Wairarapa Times-Age TUESDAY, AUGUST 1, 1939. GOOD MANAGEMENT NEEDED.

Wairarapa Times-Age, 1 August 1939, Page 6

Wairarapa Times-Age TUESDAY, AUGUST 1, 1939. GOOD MANAGEMENT NEEDED.

A I L who have g-iven any attention and thought to the position A Ae atvare that the Dominion is faced by sermus hnaneia.l difficulties, both external and internal, ! ’ nd as Xanee/wm be awaited with corresponding XV'md bl without anxiety. The policy ol the prose I Govermoenl hitherto hus been one ot possible in part bv heavv taxation and for the rest I)} , n ‘ free use of he resources available from the expansion 0 cie t miu'di Ae a-ency of the Reserve Bank. The country has depleted its capital reserves and is now plainly under the necessity of adjusting its affairs on the basis ol a much 11101 e modest level of public expenditure.

The Government has been urged by the Reserve Bank to avoid any further recourse to that ms itution for financial accommodation and to limit expend l Hire to such •1 sum as can be raised by taxation, m addition o what can be borrowed from the public. .A great deal must c epend I upoi whether this wise and timely advice is or is not <t o led and acted upon The position 1o he met and dealt \\ ith has Inu accentuated by a fall in returns from exports ol over £7ninn 1938-3!) as compared with the preceding year, bu has been developing over several years, in 1935-36 and 1.)36-.x, the Dominion’s excess of. exports over imports exceeded only Slightly the sum of approximate}’ £l2m meet debt and other payments overseas. In 11 f ‘ of exports over imports fell to £G.9ni and in to undm £3.5111.

An exercise of foresight, and the institution in good tune of a less rigorous control over x imports than has now been imposed would have averted the depletion ol storing hinds ;111 | might have made il possible to add something to these funds even, during the last two years. Instead, however, the level of imports was allowed to rise to an allogether unreasonable. height. Although during the five-year period iron l 1J34 Io 193 G inclusive, Hie annual value of imports rose Irom £-4.7111 lo £37.4m the average per annum for the period was slight 15 under £29.2111. In the twelve months to March, 1937, however, the value of imports rose to £47.6m, in 1937-38 it was £oBm and in 1938-39, in spite, of import restrictions having been in. force for several months, it was £54.4m.

Willi the. excess of exports al its present low level, a, considerable continuing reduction of imports becomes an essential condition of national solvency and ol ability to meet ()11l - liabilities in London. To the sum of approximately Elm that was already needed annually to meet debt and other pavments in London, there is now to be added a I nrt her amount of some £3tm per annum called for under the conversion amt redemption" operation now being arranged. Leaving onto: account further debt adjustment operations in London that will claim attention in Hie near future, Hie Dominion thus needs a clear animal balance of exports oyer imports amounting to £]slm in order that its overseas liabilities may be met.

At a direct view, and taking account of the healing of this heavv demand on the internal finances of Hie Dominion, the state' of affairs thus disclosed will need very careful handling. Apart from the question of external liabilities, the Government, as its policy has taken shape, is laced by internal demands which will not easily be met. particularly in view of the verv necessarv limitations now imposed on the expansion, of credit.

A considerable reduction of the present heavy expenditure on public works is one ol the things indicated, in these conditions, as inevitable. A tapering off in public, works and in other forms of subsidised work may. however, raise in serious shape tin 1 question of unemployment.

One section of the credit position which needs clarification is that of the State housing enterprise. .Advances by the Reserve Bank to lhe State at the end of March last for other pul-poses than those of the Primary Products Marketing DeI)'i rl 111c111 «111h)11111 (*(I 1(i Lll2. —iii. H 11 1 <ll sum. . Gi h wus on account of Ihe Government housing programme, the rest being for “general purposes.” In the extent to which they are being extinguished progressively by the recovery of rent payments, the housing credits should constitute a fund available for the continued tinam-ing of housing enterprise. The actual position reached should be made known.

Apart from um-eriainiy regarding lhe amount of, EG.Gm borrowed from tlw Reserve Bank for “other purposes,” lhe least satisfactory feature of the credit position is Hie existence of a coat inning deficit in the Primary Products Marketing Account. The Government should slate specifically its policy regarding this deficit.

The essential demand of lhe tola! situation evidently is that every! hi ng possible should he doin' Io stimulate and expand industrial product ion in the Dominion. This means amongst other things, setting lhe narrowest limits that are practicable to taxation. The Governmeni has incurred I rememlotis financial commitmenis, but il would be only 100 easy, by eoiitiniiing a high level of State ex pend it uro, so to handicap and penalise indirdrx- and proditclion as to dry up important sources of revenue and Io bring about u iieni ploy menl and serious monetary inflation. The Dominion is in a situation of difficulty from which it can escape only if its people are allowed and enabled to make unhampered' use of their productive energies. One of tin' most effective steps that could be taken to that end would be to afford some relief from the present almost overwhelming weight of tuxatiyu.