SHOULD WAGES BE REDUCED?

Wanganui Chronicle, Volume 74, Issue 111, 13 May 1931, Page 8

SHOULD WAGES BE REDUCED?

ARBITRATION COURT HEARING

MR BISHOP PRESENTS THE CASE FOR EMPLOYERS

REQUEST FOR A TWENTY PER CENT. REDUCTION

Changed economic conditions induced Parliament to pass legislation during last Session, empowering the Court of Arbitration to amend or alter the provisions relating to wages contained in awards or industrial agreements. Mr T. 0. Bishop, Secretary of the Employers’ Federation, yesterday made application to the Arbitration Couit under the provisions of the recent legislation, asking that Court to exercise its newly-acquired powers to bring about, a readjustment of wage rates to conform to the* changed economic conditions of the country. He submitted that a reduction of 20 per cent, in money rates of wages was essential. If such were made the result would be a reduction of all internal costs, and improvement of output, and a renewal of confidence throughout the whole of New Zealand’s industrial field.

HEARING COMMENCED

PROCEDURE TO BE FOLLOWED i [ Per Press Association. 1 WELLINGTON. May 12. The question of the issue of a general order with respect to wages was before the Arbitration Court this morning. Mr T. O. Bishop (s/rotary of the Employers’ Federation) appeared on behalf on the employers and said that he had with him Messrs W. J. Mountjoy, of the Wellington Employers’ Association, and A. S. Cookson, of the Otago Employers’ Association, instructed by the employers’ associations in their district. Mr J. .Roberts (secretary of the Alliance of Labour) appeared on behalf of the Waterside Workers’ Federation and the recent conference of trade unions. He was supported by Messrs J. McCombs, M.P. for Lyttelton W. T. Young (Wellington), and P. Warner (Lower Hutt), instructed by various unions. Messrs McCombs and Young also represented the New Zealand Trades and Labour Council. Representatives were also present on behalf of numerous unions in different districts. Miss Cossey, of Auckland, appeared on behalf of the women employees. Mr Bishop asked Mr Justice Frazer if he would indicate what proccaure would be followed. Mr Frazer said that the Court would after hearing the representations, decide what general order, if any, should be issued, and it would then be competent for the unions desiring exemption to file applications in their districts. These applications would be heard at a later date. If any general order were made the Court would certainly keep in mind the special circumstances of which it had knowledge in regard to certain industries, for instance, the flaxmill workers in the Manawatu district. It would be competent for the Court to grant exemption on its own motion where it thought fit. Mr Frazer said that when the question of a general order was previously before the Court a preliminary announcement had been made by the Court in which it had been shown what alteration there had been in the cost of living. It had been left to the parties to argue whether there should be an increase or a reduction of wages. The necessity for stating the cost of living figures had now gone because j they were regularly published. In the present case it could be taken that the > employers, by asking for a date to be fixed for hearing the parties, had initiated proceedings and it would be for their representatives to give grounds for seeking any wage reduction, to call evidence if desired, and to indicate the extent to which they considered the Court should make a reduction. The representatives of the workers would then have an opportunity to answer the case and raise any eounter-case. It would even be open for them to apply for an increase. General Order Questioned Mr Roberts questioned whether it was right for the Court to make a gen- | eral order w'hich would affect the industries in which the employers had no desire to apply for a reduction. Mr Frazer pointed out that it was not necessary for the employers to put the general order into effect unless they wished to do so. Mr Roberts: But it would be a terrible temptation. Mr Frazer, replying to further points, said that exemption where ’ granted would be retrospective. While • it would be necessary for applications ( to be filed in each district, it did not j follow that it would be necessary for the cases to be heard in each district | with respect to any one trade. He added that it would be possible for the Court’s attention to be drawn before a general order (if any) was made to the outstanding circumstances in anv industry, but it would not be possible a f that stage to hear any substantial case in support of an application for exemption. The Court could, in outstanding cases, act u.- its own motion. Mr F. Turley, representing the West Coast Sawmill Workers, said that he did not consider Mr Bishop had any authority to seek a reduction in wages in that industry, as the employers were not seeking such a reduction. Mr Frazer said that if the swamill employers did not wish that there be any reduction there were two course' open to them, either to ignore the general order or to join the employees in making a joint application for exception. Mr Young submitted that the Employers’ Federation had no authority to initiate proceedings, as it was not registered under the Arbitration Act Mr Frazer pointed out that the Federation had merely asked the Court, what date it proposed to fix for hearing. It was actually the duty of the Court to start the ball rolling. Consideration on preliminary po>o _- having been disposed of, Mr Bishop addressed the Court on behalf of the employers in respect of a general order. Mr Bishop’s Address. Mr Bishop salt/ that he appeared on behalf of the employers of New Zealand generally to submit reasons why the Court should exercise its power to

