NEW ZEALAND FINANCES

Wanganui Chronicle, Volume 75, Issue 205, 31 August 1932, Page 7

NEW ZEALAND FINANCES

A CRITICAL REVIEW ! BUDGETARY EQUILIBRIUM BURDEN OF TAXATION i A review of New Zealand’s financial lition wrs "Ivon nv Mr. L. W. Holt b'-fore the Ec<nom‘c Section of the 1 (Ingres'- in Sydney. A sumi ":»'-y ' n Mr Holt’s paper ha« already ! been cabled, but an amplified report i appeared in tho Sydney Morning I Herald which arrived by tho mai] to- ' day. ; Mr. Holt said that it was difficult to ' see the grounds for anticipating budgetary equilibrium in the Dominion in ' two years. Ho stated that railway losses had become an important proi blom for tho Now Zealand Treasurer, I amounting tn £1,910 000 in 1930-31. ■The total deficit of 1928-29 was £1.021,000. and by 1931-32 it had risen to i £5.080,000. ‘ For 1932 33 the latest official forecast was for a deficit of I £8,760.000, which waa to be reduced I £4,200.000 by wage cuts, redaction* of I expenditure, the Hoover moratorium, taxation, and the use of reserves. This adjusted deficit in turn was originally to be reduced tn abnut £2.000,000 by ndditinnal taxation. This was not done, but £2.500,000 nf bank credits were to he raised on the securitv of reserves nf a nominal value of £16,800.000 invested in discharged aoldier settlement loans. Regarding the remedies adopted to meet the adverse situation during th® last, three years. Mr. Holt said that the making of income tax more severe had increased the burden of taxation on the poorer classes. The same could be said of the increase in Customs duties, and the wage tax, which had been increased to 5 per cent, of income, was a poor man’s burden. The new taxes would all apnear to operate in a direction not calculated to increase the equity of the tax system as a whole. An important aspect of the new measure* was that the revenue would be collected in tho main from tho section of the community whose reduced spending power would most directly affect production and employment. Mr. Holt added that Customs revenue was increasing, so that the final returns from this source would probably be better than anticipated, but that no groat increase could be expected until other factors wore more, favourable. Tn addition, thorp was reason to believe that the present wage and income levy for tho special unemployment account was failing to meet the current expenditure by a considerable sum, and the question arose whether further levies for this purpose should be raised. Tt, was likely, therefore, that further taxation in some form would he introduced. Ho reached the general conclusion that budgetary policy in recent roar*? had boon too closely confined to the immediate problem of balancing the Budget; that in the wider sphere the State had favoured a deflationary policy, but that its measures of assistance to such a policy were not entirely consistent with the aim This policy appeared to be based on an unwarranted optimism as to thc future of world prices. Tn any case, it involved a period of waiting, and the recent history of the State finances suggested that the Treasury was not in a position to wait. ~ , Mr F. A. Bland said there were indications that Now Zealand was about to follow the unwise load of Now South Wales, and remove the unemployment relief fund from Parliamentary scrutiny. Mr Holt’s paper was the last of th® list, and after it had bee., discussed the section adjourned with votes of thanks to the New South Wales executive, the clerical staff, and the economics department and the Press. Professor Copland said the Press hnd given excellent reports of the proceedings. Tt. had given the section more space than it deserved, and had even contrived to add a touch of humour te its record. Conditions in New Zealand were discussed in a paper presented to th® economics section by Mr E. P. Neale, of Auckland. A sharp fall in commodity prices, it stated, increased the real burdens or fixed money indebtedness and other contractual obligations, and r greater drop in tho prices of exportable goods than in the prices of imports took place. From 1924 th® index number of imported goods fell from 1693 to 1414 in 1932, but ‘he figure for the exportable goods dropped to half. The fall in the case of Now Zealand exports, it was remarked, was not as great as the corresponding fall in Australian in the period, the percentages of the falls in terms of sterling being given as 63 per cent. Australian and 45 per cent. New Zealand. The exporters in New Zealand were 95 per cent, farmers, and consequently producers were thrown into difficulties. Farm costs, including wages, were, in tho index terms, 1586 in 1924 and 1490 in 1931. Among thc internal obstacles to recovery were past borrowings, notably for transport services, hydro-electrio developments, and for advances on real estate in excess of Jhe real requirements of tho Dominion; the overcapitalisation of manv industries (notably farriiing/ on tne basis of th® former high’prices; virtual exhaustion of fruitful avenues of capital expenditure; the rigidity of the interest rates, routs, and other long period contractual charges; dcclinging earning capacity of public works: renewals of debts nt higher rates; and the fall in prices, us well as rigidity of wages and working conditions. An Economic Coinn ittee and a Na>« tional Expenditure Adjustment Commission hnd been sot up, and measure* of readjustment wore effected. Up to the end of 1931 were included a fall in internal prices and in the cost of Jiving of 10 per cent., a rise in the exchange rate to 10 per cent., contraction of imports from £45.000 000 to £24,000.000 undot interest and exchange rates and increased tariffs, a general wage reduction of 10 per cent-, a 10 per cent, cut in Public Service pay, and other economies; relief to mortgagors, taxation relief, and increased subsidies to tho farming industry, reduction of rates of interest on Government and local body loans, special taxation on gilt-edged income, increased land development, unemployment relief, co-ordination of transport, utilisation of reserves, and raids on certain special funds. Discussing unemployment, thc paper states: “Most of thc schemes are in thc nature of palliatives rather than direct attacks on the problem, and many of the jobs have become increasingly wasteful, as finding really economic work becomes more and mor® difficult.”