FINANCIAL STATEMENT (In Committee of Ways and Means, 15th August, 1946)

Appendix to the Journals of the House of Representatives, 1946 Session I, B-06

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INDEX

PAGE Bank of New Zealand Shares .. 19 Basis of Budget .. .. 22 Borrowing Programme .. 29 Budget Surplus .. .. .. 23 Civil Debt .. .. 21 Q oa | 32 Consolidated Fund .. .. 22 Continuing War Costs .. .. 33 Domicile of Public Debt .. .. 20 Double Taxation 39 Economic Policy .. .. .. 7 Education .. .. .. 32 Estimates, 1946-47 Consolidated Fund .. .. 23 National Development .. .. 29 Social Security .. .. .. 27 War Expenses .. .. 16 Excess Profits Tax .. .. 35 Expenditure— Consolidated Fund .. 24, 25 National Development Programme .. 29 Social Security Fund .. .. 27 War Expenses Account .. 13, 16 Future Plans .. .. .. 31 „ Gold Export Duty.. 37 History of Public Debt .. 21 Hospital Rating .. .. .. 30 Housing .. .. .. 29, 31

PAGE Income-tax .. . • .. 35 International Co-operation .. .. 4 Lend-lease Settlement .. 17 Main Highways Account .. .. 28 Memorandum of Security .. 15 National Development Programme 28, 29 National Savings .. .. IT p r i ma g e Duty on Books and Periodicals 37 Primary Industries .. .. 32 Prospectus of 1946 Conversion Loan .. xv Prospectus of Local Loan .. .. xvii Public Debt .. .. 18, 20, 21 Regrading of State Services .. 31 Rehabilitation .. .. 6, 33 Revenue .. .. .. 23, 24 Sales Tax .. .. .. 37 Secondary Industries .. .. 32 Social and Economic Progress .. 8 Social Security Fund .. .. 26 Sterling Funds .. .. 6 Superannuation of State Employees .. 31 Tables .. .. . - i-xiv Taxation .. .. .. 33, 35 Taxation-reductions . - 35,38 UNRRA .. .. .. ..4 War Costs .. .. 2, 13, 33 War Expenses Account .. 13, 16

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1946 NEW ZEALAND

FINANCIAL STATEMENT (In Committee of Ways and Means, 15th August, 1946)

By the Right Hon. Walter Nash, Minister of Finance Mr. Chairman, — A year ago to-day was VJ-Day. For a year we have been freed from the constant dread for the safety of onr men in the Armed Services. That day, just a year ago, brought a victorious conclusion to the' fight to the death for man's rights and liberties and for the personal ideals of man's ethical and spiritual life. It was a triumph for thefree spirit of man and for the moral idealism which has shaped the* values and ideas of our civilization. Unfortunately the world was not entirely freed from the impact of pain and sacrifice that it had borne for six years, during which time it had suffered death, starvation, and destruction on a scale unparalleled in history. Inevitably, however, the havoc wrought by the incredible cruelties of the Nazi, Fascist, and Japanese aggression has left a tragic legacy in many lands. In the toll exacted of young lives New Zealand paid dearly, and now, as we stand on the threshold of the post-war era, it is appropriate to remember those who made this day possible, but who are not here to share it; to remember,, too, homes saddened by their absence. It is equally appropriate that any summing up of reorganization and reconstruction at this time should express thankfulness when we remember that we in New Zealand are among the most fortunate in a world still struggling in the aftermath of destruction, starvation,, and disorganization. No country can withstand destruction and the dislocations of conflict, with its uprooting of peacetime standards of goods and services, and revert to them easily, or immediately, after so long a period. Free from invasion, or direct contact with the weapons of destruction, New Zealand enters the stage of reconstruction with its productive capacity comparatively unimpaired, but it could not avoid other effects of dislocation caused by conflict, both within and beyond its shores.

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However, the steadfastness and certainty with which the Dominion is overcoming the stringencies of war and developing her productivity is a matter for the greatest gratification. The magnitude of that task of reorganization must not, however, be underestimated. Some of that reorganization has worked so smoothly that -appreciation of its success may not be fully valued. In our splendid contribution in man-power to the war about 170,000 men, half the men of military age, were at one stage withdrawn from industry. Nine thousand women also served directly in the Armed Services, whilst others worked on farms, in factories, and in our homes. The termination of the war with Japan accelerated the repatriation of our Armed Forces which was already under way from the European theatre. The demobilization of many thousands of men and women, and their absorption into peacetime activities under the Government's plan of rehabilitation, has moved swiftly and smoothly. Thus, with the return of man-power industry has been helped during the transition from war production to the provision of consumer .goods. ;Real war costs Much of the cost of the war is not measurable in terms of finance. Devastated territories, displaced populations, starvation, suffering, disease and death, stunted children, moral decadence, legacies of Mtter hatred —there are no quantitative or qualitative units capable of measuring these dreadful and inevitable consequences of war. Victors and vanquished alike have suffered in varying degrees. Assessment of the real costs of the war in relation to any one ■country or group of countries is subject to obvious limitations. There is, however, some value in comparing the measurable sacrifices of •different nations, invidious as such comparisons may appear, for it helps us to see more clearly the nature of international problems of reconstruction and the methods most likely to solve them. This is particularly so in the case of the countries of the English-speaking peoples—the United States of America and the British Commonwealth of Nations. For in a very real sense the peace and prosperity of the world and the future of civilization depend on the policies these great democracies adopt in relation to each other and the extent to which they are able to arrive at common understanding. Mutual aid and comradeship have brought victory in war —to win the peace they must continue undiminished. Each of the allies has, within the limits of its human and material resources, made its great contribution to the common war effort; but there are unavoidable inequalities in the losses that have been sustained and, consequently, in the efforts required to repair

