FINANCE AND TRADE

Wanganui Chronicle, Volume LXXXI, Issue 19058, 10 July 1924, Page 9

FINANCE AND TRADE

(By an Expert). [Special to “Chronicle."] MONEY AND MORTGAGES. New Zealand is to-uay the only country in the British Empire to be burdened with a moratorium, and after a currency of nearly ten years there are many people who consider that it should be continued for a further indefinite period, and those who advocate its extension base their opinions on the fact that the State Advances Office cannot lend more than £3500 to any one borrower, and that many men are nesting on high-priced land, which they will be unable to hold when the moratorium is ended. It is a well-known fact that many farms throughout the Dominion have been abandoned,- and some are deteriorating through not being farmed. The danger of the present situation was foreseen many years ago, and it is interesting to recall the fact that at the annual meeting of shareholders of the Bank of New Zealand, held on June 21, 1907, before there was any notion of a great war, with its far-reaching disturbances, the then chairman of the bank (now Sir Harold Beauchamp), in his address, after referring to the high prices ruling for our primary products, said: “The high prices have* stimulated enormously the demand for farm lands. Broad acres command very big values, which undoubtedly are based" on the figures now ruling for produce, and £4O per acre, may not, in the opinion of the farmer, be excessive under existing conditions, but I would emphasise the fact that such a valuation leaves

no room for an appreciable fall in the price of the produce of such lands. In the light of past experience we must contemplate such a contingency, and if this occurs to the extent of say, 20 to 25 per cent. ,jn the values of produce, it would seriously affect and perhaps financially embarrass many who have bought agricultural land at fancy prices.'' The very effects predicted seventeen years ago are being experienced now, and it is doubtful whether all the predictions and warnings, and there have been many of them during the past few years, could have changed the course of events. The cheap money scheme of the Government made that inevitable. It should be stated here that the expression “Government" does not refer to any particular Cabinet. The State Advances Offices pegged down the interest rate to 5 per cent., and one per cent, was added as a sinking fund, but the effective rate was 5 per cent. The mistake was made in tying up the interest rate with red tape. Credit, like butter, is transferable, and Hike commodities it can become scarce |or plentiful. It depends upon the savjings of the people, whether the volume of capital at any given time is large or small. The pegged down State rate set the pace for the private lender, and as all borrowers could not obtain their requirements from the State the private lenders had their share of the mortgages. The “cheap money ' inflated land values, and an impetus was given to this inflation by the fancy prices obtained for our primary products during the war. A recession in prices such as took place two or three years ago crippled hundreds, wrecked many co-operative concerns, and sent hundreds of farmers, big and small, into the Bankruptcy Court. The private lender has been thoroughly sickened and prefers lending to local bodies rather than to farmers. Borrowers have now to depend practically on the I State Advances Office, and this Department cannot help them to any exitent. Had the rate of interest been allowed to move in accordance with economic laws, speculation in land and the inflation of land values would have been checked by rising rates. One example of this was seen in connection with the trade slump of 1920-21. '_o pay for thei rexcessive imports merchants rushed to their bankers for accommodation, which they got, but the banks made them pay a stiff rate, stiff enough to force them into liquidating of stocks. Had the banks been foolish enough to keep the overdraft rate low liquidation would have been postponed. A pegged interest rate is not a good thing under any circumstances and we are not yet finished with the evils arising from it. The discharged soldiers have had their turn, and the workers who are borrowing now to pay fancy prices for house building will be the next to suffer and the State will eventually lose a lot of money. FROZEN MEAT TRADE. The freezing companies have closed down for the season, which has turned out a shade better in some respects than in the last season. There was some delay at the opening owing to stock not being fit, but on the whole there was an increase in th? export of mutton and lamb. For the period from November to May, both months inclusive, there was an increase of 113,000 in the number of mutton carcase; exported as compared with the exports for the corresponding period of the previous season, and the lamb exports show an increase of 125,000 carcases. The beef shipments, however, were less by 79,000 quarters. The increase in mutton and lamb, though satisfactory, could scarcely have made much material difference to the turnover of the many companies. It can be said that prices generally have been satisfactory, at all events the producers have received in many case above London parity, for many of the companies desirous of keeping their plants in operation have been tempted to pay just a little more than the fair price. There is necessarily a vast amount of risk in the business where the buyer has to wait any period from four to five months from the time of stock until the carcase is marketed, and it is not surprising that at times losses are heavy, and at others profits are large. The industry in New Zealand is suffering not from any slump in values, but from a shortage in the supply of fat stock. It would, however, be more correct to say that the supply of freezing machinery and plant, particularly in the North Island, is in excess of requirements. In the course of two or three months the balance-sheets of freezing companies will be issued and it will then be seen, and it is to be hoped realised, that something must be done to reduce the ■ number of freezing plants. Of course it is well-known that a proposal to consolidate all the freezing works in the Dominion under one control is being considered, but there is little hope of success with this scheme. It practically means nationalisation, whatever fancy name the promoters may give it, and this country dare not attempt nationalisation. It is very probable that there will be a substantial increase in flocks this year, and therefore, next season should see a gratifying expansion in the exports of mutton and lamb. At the same time sheep farmers must look for a lower range of values for the increased output will tend in that direction. The London meat market is dominated by chilled beef from the Argentine, and the fact that the Continent is taking frozen beef more freely affords no assistance for the class of beef exported to the Continent is of the lowest quality—Argentine beef cattle are divided into chillers, freezers, and “Continental" quality. Britian will get the best, and we must compete with this best.