effect a reduction of wage rates under all awards, industrial agreements, and apprentice orders. He admitted that it might be stated a« a general rule of the system of awards that awards should not be altered during their currency. This rule, however, was by no means hard and fast and he quoted a i number of alterations ir. the Acts from 1914 to 1925 to prove his case. The specific point he wished to make was that there was ample precedent for the present legislation in that wages had previously been adjusted, both upwards and downwards, during tiie currency of awards. The fact that awards do no in themselves constitute contracts for service was recognised both by the Court and by Trade Unions, as certain clauses in shipping Acts proved. Recent legislation had extended the powers of the Court to amend its awards, but it had not affected in any way the rights of employers and -workers in regard to the making or termination of contracts of service. As a general policy the employers whom he represented, held that wages should be main tained on as high a level as was economically practicable. Referring to the economic position of New Zealand Mr Bishop pointed out that the Dominion was a small country and in great measure dependent upon other countries to absorb our surplus production and upon their production to supply our requirements. We were also dependent upon other countries for capital for development of our resources, for which wp had borrowed heavily, necessitating the payment of interest. Economic Stability. It followed that our economic position as a debtor nation was unsound if the total value of our exports did not exceed the sum of the value of our imports, plus payment of interest in any year or over a period of years. As compared with two years ago, our income from the sale of products had fallen by just on £18,000,000 and the fall had been greatest in the last few months. The hard, unpleasant fact which could not be avoided, was that for this current year the total value of our exports would be more than £20,000.000 less than it was for the year 1929. A reduction of such an amount in our income from exports must bring about a reduction in other directions also. The effect of such a drop was that the purchasing power of the farmers was less than 60 per cent, of what I it was in 1914. The foundation of the whole struc- ! ture of the trade and commerce of New Zealand was production from the land for export. The prosperity of all other industries depended upon the prosperity of the industries grouped together under the term “fanning.” Much had been done and was being done to increase the volume of farm production. Private employers had been forced to reduce the salaries of executive officers and staffs, the Government had followed the example as regards the public service, and there remained the necessity to adjust the labour costs of production and distribution by a reduction of wage rates. If the economic I equilibrium was not restored by adjusti ing the costs of commodities to meet I the reduced purchasing power of primary products, the volume of our exports would decrease rapidly and inevitably. The issue was plain, simple and unavoidable. Costs must be reduced in proportion to export prices, but fixed wage rates were holding costs. Wage costs must be reduced and to permit ' this monev rates of wages must be ad | justed. He submitted in conclusion that a reduction of 20 per cent, in our I monev rates of wages was essential. If such were made, the result would be ; a reduction of all internal costs, an j improvement of output, and a renewal ' of confidence throughout our whole in- | dustrial field. Dairy Expert’s Evidence. Mr Bishop said that he had arranged for Mr J. Fawcett, of the IDepartment of Agriculture, to give evidence purely as an expert witness. Mr Fawcett said that he had been asked to make a statement covering the economic position in the dairy industry. It was contended f hat conditions governing the dairy industry were applicable to all primary activities to a greater or lesser degree. The payout level fo r butter-fat in the present season represented a reduction of approximately 33 per cent, compared with the average of the previous eight seasons. • He dealt at length with the effect of ' the lowered price level upon the economic structure of *he dairy industry i as at present constituted. Mr ]* aweett stated that under the fixed maintenance and Labou r Bill every movement of one penny in the payout for butter-fat re- ■ presented a movement in interest surplus of £1,322.000, or equal to 6 per cent, on a capital of £22,200,000. Had • the payout for the 1930-31 season been , equal to the average over the previous ■ years and production remained at the ! 1929-30 standard, the gross income to farmers would have boon approximately . £22.500,000, and would have been used, > roughly, as follows: Maintenance, £6,- > 000,000; interest on borrowed money . and farmers 1 equity £9.000,000; wages and labour reward, £7,500,000. As it was, however, the farmers’ gross ini come would be approximately £15,000,- - 000. If it was assumed that £6,000,000 r must be earmarked as the minimum re- > quired to maintain production, then