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these losses. It is of the utmost importance that these inequalities of sacrifice should be recognized and that mutual assistance should be cheerfully given to build up strength where it is most needed. For our part, although fortunately our Dominion was spared from actual invasion we made a maximum contribution both in manpower and in material resources. The £65,000,000 spent on defence construction represented the equivalent in man-power and materials of 30,000 homes and 7,000 public and commercial buildings. On the food front we strained every effort despite difficulties in man-power and in obtaining essential imports of fertilizers. For example at VJ Day New Zealand, in addition to feeding our own people and sending unprecedented supplies to Britain, also, under reciprocal aid, was supplying sufficient food for no less than one million United States personnel. Despite man-power difficulties our volume and value of factory production were expanded greatly in the war effort, civilian consumption being at the same time substantially limited. During the war period New Zealand factories provided for our own and for the Allied Forces over 1,000,000 battle-dress suits, 1,500,000 pairs boots and shoes, 1,500,000 blankets, and 2,250,000 pairs socks. As regards munitions, nearly 6,000,000 grenades were supplied, and 253,000,000 rounds of small ammunition, and 1,500,000 mortar bombs, were made in New Zealand. Turning to services of various kinds so essential in the maintenance of living standards we see a like sacrifice. Civilian rail-travel fell during the war years, equivalent to twelve million passenger journeys per annum. Petrol rationing and road goods and passenger services have reduced the road miles travelled for normal civilian purposes by two and a quarter billion. The loss in personal services rendered by school-teachers, doctors, dentists, and a host of other skilled workers whose contribution to real national income is most important in a modern society, has also been heavy. Seventy per cent, of New Zealand's male teachers served in the Forces at one time or other and, although they were for the most part replaced by re-engaged superannuitant school-teachers, the full teaching service could not be given in our schools —much less could the planned reduction in the size of classes be carried out; 589 of 1,600 doctors served for more or less lengthy periods overseas and were hence not available to attend civilians. Moreover the calls made by servicemen and ex-servicemen upon doctors in New Zealand further reduced the attention they could give to the public. It is the same story with dentists, nurses, lawyers, tradesmen, and labourers. While New Zealand did not spare its man-power and material resources in the war effort, Government's policy of social and material progress was implemented within the limits imposed by war conditions. I*—B 6

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Such activities as housing and hydro-electric-power development were given special attention, and it is satisfactory to note that from 1939 to 1945 no less than 8,500 housing units were completed at a cost of £14,000,000, while hydro-electric development accounted for a further £20,000,000. As hydro-electricity supplies play such an important part in the development of the Dominion, such undertakings were regarded as priority works even during the war period. Thus in 1936 the main Government plants generated a total of 793,000,000 units, whereas by 1945 the output had been increased to 2,083,000,000 units. In spite of the necessity to satisfy other pressing demands, New Zealand has increased her generating-capacity by no less than 57 per cent, since the war started. Full implementation of the Government's social security scheme was also hampered somewhat as a result of the war, but, nevertheless, it was possible to make substantial advances, as is shown by the fact that social security payments increased from £7,000,000 in 1938-39 to £23,000,000 in 1945^-46. International co-operation The cost of war in terms of human sacrifice—quite apart from its financial implications—renders it imperative that New Zealand should co-operate to the fullest possible extent with peace-loving nations in building up the fabric of a world organization which will banish for all time fears of war from the hearts of mankind. The re-establishment of decent standards of living in countries torn asunder by the war is a first pre-requisite in building the necessary frame-work within which such international co-operation becomes possible. The devastation and suffering in the occupied countries has to be seen to be properly appreciated, but unless those favoured countries which have the resources are prepared to assist to the maximum of their respective abilities, not only will that suffering be continued unnecessarily, but the fruits of victory will be denied to the United Nations. Various organizations have been established overseas, under the auspices of the United Nations with a view to providing relief and hastening reconstruction, and New Zealand is an active contributor and participant in them all. Under UNRRA we have supplied personnel, foodstuffs, supplies, and equipment, and to cover our proportion of the total expenditure, Parliament has already voted the sum of £2 6 millions. A request was recently made by UNRRA for an additional contribution of a like amount and this has already been agreed to, subject to ratification by Parliament this session. It is anticipated that the activities of UNRRA, as such, will be discontinued at the end of this year, although it is probable that further assistance will be necessary by

