Waikato Independent, Volume XXX, Issue 2310, 13 March 1930, Page 5

DAIRYING

; THE ECONOMIC ASPECT. EFFECT OF OVERTAXATION As a result of representations made to him by the Waikato Independent, Mr F. H. Anderson, Chairman oi" the Cambridge Co-operative Dairy Co., Ltd., a gentleman recognised as one of the best-informed men in South Auckland with respect to the dairying industry, has supplied us with the following original article, which we» Lave much pleasure in presenting to our readers for their careful perusal and consideration. Falling Prices. At the present time, when we are apparently entering upon a period of falling price levels for the primary exports of New Zealand, it is necessary that the primary producers and the •community at large should take stock -of the effect this will have on the Dominion as a whole. I can well remember, ten years ago when the burden of war debt and other annual charges arising from the war was weighing heavily on the finances of the Dominion, the appeal was reiterated by every Minister of the Crown to the primary producers to increase their production. How well the primary producers have responded can be instanced, so far as the Auckland Province is concerned, iby an export increase in butter alone of over 400 per cent during that period. It is unnecessary to labour the point as to what extent that and other primary production increases have benefited the community at large and the State. Increased Cost of Production. During each year of that period the primary producers of the Dominion have found that their increased turnover has been accompanied by an everincreasing cost of production, until they have reached the point where, I venture to assert, further increased production will not prove a solatium in the face of lower prices for then- exports.

The remedy for these increased costs is not within the sphere of the primary producers (no section of the community has got to be so careful, with its expenditure), and if they are to receive no assistance from the Government of the day and the business community in decreasing these costs, farming generally will receive a set-back which will have a boomerang effect on -those levying tribute on the industry.^ This article is written with the idea of reviewing the main factors which are a burden on the farnving community and on the dairying industry (which is of paramount importance to ihOj, Auckland Province in particular) and, as it is written without political bias, should receive the open-minded consideration of farmers and the business community which the subject deserves.

Burden of Taxation. During the past-war years successive Governments have made little attempt to call a halt in public expenditure, but on the contrary have elected to jrive way to electoral pressure, as instanced by the expenditure on social services provided by the State having increased from two millions in 1914 to Bis millions in 1928. for a similar reason the tevenue raised by indirect taxation has periodically increased, until at the present time the State is collecting two and a-half times as much by that means as by direct taxation. Indirect taxa'tion by way of customs duties obviously raises not only the ■cost of imported goods, but also the cost of the products of our protected secondary industries, the most immediate effect being on the cost of living. Passing It On.

"..' i - Business and professional men pass on the effect of this form of taxation by increasing the price of the goods that they sell, or the services they render, and in this passing on the wage- - earners of the Dominion are affected; but as the majority of the wage-earn-ers have been protected from these increased costs by the awards of ..the Arbitration Court regulating wages to eome extent in accordance with the movements in the cost of living, the Dominion weighted average wages for till industrial groups has increased from the index of 1000 in 1913 to 1760 in 1928. Obviously the increased cost of living is passed on by each section of the community to the other in increased charges for all commodities. If the farming community were selling on the local market they would be able to load the price of their products with the extra costs passed on to them, but unfortunately they are not in that happy position, having to accept the level of prices of the world's overseas markets. Commercial interests and tradesmen, however much they dislike increased direct or indirect taxation, increased award rates of wages and increased local government rates for city •and town development, nre in the fortunate position of being able to pass all these on—truly an extraordinary

state of affairs in a country like New Zealand, which has every natural advantage for the development, of all branches of agriculture. Protecting the Farmers.