£9,000,000 was available for all interest and labour, or if it was assumed that i the farmers’ equity was 50 per cent, of the total capital, then wages and labour were being maintained on interest on that equity. As the Court was on the point, of ad journing for lunch, Mr Frazer asked Mr Bishop how long he thought his case would take. Mr Bishop said that a great, deal depended upon the extent to which witnesses were cross-examined. However, allowing reasonable time for crossexamination, ho expected to conclude his case to-morrow night. He would be calling Messrs W. D. Hunt, H. D. Acland and possibly Jessup of the Meat Board. Mr Roberts indicated that he would require at least a two days’ adjournment for the adequate preparation of his reply. Mr Fraser said that if Mr Bishop’s case concluded to-morrow night, the Court would then adjourn till Monday. It was likely that the hearing would be concluded at the end of next week or on the following Monday. Afternoon Session. When the Arbitration Court resumed this afternoon, Mr Fawcett was crossexamined by Mr M.cCombs. He said that farmers’ interest charges were a bigger item than either maintenance or labour charges. Mr McCombs: Then surely the best help than can be given the farmer is to reduce interest charges? Witness: Yes. Either reduced interest charges or reduced capital, which, of course, will amount to the same thing. Witness agreed that a number of farmers would still be in difficulties even if they had no labour charges at all. Mr McCombs: Then your evidence is not much help to Mr Bishop. Mr Fawcett: As I said this morning, I am not here to help Mr Bishop or to help anybody else. Mr McCombs: I thought from your evidence that you were here to help Mr Bishop. (Laughter). Replying to Mr Roberts, Mr Fawcett said that so far as direct payments to farm workers were concerned, award rates did not affect the farmer, who would only benefit indirectly as the result of a general reduction in wages bringing down the cost of the goods which he had to buy. In reply to Mr Bloodworth, witness said that some farmers in New Zealand were producing at a loss and any reduction in thei r costs would operate to their benefit. To Mr Young, witness stated that the payment of interest on land which had been purchased at a high value, was a substantial charge on the farmers. Replying to Mr Monteith, Mr Fawcett said he would not be prepared today to pay for land the prices on which his figures given during the morning had been based. Those prices, however, were what had been paid for land. Mr Monteith: But they would not be paid to-day. Witness: They represent the money that has been put into the land. Mr Monteith: Ah, yes, but I could throw money into the gutter. Mr Bishop then called Mr W. ID. Hunt, who said in giving evidence that he was acting for the New Zealand Meat Producers Board and the Dairy Export Control Board. After emphasising the dependence of the Dominion upon primary products, he said that the proportion consumed locally and exported of the main lines, were approximately as follows: Percentage Consumed Ex. locally, ported. Wool 3 97 Butter 23 77 Cheese 6 94 Mutton 49 51 Lamb 93 Other meat, beef pork, etc. 77 23 Quality of Lambs. It would be seen, he said, that the Dominion depended for the maintenance of its overseas commercial and financial overseas relationships upon its dairy, wool and meat industries, and that in these lines the surplus exported was very much in excess of the quantity used for .local consumption. The lands of the Dominion varied very much in quality, climatic conditions and producing capacity. Some lands would produce much more cheaply than others. The richest lands could produce on a level of prices and costs that the poorer lands could not meet. It must be borne in mind, however, that the rich and high-producing land was only a small proportion of the country. Any increase in the country’s products must be brought about by a further improvement and development of ’he occupied second and third-class land, and by bringing into occupation and production lands of this type which were still in in an improved and non-producing con- ’ dition. The bi)ll< of the rich lands were already developed. Mr Hunt went on to quote the drop . in the prices of primary products, after which he summed up the position as follows: “Put shortly, as compared , with the 1913-14 season, the cheese pay. • out for 1930-31 has fallen 30 per cent., and the butter pay-out 84 per cent. As . compared with two years ago, the cheese pay out has fallen 48J per cent. I and the "butter pay-out 40 per cent. Compared with the average pay-outs for the four years ending with the 1928-29 season, the cheese pay-out has fallen 491 per cent, and the butter pay-out 364 per cent. If to-day’s values are taken instead of the estimated average ' for 1930-31, the fall is greater still and very much greater in the case of cheese. 1 “In lamb, the values on the farm in April, 1931, are 22 per cent, below • April, 1929, and 47 per cent, below the average of the four years’ Aprils from ‘ 1926 to 1929. 1 “In wether mutton farm values in April, 1931, are 40 per cent below April, 1914, 64 per cent, below April, 1929, and 60 per cent below the average of the four Aprils from 1926 to 1929. I “In ewe mutton, values in April, 1 1931, are less than one third of the value ruling in April, 1914, less than ’ one fourth the value that obtained in t April, 1929, and loss’ than one third the ! value that obtained for the average of ' the four Aprils from 1926 to 1929. “Tn crossbred wool, values to-day are 47 per cent below July, 1914, 6-1 A per ’ cent, below the average for the full year, 1928, and 61 per cent below the 1 average of the four years from 1925 to ’ 1928. i Cities Must Reduce Charges “From the foregoing it will be seen - that the farmers are to-day receiving - for their produce, prices on an average s very much below the prices they were f receiving before the war. The farmers - cannot get any more for their produce • than that obtainable in the world’s un- ) sheltered markets. What the farmers - sell for Home consumption is mostly 1 sold at prices fixed by export values.