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other means. Thus a new refugee organization will need to be established to care for displaced persons and certain of the rehabilitation projects could be taken over by the new World Bank. It is expected, too, that the UNRRA health activities will be taken over by a new world health organization. In other words, it is considered that a continuation of the existing UNRRA measures should be a world responsibility—a responsibility of the United Nations. New Zealand is also a contributor to the United Nations Organization and, as honourable members are aware, our representatives have taken a very active and influential part in the activities and ■discussions of that organization. The United Nations Organization will, it is hoped, have all the advantages without the manifest weaknesses of the old League of Nations which is now in process of being wound up. Another international organization to which New Zealand is a ■contributor is the Food and Agriculture Organization, with head--quarters in Washington. The purpose of this organization is to formulate plans for the more equitable distribution and better utilization of the world's food resources, particularly during the present emergency, where there is a world shortage of foodstuffs. The restoration of world trade is a further necessary precondition of permanent peace. A practical and important example of the mutual desire for the successful and early restoration of world trade is to be found in the loan agreement recently concluded between the United Kingdom and the United States of America Governments. The United States has granted the United Kingdom a loan of 3,750 million dollars which will be used mainly for the importation of much-needed foodstuffs, machinery, and raw materials. As New Zealand relies on the United Kingdom for dollar funds, the conclusion of this loan will be of benefit to this Dominion also. It is not intended, of course, that there should be a general relaxation of controls in respect of imports from the United States as the funds are loan-moneys and as such have to be repaid, but it will •enable a much quicker restoration of international trade to be effected than would otherwise have been possible. New Zealand still adheres to a policy of Empire preference. In fact the loan will provide the United Kingdom with a muchneeded breathing space within which to recover and reorganize her industries for peacetime production and build up an export trade sufficient to pay for imports of food and raw materials and also to meet her international exchange obligations. The Mother Country is at present embarrassed with the huge accumulation of sterling obligations amounting to £3,500 millions owned by various countries, the largest holders being India and Egypt. To a large extent these balances are the result of- the United Kingdom's efforts in the war

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and there is no donbt that the way things have worked out the United Kingdom practically alone among the Allied Nations has been left with a huge external war debt. In the course of the struggle to save herself and the world, the United Kingdom ruthlessly sacrificed her trade and made a maximum war effort. Now she is striving to reconvert her industries and build up an export trade, much greater than before the war, sufficient topay for necessary imports of food and raw materials. To repay the external war debts means building up exports to a level in excess of the value of necessary imports. It is a condition of the United States loan that the United Kingdom should negotiate with the holders of sterling balances accumulated during the war with a view to the balances being divided into the following three categories:— (1) Balances to be released at once and convertible into any currency for current transactions; (2) Balances to be similarly released by instalments over a period of years beginning in 1951; and (3) Balances to be adjusted as a contribution to the settlement of war and post-war indebtedness and in recognition of the benefits which the countries , concerned might be expected togain from such a settlement. The sterling balances belonging to New Zealand increased because imports of necessary commodities could not be obtained with the result that we now have a substantial accumulation of deferred maintenance and replacements in transport systems, factories, and homesto make good as soon as the necessary imports can be obtained. Throughout the war period the prices received for our main exports were governed by bulk contracts with the United Kingdom and there was no question of profiteering at United Kingdom's expense. As the United Kingdom is the only market for most of our exports our prosperity is bound up with that of the United Kingdom and we have a direct interest in her economic recovery. As to how we could best assist in that recovery is a matter that requires careful consideration. One way would be for this country in future to take a greater share in its own and Commonwealth defence. Prior to the war the cost was borne mostly by the United Kingdom. Demobilization and rehabilitation Gfenerous treatment of New Zealand servicemen and women in the period of demobilization and rehabilitation into civilian employment is in the forefront of Government's plans for the transition period from war to peace. In this respect our record compares more than favourably with that of any other country. Provision has been made for the payment of gratuities by the setting aside of £18,000,000 for this purpose from the War Expenses Account in the last financial year.