Within the last year or two agriculture in Britain has been assisted by the State by relief from the entire burden of local taxation. Australian dairymen have counter-balanced their high costs of production (caused by protection) by the introduction of the Patterson scheme, and American farmers have been assisted by protection to the utmost limit. Yet in New Zealand no honest attempt is being made to legislate for the economic development of the primary industries on which the prosperity of the country absolutely depends. Interesting Data. To examine the ability of the primary producers to pay the increased costs of production I propose to review some of the facts brought out by a survey of dairy farming in Auckland and Taranaki Provinces conducted by Mr E. J. Fawcett, M.A. (Cambridge), Government Farm Economist during the years 1927-28. This investigation was made from an examination of the working of 206 farms in the most productive counties in these Provinces, and one of the objects of the survey was "to establish tentatively a standard labour return founded on the average farm turnover, so that an indication may be given of the earning-valuc of land under different conditions." As the data compiled by the Farm Economist was derived from such a wide field, and as it has been published in a Government bulletin, it should be authentic enough to base certain conclusions on. In the report dealing with these 206 farms, very extensive analysis has been made of production, costs, etc., the subject being handled by way of seven groups on a buttcrfat per acre range. The average buttcrfat per acre over the whole is 1041bs per acre, but, as it is unfair to take that figure to form conclusions on, I purpose taking the figures of the third group, which contains 47 farms giving a buttcrfat average of llllbs to 1301bs fat per acre. On a 100-acre farm basis, milking 44 cows, income returns at 1/4 per lb butterfat nett to the farmer average £BOO, plus pigs, a total of £B6O, a questionable addition of sales of surplus stock bring the total up to £BBB. Allowing for maintenance at £2Ol, interest at ,7 per cent on capital invested (land/and stock), a balance of £3OB avail able for labour reward. <A*W"

An. analysis of these figures shows .that the land farmed has been taken at a capital value of £44 per acre (a valuation that should be a fair one and not subject to criticism), and that the labour reward per unit of labour (taking 2.4 units as the average on such a farm) is £l2O per annum or £2 6/- per week.

To substantiate these figures as fairly taken from the report of the Government Farm Economist, I give further data compiled by him from a group of 50 farms of an average area of 57 acres, averaging 1251bs of butterfat per acre and described by him as "all of high-production country." After allowing for interest on capital at £43 per acre, the total labour reward is given as £l7B 10/- or £3 8/- per week for one unit of labour attending to a 57-acre farm and milking 25 cows. Dealing firstly with the land values given in these two instances, I desire briefly to assert that good dairying land cannot be brought into sufficient fertility to produce the butterfat given above and loaded with improvements at present-day costs at any figure under these statec].

The second point is the labour reward to the farmer, and it must be apparent that the weekly reward shown above is neither commensurate with the skilled services entailed, the risks attached to the business, nor with the standard of living claimed for other sections of the community.

In concluding my references to the Farm Economist's survey, I desire to quote two very pertinent remarks in it. Dealing with the question of developmeat of land he states: "It is apparent that it is the portion of interest surplus which is left after mortgage interest is paid which must be relied upon for work of this nature." And further: "In many instances the requisite capital is provided from money which should be devoted to the comfort of the family; in eases such as these the credit for increased fertility is due to the efforts of the combined family." The final point I desire to deal with in cost of production is the cost of replacement of daily cattle. The Farm Economist has taken the figure at 21 per cent per annum over the 206 farms, but as he has not dealt with the subject conclusively he adds: "More accurate information is to be collected on this phase of management in the future."

Experienced farmers will bear mo out that the percentage is not very wide of the mark, and that it has for the major part been brought about by

the very fact that, with a view to increasing production, methods of more intense farming have had to be adopted. Deductions. In conclusion, I desire to assert that there is very little wrong with our primary industries within themselves, and that the remedy for their economic development lies along the lines of an alteration in the incidence of taxation, a decrease in the cost of living, and a consequent lowering of the cost of production. I do not intend to deal with the application of the remedy—that must perforce remain very much in the hands of the legislature of the country —but I do stress this much: that a great portion of the burdens arising from taxation can be lifted from the shoulders of the primary producers of the country, with an ultimate advantake to both commercial interests and wage-earners of the country through increased exports and prosperity derived from the development of land.