The only course left open to them is to get their costs down. They are doing this every way they can. The cities and towns of the Dominion live by serving the country. They must help the country by reducing the cost of the services they render tuo country. The country has already reduced its charges to the vities for goods pro duced in the country for consumption in the cities. The cities must now respond by reducing their charges botn to the country and to their own inhabitants. If the cities do not get their costs down to meet the position, much of our second and third-class land must go out of occupation on the present lines, and either cease to be occupied at all or revert to a system of merely grazing the natural grasses. The result would be an enormous falling off in production and exports. This would probably result in failure to meet our overseas engagements ano would affect the exchange position and bring about a depreciated currency, which is in itself a reduction in salaries and wages and also in the value of savings.

“in my view we have only two alternatives. One is an immediate and drastic reduction in costs. If wo fail, to do this the other alternative will be forced upon us. That is a depreciation of currency which will reduce the purchasing power of all salaries and wages and also reduce the value of all savings. An immediate reduction in costs, which involves a reduction in salaries and wages, will have the effect of reducing costs to everybody, including the wage earners, and in the end the wage earners may not be any worse off. On the other hand, the history of depreciated currencies, which have been numerous since the war, shows that while everyone has suffered by the universal dislocation, the wage earners may not be any worse off. On the other hand, the history of depreciated currencies, which have been numerous since the war, shows that while everyone has suffered by the universal dislocation, the wage earners have suffered most and the farming community have suffered least. Wages and salaries have increased very much since 1914. Ic was necessary that it should be so. The inflation that took place decreased the purchasing power ot money wages, and salaries that were adequate on the general level of values that obtained in 1914 would be quite inadequate on the level of values that ruled subsequently. It must bo equally obvious that wages and salaries which production could carry on the level of values that obtained up to a year ago, cannot be carried on the level of values ruling to-day.” Replying to Mr Bishop, Mr Hunt said that in referring co depreciated currency he had meant to infur that this could bo caused by increased rates of exchange, in the same manner as had occurred in Argentina and Australia. Prices of Land Replying to Mr Roberts, witness said that the prices of land in recent years had been on a reasonable level. The effect of the wild-cat purchases in the 1918-19 period had been wiped out. He agreed that the interest rate was too high and considered that ic should fall. The history of slumps throughout tho world had shown that they almost invariably had been followed by a fall in average interest rates which, for instance, had recently fallen m tho United States and other countries. Ho believed that they had not fallen in New Zealand simply because the Government’s participation in borrowing on the market had had tho effect of artificially keeping interest rates up unnecessarily. The Court adjourned until to-morrow morning. CASE FOR EMPLOYERS NECESSITY FOR ADJUSTMENT COUNTRY’S INDEBTEDNESS STAGGERING TOTAL REVEALED WELLINGTON, May 12. “I appear on behalf of the employers of New Zealand generally to submit reasons why the court should exercise its power to effect a reduction of wage rates under all awards, industrial agreements and apprentice orders,’ stated Mr T. O. Bishop, secretary of the Employers’ Federation, in presenting his case to the Arbitration Court at Wellington to-day. “Throughout a period of nearly 40 years the adjustment of wages in New Zealand has depended upon the awards and decisions of the Court of Arbitration. Even in those industries which have not been directly subject to awards the court’s standards have been the most potent factor in w T age deter ruination. “The I.C. and A. act Goes not pro vide for the amendment of awards except for the purpose of remedying a defect or, in any other case, with the consent of all parties. It may therefore be fairly stated as a general rule of the system of awards that awards shall not be altered during their currency. However, this rule is by no means hard and fast as the following brief record of the years from 1914 to 1925 will show. “In 1914 the Regulation of Trade and Commerce Act, Section 25, gave power to suspend any industrial award or agreement, but not in respect of minimum rates of wages. In 1918 the War Legislation and Statutes Law Amendment Act, Section 18, gave power to amend the provisions of awards in respect of hours of employment and wages on application by any party to an award. In 1920 the War Legislation and Statutes Law Amendment Act of 1918 was modified by an amendment of the Arbitration Act. In 1921 an amend inent of the I.C. and A. Act gave the court power to adjust all wages rates prescribed in its awards by means of general orders made at six monthly intervals during a period of two years. Therefore, prior to the Finance Act of this year, there have been four Acts of Parliament which provided for the alteration of awards during their currency. Each of these Acts became law as the result of a state of national emergency arising out of the war. The Finance Act of this year has been designed to meet a case of national emergency also. Movement of Wage Rates “The movements of wage rates resulting from the legislation mentioned have been as follows:—In 1914 prior to the outbreak of war rates of wages were: Unskilled, Is 2d; skilled, Is 44'1 to Is 6d. Prior to the legislation of