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In the matter of rehabilitation, the Government's schemes are directed to restoring, as far as possible,. the opportunities lost by •ex-servicemen and ex-servicewomen as a result of the war. Priority is given to them for State houses, while the future needs of the building industry are being assisted by the establishment of additional trade-training centres throughout the Dominion. Land-settlement plans, involving an expenditure by the State of some £54,000,000, will provide for the establishment of 6,000 settlers during the next, four years. The records of the Rehabilitation Department show that up till the end of June, 1946, 163,592 men and women have passed through the Department. Of this total 133,006 are in employment, 38,916 finding employment themselves, 52,661 returning to pre-service •employment, while 18,927 have been placed by the Department. Men undergoing full-time training in rehabilitation training centres total 3,280, while 4,142 men have had or are undergoing training with private employers under the Department's subsidy scheme. The 30,437 men and women not vet placed include 21,819 service personnel not yet discharged, in hospital, &c. Economic policy It is ten years since I presented my first budget to this House. In it I stated the aim of the Government which was" to organize an internal economy that will distribute the production and services of the Dominion in a way that will guarantee to every person able and willing to work, an income sufficient to provide him and his dependents with everything necessary to make a ' home ' and ' homelife ' in the best sense of the meaning of those terms." That statement was made at a time when the people of New were rising out of the despair and unemployment which had "been their lot for several years. In that budget I outlined the economic plan by which the Government subsequently lifted the country out of the miseries of the •economic depression. That plan can be equally effective to-day in overcoming the difficulties of the post-war period and maintaining full employment, good living standards, and economic security for all the people. The policy then, and it is equally valid to-day, depended on putting the power of economic direction into the Government's hands, necessitating control by the Government of the currency and credit structure of the Dominion. This basis was made secure by the Government acquiring complete ownership of the Reserve Bank. In the first few years of the administration of the Reserve Bank it was used effectively to reverse the effects of existing deflation, but £ince the war began the Government control of the Reserve Bank has provided a powerful weapon against inflation. The State's own borrowings from the Reserve Bank during the "war have been characterized by a restraint which is unique amongst

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belligerent countries, and, since 1942, the policy has been to confine loans to direct subscription from the public without recourse to* Reserve Bank or trading bank funds. Public ownership of the Reserve Bank has facilitated the financing of the guaranteed-price scheme for dairy-produce and the marketing of other produce. It has facilitated the Government's housing scheme under which over 21,300 houses have already been built, and it has been instrumental in holding down the general level of interest-rates. Public ownership of the Reserve Bank was the key which enabled the Government to raise public and private spending to the level necessary to employ the productive resources of the Dominion, thus providing full employment and full opportunity. During the eleven years since the advent of the present Government, in addition to the advantages set out above, the bank has out of its profits paid over to the Consolidated Fund the sum of £3,668,997. Fundamental also to the Government's programme was the more equitable distribution of the national income among the people and the making of the people secure in their gains. The fulfilment of this programme during the past eleven years,, including six years of Avar, has been an outstanding administrative achievement. By the redistribution of the national income through guaranteed prices, wage increases, and the social security scheme r poverty has been abolished and economic security established for everyone. The Government also put into practice the principle that the highest level of education was the right of every New Zealander and not just the privilege of the more fortunate. The principles which inspired the Government's programme in .1936 and through the past eleven years can be restated to-day with equal force. , SOCIAL AND ECONOMIC PROGRESS This is a fitting opportunity to review in brief social aild economic progress during the past ten years. During a decade which included six years of total Avar, remarkable progress has been made. Appended to this statement is a statistical table (Table 6), showiiighow very strikingly the Dominion has progressed since 1935-36, aM even, in certain major respects, since the beginning of the Avar. For instance, in the year ended 30th June, 1936, total production Avas valued at £114,000,000, in 1939 the value Avas £136,000,000, whereas the latest figure—namely, for 1946 —gives a total of £184,500,000, representing an increase of over 62 per cent, since 1936. This substantial increase represents not only an adA r ance in money valries,. but in actual volume. The index number for volume production Avas 93 in 1936, 100 in 1939, and 107 for the latest year (1944)„

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The following adjustment should be made on page 9 of the Statement:— In the eleventh line, after the figures £527 and £1173, the word " millions " has been wrongly inserted in each case. Tlje reference in the text is to Table 7 of the Appendices, which gives the income per head after all taxation has been deducted, and says that income has increased from £527 (£52 145.) per head in 1935 to £ll7 3 (£ll7 65.) per head in 1945, an increase of 123 per cent. The text will be in order if the word " millions " is struck out in each case where it appears in the eleventh line of page 9.

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Aggregate private income totalled £125,000,000 in 1936, £186,000,000 in 1939, and over £304,000,000 for the year ended 31st March, 1945, an increase over the whole period of nearly 145 per ■cent. Mortgage interest-rates are now at the lowest average rate ever recorded in New Zealand—namely, 3 87 per cent. A table included as an appendix to this statement (Table 7) shows the changes in aggregate private income per head after taxation (including social security contributions) has been deducted. This table shows that net aggregate private income (gross, less taxation) increased from £527 millions in 1935 to £1173 millions in 1945 —an increase of 123 per cent. Further, when this residuum is corrected for retail-price changes, we find that the real purchasing-power of the, people increased .by, 60 per cent, between 1935 and 1945. The -disposal of aggregate private income is further illustrated graphically (Tables 8 and 9). These conditions are reflected, as elsewhere, in the savings-bank figures. The total funds standing to the credit •of depositors in March, 1936, were £65,000,000, in 1939 these had increased to £75,000,000, while in March, 1946, the total stood at no less than £156,000,000. To these figures must also be added National Savings bonds « and accounts which, at 31st March last, totalled over £40,000,000. Statistics of the volume of production during the past decade ;show the following trends. The volume of factory production, increased by 70 per cent, between 1936 and 1944. Coal production (1935-45) was 34 per cent, up; timber production (1936-44) 20 per ■cent, increase; electricity production 120 per cent, increase. The number of building permits issued for private dwellings totalled 4,140 in 1936 (March year). In 1946, 7,736 permits were issued for private dwellings of which Government housing construction accounted for 2,623 dwellings. Turning now to live-stock production, wool produced in the 1946 production year totalled 1,006,000 bales, as compared with 717,240 bales in 1936; total meat production exceeded 500,000 tons in 1946 •compared with less than 450,000 tons in 1936. Despite the drought during part of the current season cheese production amounted to 90,000 tons in 1946 compared with 88,500 tons in 1936. Butter production shows a fall from 168,329 tons in 1936 to 126,000 tons in 1946. Butter production in 1945 totalled 155,900 tons. That the live-stock position is inherently sound is indicated by the statistics of cattle and sheep. The number of cattle in the Dominion in 1945 was 4,590,926, the second highest figure on record (exceeded only in' 1942), while the number of sheep, 33,975,000, in 1946, is the highest on record.

