AGRICULTURAL PRODUCTS

Wairarapa Daily Times, 11 August 1936, Page 6

AGRICULTURAL PRODUCTS

COSTS AND WAGES,

GOVERNMENT CRITICISED,

INTERESTING SURVEY.

Addressing a gathering of district farmers yesterday afternoon, the Dominion President of the Farmers’ Union (Mr W. W. Mulholland) strongly criticised the policy of inflating wage and other costs without at the same time inflating the prices of agricultural products so as to bring them into a reasonable relationship with costs.

Mr Hugh Morrison (Provincial President of the Farmers’ Union) presided over a fairly large attendance. Mr Morrison, in introducing the Dominion President, said he had known Mr Mulholland for a number of years as a man of integrity, honour and ability. He believed the farmers of New Zealand had got the right man in the right place. Mr Mulholland had been chairman of the Wheat Board for a number of years, and there, as elsewhere, his colleagues spolce of him in the highest terms. Mr Mulholland had taken over the leadership of the Farmers’ Union at a critical time, with the farming industry in this country in a transition state.' Being a busy farmer, their new Dominion President necessarily had taken up that position at considerable personal sacrifice. Mr Mulholland could be depended upon to stand up for farmers and to carry out his duties in a way that would be of benefit to farmers.

The most important question for farmers at the present moment, Mr

Mulholland went on to observe, was that of better organisation. They must be sufficiently well organised to hold their own against the compulsorily or-

ganised sections of the community, or resign themselves to suffering the consequences of disorganisation in the way of severe economic penalties. The policy of the present Government was for the compulsory organisation of the wage-earning sections of the community. It might, indeed, be said that the Government’s policy looked further - looked to the whole community being organised in its various sections. With 60 or 70 per cent of the bread-winning section of the community compulsorily organised, the farmer, though nominally free to organise or not, really had no choice. Farmers must organise or become ecomonic serfs of the rest of the community.

Dealing with the economic policy of the Government, Mr Mulholland said he wished to direct special attention to the fact that high prices did not in themselves mean prosperity. The most solidly prosperous period in New Zealand was the first decade of the present century. Prices for farm produce in that decade were low by the standards of later periods, but farmers in that decade were prosperous because their costs were reasonable in ' comparison with the prices then ruling. It did not matter to producers whether prices were high or low so long as costs left them a margin. Because prices tended to be on a world parity, it had seemed better to reduce costs than to raise prices internally. The aim had been, not to reduce costs in accordance with slump prices for produce, because it was recognised that these prices were abnormally low, but to reduce costs in a degree that would enable them to be reconciled with prices when these last returned to a level that could be regarded as normal. The late Government had effected quite a considerable amount of cost reduction, with the result that costs and prices at the beginning of this year were in a fairly reasonable relationship. Had there been no interference with this policy, the position now would have been fairly satisfactory. The present Government had come into office on the definite policy of artificially inflating prices and costs. At least, that was the policy the electors understood the Government was putting forward.

Unfortunately, Mr Mulholland continued, the Government had put the wrong foot first. Instead of an artificial inflation of the prices of agricultural products being succeeded by an inflation of wages and other things which went to make up farming costs, the Government had reversed the process. He thought the Government had made a considerable mistake in doing that. It had now more or less lost control of the inflation it had endeavoured to bring about, and could only stand by and let. the forces it had let loose by its various Acts take their course. There might be some point later on at which the Government could regain control, but at present it had lost control. The Budget, which had been designed as an inflationary instrument, would add in many ways to the costs of primary producers. It imposed a burden of 31 millions in direct assessments, an increase of nearly, five millions, which must in itself build up costs. In addition, about ten millions were provided for various public works. This expenditure also would have an inflationary effect, though in part that effect might be postponed. Betting the total expenditure of 41 millions provided for in the Budget against the 53 millions at which our export produce was valued last year, it was easy to understand what a tremendous effect this inflation must have on production costs. It had been calculated by Mr Mason, of Christchurch, that the direct inflation of costs on account of the raising of wages under the Government’s legislation would amount to nine millions.