1918 rates were substantially increased, but there was no general pronouncement of tho Court until April, 1919, when three rates mere declared as fol lows: —Unskilled, 13L1 and 2sd, semiskilled, Is 4ld to Is 6d and 24d; skilled, Is 74d and 2Ad. In January, 1920, these rates were increased by Id all round, becoming: Unskilled, Is 7d; semi-skilled, Is 8d to Is 9|d; skilled, Is lid. In May, 1920, the court amended the basic rates and added a new* bonus of 3d, and the rates became: Unskilled, Is 7d and 3d; semi-skilled, Is 8d to Is lOd and 3d; skilled, 2s and 3d. In November, 1920, by the addition of a bonus of Jd the rates became: — Unskilled, Is 10id; semi-skilled, Is 11 id to 2s lid; skilled, 2s 33d, and these rates were then stabilised until May,

Following the A mending Act of 1921, the rates were reduced in May, 1922, by lid per hour, becoming: —Unskilled. Is 94(1; semi-skilled, Is IOJd to 2s 4d; skilled, 2s 24d, and in November, 1922. by id per hour, which made them: Unskilled, Is Bjd; semi-skilled, Is 9|d to Is Hid; skilled, 2s lid. Between this date and 1925, as awards came up for review, these rates were brought up to: Unskilled, Is 9d; semi-skilled, Is lUd to 2s; skilled, 2s 2d “In 1925 tho rates were again re viewed by the court and were made:— Unskilled, Is lOd; semi-skilled, Is 11'1 to 2s Id; skilled, 2s 3d. The reduction of 5s per week made in May, 1922, was restored and the new rates wore 3s per week lower than tho peak of 1920, since 1925 wage rates have been stabilised at this level. This brief history ot wage mexements during th* last few years is, of course, quite vs ell known, but a ct,.-? for wage adjustment woulf hardly bi complete without its inclu sion. “The specific point I make is that there is ample precedent for the presj.nlegislation in that wages have previously been adjusted, both upwards and downward 1 ., during the currency awards. Awards not Contracts The legislation under which the present application is made has been criticised severely and one of the charges made in support of the criticism was that awards of the court are definite contracts between employer and employee and consequently should not be amended under any circumstances until after the fixed term has expired. 1 have already pointed out that the alteration of wage rates both up and down is no new proposal, but tho statement that awards of the court are contracts of service between employer and employee is worthy of examination. I submit that when this court makes an award under the powers of tho I.C. and A. Act it is in effect making a set of regulations to govern the industry specified and that such regulations then become, to all intents and purposes, an extension of the Act. There is, however, no contract of service until an employer engages an employee and it is mutually agreed between them that the terms and conditions of the award are to be the terms and conditions of the employment. The existence of an award prevents an engagement of a worker by an employer on terms less favourable to tho workers than those specified in the award, but it goes no further. It does not bind an employer to engage a worker at all or even to remain in business as an employer unless it suits him to do so. Nor does it bind any worker to accept engagement from an employer either on the terms and conditions of the award or on any other terms. This fact, that awards do not in themselves constitute contracts of service, is recognised by both this court and by trade unions. “As a general policy the employers whom I represent hold that wages should be maintained on as high a level as is economically practicable. That is borne out by the fact that in prosperous times the majority of em ployers have paid in excess of the award rates. .1 do not deny that the award rates arc standard rates in several big industries, as for instance waterside work, work on board ship and work in coal mines, but in these cases the fact is recognised and the rates arc high. Tho replies to a questionnaire circulated amongst employers a few years ago showed that more than 70 per cent, of the workers under awards other than those mentioned at that time were in receipt of wages higher than