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A sample survey of the net incomes of some 1,200 to 1,500 dairyfarmers shows that the average net income for a herd of fiftv-seven cows totalled £452 in 1945 as compared with £306 in 1936 when theherd average of the sample was fifty-six cows. The average return per cow from butterfat totalled £1936 in 1945 compared with £1303: in 1936. New Zealand has experienced to date a smaller increase in the general level of prices than has obtained in any other country. The wartime index figure of essential items in the cost-of-living indicates that in March, 1946, retail prices of essential goods were less than 1 per cent, above those ruling in 1942. These statistics indicate very clearly that New Zealand is continuing to maintain a high standard of well-being for the people. Index numbers, of course, tell only part of the story, the absolute level of prices of essential commodities in relation to purchasing power is the real criterion of the prosperity of the people. A table is appended to this statement (Table 10) which shows that, in regard to the level of prices of basic needs, New Zealand also shows up in a most favourable light. Retail prices of bread, flour, milk, butter,, cheese, beef, and bacon are shown to be lower in price than in other low-priced areas, the efficient control of distribution of basic foods contributing in no small measure to this result. The Government firmly adheres to its stabilization policy, which undoubtedly is in the best interests of all sections of the community. The policy must continue until such time as the supply of goods for consumption is adequate to meet the demand, but the administration of the scheme must remain flexible, and methods will no doubt alter as conditions change and the position generally is eased. Recent happenings in the United States of America, where the supply position is relatively much better than in New Zealand, is an object lesson as to what happens when controls are lifted prematurely. In such circumstances some producers and traders for a time can make large profits by exploiting the shortage of goods, but with higher costs it is not long before other sections demand increases, and if that process continues the ultimate result is disastrous for everybody. Numerous suggestions are made that inflationary difficulties can be adjusted overnight by the simple process of currency manipulation. I am satisfied that there is no road to national prosperity and an increase in general living standards, except by increased production and equitable distribution, and to this end the Government are concentrating their best efforts. In view of the special significance to New Zealand of exports,, it is interesting to record that in 1936 our exports were valued at £50,000,000, in 1939 at £58,000,000, and, in spite of the local difficulties arising out of the war in respect of man-power, fertilizers, and

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. -equipment. The exports for the year ended 30th June, 1946, is an all-time record. They amounted in value to £90,674,000. The figures do not include reverse lend-lease exports which in the .same period amounted to £5,271,000. Imports during the same period, including lend-lease items, totalled £62,647,000, of which £45,072,000 were non-Grovernment imports and £3,347,000 lend-lease. Import licenses issued in 1945 and which have not yet been exercised, together with licenses issued in 1946 amount to £93,839,883. In addition to this sum, a further £9,263,188 of licenses have already been issued for the 1947 period. This makes a total of licenses issued for these periods of £103,103,071. Most of our exports go to the United Kingdom, and in view of the present food position in that country—worse in some respects than during the dark days of the Avar —it is of the utmost importance that we supply every possible pound of food to relieve the hardships •of the people there. TJiis can be attained both by producing to the r limit of our ability and by assisting in the nation-wide Food for Britain Campaign, which is sponsored by the Government. Under contracts made in 1944 the United Kingdom Ministry of Pood agreed to buy our exportable surplus of dairy-produce and meat for a period of four years. At that time prices were fixed for the first two years of the contracts. During my recent visit to London the prices to be paid for the third year covering the 1946-47 season were discussed with the United Kingdom Ministers and officials, and it was agreed that the priee for butter would be 1755. sterling a hundredweight and for cheese 102s. 6d. sterling per hundredweight. For meat it has been agreed that prices will be 7} per cent, above those ruling during the first two years of the and for pig-meat 11| per cent, above the prices prevailing last year. Furthermore, it was agreed that the period of the contracts would be extended to 1950, the prices to be paid to be agreed upon annually. This two years' extension of the contracts will give wadded security to our farmers and afford them an assured basis for expanding their production to the utmost for the benefit of themselves :and of the people of the United Kingdom. In accordance with existing arrangements the increase in prices as received in New Zealand will be credited to industry stabilization accounts, and the amounts to be paid to farmers in the meantime will continue to be governed by production costs on the farm and in the factory. The lump-sum payments of £4,000,000 sterling per annum will continue, in terms of the arrangements made in 1944, to be paid until 1948. As a result of New Zealand's favourable overseas trading position in recent years, and in spite of the substantial repayments