The inflation already set in motion was of cumulative effect, and was growing like a snowball, Mr Mulholland continued, and already it had done a good deal to increase the cost of living. The Government had instructed the Arbitration Court to fix a basic wage, taking account of the cost of living. It would have to be determined whether the basic wage -was to be altered, perhaps at intervals of six months or less. Very shortly the court would bo asked to increase the basic wage because the cost of living had risen. Tho effect of increasing the basic wage would be to increase the cost of living still further. Then the Court would be asked again to increase the basic wage, and so it

would go on until some point was reached at which equilibrium could be established. Meanwhile all these developments would increase the costs to be met in farming industry. One effect would be a very considerable increase in farm labour costs. With other wageearners getting such handsome increases, farmers could not expect their men to give their services in the old conditions and at the old rates of pay. He felt convinced that the increase in the farm wages bill would be from 50 per cent upwards.

Another factor that would increase costs was Government control of industry. In its control of petrol, the Government had given the people engaged in the industry practically a monopoly and had increased the cost of petrol to the consumer. That the increase might be slight was not the point. The spread of Government control of industry was going to increase costs every time. Government control of the transport industry, for example, was going to cause a great increase in costs. Another increase in costs would be brought about by Government control of imports. With the Primary Produce Marketing Act in full operation, the Government would have complete control of oversea exchange. Ninety-five per cent of the sterling exchange would then be in the hands of the Government, and would be used to control imports. An example of this control was the embargo on wool packs to protect local industry, which meant an increase to the wool grower this year of several pence per pack.

All these increases in cost were br*ought about by the Government as part of its policy—in other words, by an artificial inflation of costs. As it was originally laid down, the Government’s policy had provided also for an artificial inflation of prices. He maintained that they must insist on the Government putting into effect the whole of its policy. For the time being, the Government had succeeded in bringing about the conditions of 1931, on a higher level of prices it was true. Unless the Government carried out the whole of its scheme and corrected the relationship of costs and prices—putting them both on the same level, so that farmers could carry on their business profitably, or without undue loss —it was going to bring about conditions that would affect not only farmers, but eventually the whole of the community. The position might be modified for a time by the boom conditions resulting from heavy Government spending, but this effect would not last for long. It was for farmers to see that the Government carried out the whole of its policy. He repeated that what it had done so far was only to re-estab-lish the conditions of 1931. There was no question of the Government abandoning its present policy. The inflation of costs had to stand. Consequently the only salvation for the country was that they should get an inflation of prices to an equivalent extent. If the Government had first .inflated prices, the inflation of costs would have followed as naturally as night follows day. Touching on guaranteed prices, Mr Mulholland observed that the term as now used was, in his opinion, a misnomer. What was wanted was not a price that would be fixed and left at that, but a price that would be adjusted to costs from time to time, at all events until they arrived at a situation in which inflation remained stationary. It was possible to adjust mortgages on the basis of prices and costs, but it could not be done on the basis of prices only. A number of utterances by the Government indicated a belief that it would be possible to fix prices and allow them to remain stationary. There was some evidence that the Government was inclined to slow up, at least, if not to abandon, the increasing of prices. It was imperative to-day, as it never had been before, that farmers should get together, not in their own interests only, but in those of the community generally, to induce the Government to give effect to the whole of its policy, and so avert a return of the conditions of 1931.

Mr Mulholland said he believed the marketing policy of the Government, in the extent to which it aimed at evening the prices received by producers over a period of years, had merit. Already, however, they could see the evil of direct political control in the announcement that any surplus this year would bo used for the benefit of the dairy farmers and their industry. The policy was not going to work if there Avas to be a lolly scramble every time a surplus appeared. Mr Mulholland condemned the increase in the company tax from 4s 6d to 7s 6d. This, he said, Avas indirect taxation Avhich Avould be passed on to customers in additional charges. It Avas totally opposed to the declared policy of the Labour Party. Mr Mulholland Avas accorded a hearty vote of thanks for his address.