those specified. To-day award rates are the actual rates being paid in the majority of cases and, unfortunately, the continuance of even award rates is no longer economically practicable. Losing Ground Steadily “It is shown that financially this Dominion has been losing ground steadily for the ten years, 1920-29 inclusive, and that t he accumulated debit balance for that period is no less than 62 million pounds. For the year 193') the position was no better. £ Visible imports 43,025,914 Interest payments overseas 7,000,000 ap. Total 50,000,000 Exports 44,940,692 Loss over 5,000,000 In the eleven years the Dominion has borrowed abroad au additional £66 million. pounds; indebtedness at March 31, 1930, was in excess of 267 million pounds, or £.178 Is Id per head, nearly £7O per head greater than the debt of New South Wales, double that of Victoria and in excess of the total for all Australia, including the debit of the Commonwealth. If the local body debt be added to the debt of the general Government the total, after making proper allowance, is £327,563,856 or £223 per head of population. The total amount of interest payable on the national debt as at March 31, .1930, was £11,991,370 of which £5,228,455 is payable in New Zealand, £6,470,369 in London and £292,516 in Australia. The interest on local body debts amounts to 4J millions annually, of which £1,319,294 is payable outside New Zealand. Lt is necessary, therefore, that the value of our exports should exceed that of our imports each year by about, eight million pounds, plus the cost of shipping and other incidental charges. If this bal ance is not secured, the only way to square accounts is by way of borrowing, and that method has been prac tised in New Zealand until the danger point has been reached. There are two points to be specially noted arising out of these figures: —First, the magntiude of the fixed charges to bo paid out of our national revenue; second, that

xve shall have to live within our income for some time to come because as a nation wo cannot afford to borrow* any more money even if it were available. Economic Position One of the things about the econo mic position of New Zealand xvhich strikes an investigator most forcibly is the great measure of her dependence upon other countries. To quote tho Unemployment. Investigation Committee’s report, page 2:— New Zealand is a small country with a comparatively high standard of liv ing. Wo produce a very large surplus of certain goods and xvo are remark ably deficient in the production of other goods—for example, base metals and the heavier manufactures. Consequently our external trade is, per capita, the highest in the world and we are proportionately less indepndent of other countries than almost any other people We depend upon the requirements of other countries to absorb our surplus production and upon their production to supply many of our requirements. The Year Book, 1931, supplies the information upon which the financial position of New Zealand can bo determined; the export figures are on page 277, tho import figures on page 302 and tho particulars as to State and local body loan indebtedness on pages 610 and 657. I give these references so that the following table may be verified; the table is published in the “New Zealand Financial Tinies” of December 10, 1930, on page 12:—

These figures are approximate. That is a simple statement of fact. It might have been added that we have also been greatly dependent upon other countries for capital for development of our resources, that we have borroxved heavily and have to meet the interest payments out of our general resources because very little of the expenditure of borrowed money has led to the earning of interest or sinking fund. It follows that our economic position as a debtor nation is unsound if the total value of our exports does not exceed the sum of the value of our imports plus payments of interests in any year or over a period of years. Reduced National Income It is not necessary to my case to discuss the actual amount of the national income. The outstanding fact that is essential is that tho total has been very substantially reduced in the last two years.