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of overseas indebtedness which have been effected, the Dominion's net sterling balances in March last reached a record of £(N.Z.) 98,000,000. In considering this satisfactory figure, however, account must be taken of the fact that during the war years industrial plant and equipment suffered substantial depreciation and now requires extensive replacement, the Government's own requirements in respect of additional hydro-electric equipment, railway rolling-stock, &c., are substantial,, while the public have had to postpone replacement of many essential worn-out items and merchants' stocks generally have been reduced to a very low level. Moreover, overseas prices have practically doubled since the war, so that the import value of our sterling exchange has been correspondingly reduced. All these factors give point to the necessity of maintaining the policy of import selection. an indication that the Government are liberal in implementing that policy is shown by the fact that for this year import licenses issued, including amounts carried forward from previous licensing periods, exceeded at 31st July last, as already mentioned, £100,000,000. It will thus be appreciated that existing shortages in imported goods are mainly due to the physical inability of overseas suppliers to meet our requirements. Any review of social and economic progress would not be complete without reference to the Social Security scheme —the cornerstone of Government's social policy. Social security now plays such an accepted and important part in the life of the community that one is liable to overlook the advances which have been made over the past eleven years. Thus, as regards age-benefits, for instance, in 1935 an age-beneficiary at age sixty-five years was entitled to £45 10s. per annum (17s. 6d. per week) for himself, plus £l3 per annum (ss. per week), for two or more children. To-day the age-benefit, at the age of 60, is £lO4 each —that is, £2OB (£4 per week), for husband and wife —together with £26 per annum (10s. per week), in respect of each dependent child. Moreover, the period of residence in the Dominion has been reduced from twentyfive to ten for those who were residents of the Dominion on the 15th March, 1938, and to twenty years for those who arrived after that date. The property exemption has been increased from £5O to £5OO each. Again, unemployment benefit, which in 1935 was 14s. per week, is now 40s. per week, the rate for a dependent wife has been increased from 10s. to 40s. per week, and for each child from 4s. to 10s. per week. The universal child allowance of 10s. per week payable as from Ist April, 1946, replaces the 2s. per week in respect of each child in excess of two payable in 1935. One further example: to-day we have a universal superannuation benefit of £25 per annum, 10s. per week, increasing by £2 10s. per annum until a rate of £lO4 per annum is reached. In 1935 there was no universal superannuation benefit. This, of course, is only part of the picture. There has, in fact, been a very material improvement in all the major factors affecting

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the general well-being of the people, invalid benefits, sickness benefits, and others have all been improved. Appended to this Statement is a statistical return showing very strikingly how the Dominion has prospered since 1935, and even since the beginning of the war, WAR COSTS In regard to war finance, it was laid down in the Government's first war budget that the policy would be to meet such costs as far as possible by taxation and to rely on borrowing only for the balances required. Our record in this connection is a creditable one. War costs, including those for debt charges and pensions to date met from the Consolidated Fund, total £640,000,000, of which 35 per cent, onlyhad to be provided from loan moneys while the whole of our 1939—45 war loans are now domiciled for payment in the Dominion. New Zealand's results in this connection bear favourable comparison with those of any of the Allied Nations. It is of interest to mention that in the 1914-18 war the whole of the expenditure was financed by loans of which no less than one-third were raised overseas and represented a serious drain on the Dominion's external resources. The total 1939-45 war costs, amounting to £640,000,000, to which I have referred were expended on the following purposes: — £(m.) War and other stores .. .. .. .. 195 Pay and allowances .. .. .. .. 177 Accommodation, food, and clothing .. .. 76 Land, buildings, and ships .. . . 41 Miscellaneous services relating to the Armed Forces .. 36 Transport .. .. .. .. 23 Interest on war loans and principal repayments .. 20 Gratuities .. .. .. .. 18 Repairs, maintenance, and rent .. .. .. 7 Pensions .. .. ~ .. .. 5 Rehabilitation .. .. .. .. .. 5 Medical and educational services .. .. .. 3 Ancillary .. .. .. .. 34 640 Costs for war pensions, rehabilitation, and for interest and repayments on account of war loans will, of course, continue for years to come. The original Budget estimate for 1945-46 for War Expenses Account envisaged an expenditure of £105,400,000. The collapse of Japan so soon after the cessation of hostilities in Europe necessitated a different reassessment of costs, but in the aggregate it was considered that much the same, if not a greater amount would be required, while up to the point of demobilization extending into this financial year expenditure was estimated at £139,250,000, including gratuities.

