COUNTRY PARTY.

Waikato Times, Volume 109, Issue 18346, 4 June 1931, Page 3

COUNTRY PARTY.

CANDIDATE FOR TAURANGA MR F. COLBEOK'S CAMPAIGN. THE ECONOMIC SITUATION. Polbeck, of Morrinsville, who has been selected by the Country Party as Its candidate for the Tauranga district at 'the next general election has just concluded a speaking tour of the Bay of Plenty. The following speech on the present economic situation was one of the addresses he delivered. The present unfortunate financial situation, Mr Colbeck said, was not due entirely to the slump in prices, nor was it due entirely to the adoption of the gold standard. The slump In prices was simply the culminating factor. The present position was largely due to an orgy of extravagance. The Budget must be balanced but it should not be balanced by fresh taxation but by economy in expenditure. We had been living beyond our income and we had got to get back to balanced expenditure. The New Zealand public debt increased between 19-20-1930 by 33 per cent- and taxation by 20 per cent-, while the fall in prices had made us feel the effect of previous extravagance but did not create it. Since we could not increase the prices at which’ we sold, the only possible solution was to reduce the prices at which we produced, so that we could compete in the open market with our foreign competitors.

A Previous Warning. Mr Colbeck said he wished to stress the point that Mr 'H. M. Rushworth and he toured the Bay in 1929 and the whole tenor of their remarks was a warning that prices must fall owing to the adoption of the gold standard and other causes. Again in 1930 'Mr Gane and he visitedCthe district and they were still more emphatic in showing the coming fall in prices. The reason he mentioned this was because if the Auckland Executive, of which they were the mouth-piece, oould see clearly what was coming, surely the Government, with all the information at its command, should also have known, and should have made preparations to meet the financial storm.

“Do you see any evidence of any preparation?” asked Mr Colbeck. “What did they do?” They raised the cost of living by increased customs taxation, they persisted in the absurd wheat duties, and imposed a poll tax to raise money to employ an ever increasing army of unemployed doing work that did not increase the production of the Dominion one iota. They borrowed more money than had ever been borrowed before, in the same space of time, to -build useless railways and to continue in the orgy of extravigance started toy previous Governments. The slump would have come whatever they had done but, had we prepared to meet it two years ago, it have been merely an inconvenience and not’ a catastrophe. This was not the first slump the world had known. Slumps and booms alternated and w r ere caused by numerous and varying factors. A war generally caused a boom and created a corresponding slump. It is just like the swinging of a pendulum. A war, or perhaps the discovery of gold, caused a demand for commodities and there was a tush to supply this demand. People got over-confident and put all the money they had and also all they could borrow into production. Commodities were thought to be better value than money. This brought about over production and, as the demand for commodities slackened, overconfidence turned to doubt, doubt turned to fear and fear often turned to panic. Instead of believing that commodities were better holding than money, everybody began to think that money was better holding than commodities. There was a war to sell and one had the ground prepared for a slump. Our Special Troubles.

This was just what happened In 1914. The war created a demand for commodities such as the world had never seen. Production increased astoundingly considering the decreased number of producers. After the war 'there was four years waste to make up and production continued on an Increasing scale owing to the return of soldiers to production. The inevitable result was over-production. Confidence began to wain, and the pendulum began its swing backward. This swing backward was in proportion to the swing forward, caused by war conditions. It was probably exaggerated owing to the inflation of currency which took place during the war period. The deflation was not yet complete and it was unlikely that wo should get back to normal until deflation was fully effected. • Our special troubles were due to the fact that wages and interest, which were inflated along with other commodities and services, had not come down in anything like the same ratio as farm produce and raw material generally. Farm produce was down below 1913-14 parity but costs of manufactured goods and labour were 60 per cent, higher than in 19131914.

In Great Britain, our principal and indeed practically our only market, conditions were much as they were here. She, Great Britain, was certainly getting her raw material and food stuff cheap enough, but her manufacturing costs remained so high that she was losing her over-sea markets. Her taxation was the highest in the world and she had a huge army of unemployed to maintain. Owing To high costs, she was selling less, and of course was consequently buying less. The less she bought from us the less we bought from her.

The slurfip accentuated troubles brought on by extravagance and bad legislation. We were in a bad way before tho slump came. For years we had been indulging in an orgy of extravagance and waste. Our national debt showed clearly what had been going on. The following f. urcs showed the amount of our national debt from 1914 to 1930:

The interest on these loans was paid in. prlynnry products. The rate of interest was gradually rising as our loans were renewed and, at the same time, the prices of the produce, with which the interest was paid, was steadily falling. It took twice as many bales of wool to pay our interest charges ns it did two years ago. It took N)ue third more butler and one half

more cheese. If our production costs had come down, as they should have done, we could have stood the strain. Owing to our ridiculous system of taxation, our domestic prices for all commodities, except those farmer's produced, were as high as they were? two years ago when our produce was fetching twice the price. The Cost of Production. You may ask why is this so, said Mr Colbeck. The reason was simple. The domestic cost of commodities, other than primary, was fixed by import cost plus duty. Duty plus profit on duty was 4 5 to 50 per cent. Add to that 10 per cent, for exchange and one had an average increase of 57 per cent- above free import. This fixed the domestic cost. The domestic cost fixed the cost of living. The cost or living fixed the cost of wages, and a combination of them fixed the cost of production.

To prove that his calculation was correct Mr Golbeck pointed out that the Government statistician said the cost of commodities other than primary produce was CO per cent, above 1913-14 level.

Before passing to other subjects Mr Colbeck said he wished to specially impress- upon his listeners (he fact that import parity fixed domestic cost. If domestic prices were materially lower than import prices, there would be no imports. If domestic prices were materially higher than import prices there would be no local production. As a matter of fact the prices were practically the same but, because it was more convenient to draw supplies from local sources, the proportion of local goods sold was, approximately," two lo one. The effect of this was that for each £1 the Government received iii “duties,” the consumer paid £3 in ‘increased cost of commodities. In reference to this the speaker called attention ,to the legislation'with regard to . reducing wages. Tl:c Government had decided lo reduce the wages of its employees by, f O'per cent, it was also proposed that the Arbi;, tration Court should reduce all wages "under awards” .by a like amoijnt. The Government said that this would reduce the cost of living by a like amount., “Will it?” queried Mr Goibeck. “I say it will not unless you also reduce the cost of imports which is the governing factor in domestic costs." ' Of course the reduction in th,e,Goy"ernment employees” wages, would reduce the cost of Government. . Tlie general reduction, however, would not materially reduce the cost , of comt modifies, because 'the only compel!--tor the local 'manufacturer, had, to compet-e with, viz.,' imports,.stood' exactly where it did.

In conclusion Mr Colbeck said he firmly believed that the wage cut would be largely ineffective in either reducing the cost of living or the cost of production of primary products, and would merely swell.the profits of..,the secondary industries. When the “worker” found "■that his sacrifice had been made in vain” there would be serious trouble. When the farmer found that his costs remained the same and that the "worker” had le&3 money to buy farm products with, what would he do?

1914 99,7,20,000' 1920 201,171,000 1925 227,815,000 1930 Our local Vverc: — bodies debt lljrurcs £ 1914 20,773,000 1920 ... 30,188,000 1929 09,294,000