As compared with two years ago our income from the sale of exportable products has fallen by just on eighteen million pounds and the fall has been greatest in the last few months, viz., a total of 64 million sterling. If the rate of progression is continued, as appears more than likely, tho reduction for the year ended June next as compared with the year ended June last will be approximately £13,000,000 and the reduction for two years will total over twenty million pounds. “We are back to pre-war prices. In 1913 the total value of our exports was just under 234 million pounds. Add fifty-seven per cent, for increased volume of production at the same prices and our export values for this current year are indicated as approximately 36 million pounds or 20 million pounds less than 1929. The increased volume of production is given in the Year Book, 1930, p. 319 and for 1931, p. 298. The index numbers for 1913 and 1929 are 1341 and 2106 respectively. I shall call evidence as to prices of exportable products which will support these conclusions. “The hard, unpleasant, fact which cannot be avoided is that for this current year the total value of our exports will be more than twenty million pounds less than it was for the year 1929. But a reduction of twenty million pounds in our income from exports must bring about reductions in other directions also. One-third of our primary production is consumed locally and the price depends on the prices received for the two-thirds exported. Considering the total primary production, the fall in value for the current year as compared with 1929 is therefore approximately 30 million pounds. “Tho production figures for secondary industries are not available yet, but it is certain that there is a falling off in production of manufactures as a result, of the reduced purchasing power of exports. Reduced Spending Power “Upon this point the judgment of the Commonwealth Court of Arbitration in the recent basic wage case states: — “Tho level of real income in any community is determined by the productivity of that community’s industry and trade, and what we can receive in exchange for exported products, particularly where wo rely on such surplus for our financial adjustments abroad, is the one essential factor that cannot be overlooked. Tho £40,000,000 fall in prices is, therefore, a real and immediate fall in the spending power of the Com inonwealth. But our loss of spending power docs not end with this. Before the beginning of the present disturbance we were able to borrow thirty million pounds per annum for use in developmental and other lab-our-employing works. Now we cannot borrow money from abroad. It is quite clear that for a long time to come any money borrowed for governmental purposes must be raised locally. Loans raised locally divert capital from agricultural and indus-

trial development, and to that extent reduce tho amount available for furnishing credits to private enterprise. It is true that this thirty million pounds per annum is not in the true sense of the term national income; it is true that ultimately wo will be better off if public borrowing comes from internal wealth. But for the moment and for some time to come we have thirty millions per annum less to spend, making, with the loss from fall in prices, a total of seventy million pounds as compared with 1928. The disaster, however, docs not end here. Such a violent change in spending power reacted in all directions. It immediately reduced income derived from services, particularly those controlled by State railway and tramway authorities, whose receipts declined rapidly, and whoso deficits increased month by month at an alarming rate. This, with other declines in public revenue, left the State and Commonwealth Governments unable to balance their Budg cts. Grave Governmental deficiencies created a general air of financial insecurity which increased tho general stagnation. Then, again, tho contraction of purchasing power traceable to a direct loss of income, led to further decline in productivity.

The first loss was added to by in* ternal losses, the extent of which cannot be calculated. Opinions differ as to the actual money figure for these repercussions. Some economists arc of opinion that they equal the original loss, but this probably is an exaggeration. It can be safely said, however, that for the moment they exceed 50 per cent, of the primary loss, making the reduced spending power of the community over one hundred million pounds, or in the vicinity of one-sixth of the average national income of the preceding five years.’* If that reasoning be applied to our own case then the total reduction of our spending power amounts to (20 millions and 6 millions loan money) and 50 per cent., equals £39 millions. The national income before the present drop in prices was estimated at from 130 to 140 millions. If we take it at the higher figure the reduction amounts to 27.5 per cent. Farmers’ Purchasing Power. “The purchasing power of the farmers is less than 6C per cent of what it was in 1914 as regards either farm requirements or general commodities. It has been below the 1914 level ever (Continued on next page)

Visible and Visible and Invisible Imports (Millions) Invisible Exports (Millions) Adverse Balance (Millions) 1920 . .. £74 £50 £24 1921 . .. 55 49 6 1922 . .. 47 47 — 1923 . .. 54 49 5 1924 . .. 60 56 4 I 1925 . .. 65 58 7 ’ 1926 62 49 13 1927 Favourable Balance 1928 . 60 3 Adverse Balance 1929 . .. 61 60 1 Adverse Balance — —— Aggregate £592 £530 £62

Year ended March 31, Imports. Exports. 1929 45,105,865 57,154,343 1930 , 49,167,914 49,045,817 1931 38,300,807 39,495,707