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Details of these revised estimates were set out in the Addendum to the Budget last year. The following table gives the original budget estimate, the revised figures to the point of demobilization, and the actual expenditure to 31st March last. Original Revised to Actual, Budget. Demobilization. 1945-46. -£(m.) £(m.) £(m.) -Navy .. .. .. .. 6-0 7-99 6-0 Army .. .. • • • • 38*0 43*72 24*0 Air .. .. ..31-4 33-54 32-1 Total Navy, Army, Air .. .. 75-4 85-25 62-1 Deferred pay .. .. " .. . .... 5-0 ... Ancillary .. .. .. .. 4*o 6-0 1*6,. Rehabilitation .. .. .. 2-0 3-0 2-6 Reverse Lend-lease .. .. ..24-0 22-0 22-8. Gratuities . .. .. .. .. 18-0 18-0 Repayment of war debt—r Overseas .. .. .. .. .. 22-5 In New Zealand .. .. .. .. .. 5-0 £lO5-4 £139-25 £134-6 The actual charges against War Expenses Account for the financial year amounted to £134,645,000, and receipts totalled £128,480,000. The latter included loan moneys, £37 2 million; taxation, £514 million; sales of surplus assets, &c., £l3 million; United States of America lend-lease and Canadian Mutual Aid, £26 8 million. Loan receipts included the 1945 Victory Loan of £25,000,000 which was oversubscribed by £645,384, including receipts from National Savings, amounting to the very satisfactory figure of £9,327,000 foi* the year. The oversubscription of this, the last war loan, after the heavy demands 6f previous war loans, was a pleasing feature of last year's war accounts, giving to New Zealand a proud record on the home front, to equal that which our fighting Forces established on the war fronts, of having worthily met all obligations on all occasions. Looking at the expenditure side, we had a total outgo of £134,600,000, or, if we deduct the debt repayment item of £27,500,000, the net expenditure was £107,100,000, which was £1,700,000 in excess of the original Budget estimate for the year. The difference between this and the revised estimate of £139,249,000, covering costs up to the completion of demobilization, will be reflected in the expenditure for this financial year. Actual expenditure last year by Army was gross £45,269,000; credits, £21,251,000; net, £24,018,000. Credits, which came chiefly from rebates on payments for war stores made in previous years and from the settlement of accounts for stores supplied to the Eastern Group, were much higher for the year than anticipated, due to early settlement, and explain the comparatively small net expenditure.

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Air expenditure was £321 million and Navy £6 million, whilst, the other main items were Reverse Lend-lease £22 8 million, and Gratuities £lB million. Details of both receipts and expenditure are shown in the annual accounts. Members should also examine Table 4. Memorandum of Security In connection with the repayment of the balance owing under the Memorandum of Security Agreement with the United Kingdom, the position under this agreement at the 31st March, 1946, was as follows: — £ Balance owing, 31st March, 1945 .. .. 18,962,500 Borrowed, 1945-46 .. ... .. .. 3,537,500 £22,500,000 Repayments, 1945-46 .. .. .. ..£22,500,000 I desire here to place on record the extent to which the facilities made available to us by the United Kingdom Government under the Memorandum of Security Agreement have been utilized. Finance was arranged in this way to meet New Zealand's share of the cost of the Empire Air Training Scheme and the cost of our Division in the Middle East. Advances were made as required from time to time by the British Government, we on our part arranging periodical lumpsum repayments as our finances permitted. The first advances were made in the financial year 194(ML1, and for the six-year period a total of £60,834,184 ss. lid. was arranged in this way, but, by the periodical repayments the total outstanding, was kept down to a manageable figure, so that at the close of the war the balance was £22,500,000, and this was completely liquidated, as I have mentioned, before the close of last financial year, so that of a potential huge overseas debt of over £60,000,000 not a penny now remains as a liability against the Dominion. The debt of £22,500,000 in New Zealand currency representing £18,000,000 sterling was the subject of negotiation in 1944, in conjunction with the lump sum payments total £28,000,000 sterling which the British Government agreed to pay. The arrangement then made was that a maximum of £18,000,000 sterling borrowed or to be borrowed under the Memorandum of Security would be held over for further discussion at the termination of the war. : The New Zealand Government, however, after taking into account all, the relevant factors, decided that this debt should be liquidated forthwith. We appreciate the facilities made available to us in this way by the United Kingdom Government but have been happy to arrange for repayment in full of the debt so incurred.

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War Expenses Account, 1946-47 War Expenses Account has now been brought to the stage of what may be termed " mopping-up operations." It has been possible at this stage to eliminate and transfer to the Consolidated Fund continuing defence items and to limit the use -of the account to adjusting unsettled commitments of the past, meeting the cost of the J Force, and paying certain items of our rehabilitation programme. Expenditure for this year for the residual costs still chargeable to the account is estimated at £32,000,000, as follows: £(m. Navy .. .. .. .. .. .. .. .. i »2 Army (including cost of J Force) .. .. .. .. .. 11 *0 Air (including cost of J Force) .. .. .. .. .. .. 2*9 U.N.R.R.A. 4*l Reverse lend-lease .. .. .. .. .. .. .. I*s Rehabilitation .. .. .. .. .. .. .. .. B*o Purchase of surplus assets from U.S.A. .. .. .. .. .. I*7 Grift of food supplies to Britain .. .. .. ~ .. .. I*o Miscellaneous .. .. .. .. .. .. .. .. o*6 £32-0 Finance for this expenditure will be provided by—£(m.) National savings .. .. .. .. .. .. .. 6*o From U.S.A. Government in reimbursement for war supplies not eligible for reciprocal aid .. .. .. .. .. .. ..3*2 Disposal of surplus assets .. .. .. .. .. ..10*5 Sale of reserve stocks and other commodities .. .. .. .. 5*2 Miscellaneous receipts .. . . .. .. .. .. .. B*l £33-0 The estimates for the Service Departments cover costs connected with the J Force, estimated to amount to £4,000,000, the balance being required to meet accounts unpaid at 31st March last and rapidly diminishing charges such as for deferred pay, leave privileges, &c., which will be incurred this year. The amount provided here for rehabilitation covers only a small portion of our total programme and is for such items as educational grants, trade training, tools of trade, business loans, &c. A portion of the amount will also be set aside for transfer to the Land for Settlements Account for purchase and development of land far rehabilitation purposes. It has been the established policy of the Government to apply such moneys as can be accumulated in War Expenses Account over current requirements to the repayment of war debt, and it is

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proposed to continue this procedure, so that the surplus on the year's working and any part of the opening balance not already committed, will be transferred to Loans Redemption Account. National Savings National Savings continue on a sound basis. Until world supplies •of consumer goods and production in this Dominion together provide sufficient commodities to meet the needs and demands of the community, it is well that these savings should continue at a high level. It is not only desirable but essential to a stabilized cost of living that excess cash over and above that required for normal livingexpenses should continue to be saved and invested in National Savings. Further, as these moneys will be assisting our rehabilitation programme, those who continue to lend through National Savings, besides building up an asset for themselves in future years, can feel that their money is doing a worthwhile job in the meantime. Lend-lease Settlement An agreement was recently signed in Washington concerning settlement of lend-lease and reciprocal-aid transactions between New Zealand and U.S.A. Governments. It provided that in recognition of the benefits mutually received by the two Governments from the interchange of lend-lease and reciprocal-aid goods and services supplied during the war, no payment would be required of either •country, and that consequently all obligations arising from lend-lease and reciprocal-aid transactions were to be cancelled. Bold in its conception and generous in its application, lend-lease has been one of the most successful factors in the winning of the war. In 1941 when President Roosevelt announced the granting of lendlease assistance, the Empire pool of dollar funds had reached a very low level, but with the new facilities offered, the stream of munitions, •essential industrial materials, and foodstuffs was continued on an ever-increasing scale. It is difficult to gauge in terms of money, all the assistance given bv each country to the other, but taking goods returned or returnable, the difference in price levels and all other factors into account, it was agreed that lend-lease and reciprocal aid reasonably balanced one another. The cancellation of all obligations concerning lend-lease and reciprocal aid is a mutually satisfactory arrangement for both -countries, and it permits an approach to post-war international problems without any financial or other commitments as between the U.S. and New Zealand Governments. In. conjunction with the lend-lease and reciprocal-aid settlement, arrangements were concluded for the purchase by New Zealand Government Of U.S. surplus, war property to a total, value of approximately. 5,500.,000 dollars. The bulk of this equipment came from the

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Pacific, and it included such items as earth-moving plant, tools, tires and tubes, steel huts and buildings, navigational and aerodrome equipment, and civilian-type aircraft for use by the New Zealaiid, National Airways Corporation. Provision was made in the agreement for this material to be paid for by the establishment of a special fund in New Zealand currency. This fund will be available to theU.S. authorities for the provision of property and accommodation required for their institutions in New Zealand and to finance the cost of educational and cultural programmes, such as the creation of" scholarships, information libraries, and other facilities of mutual benefit to New Zealand and the U.S.A. PUBLIC DEBT With a net increase during last financial year of £21,273,000,. the public debt as at 31st March last reached the total of £624,511,000. Debt transactions for last financial year may be summarized asfollows: — Raised for war purposes — £ £ Victory Loan .. .. .. .. 25,645,000 Memorandum of Security .. .. .. 3,537,000 Treasury bills for refinancing part of Memorandum of Security .. .. .. .. 8,000,000 37,182,000" National Development Loans .. .. .. . . 12,980,000Purchase of Bank of New Zealand shares .. .. .. 7,038,000 s Total raised .. .. .. .. .. 57,200,000* Repayments — War Expenses Account — For Memorandum of Security .. .. 22,500,000 Repaying war debt in New Zealand .. .. "5,000,000 27,500,000 Public Debt Repayment Account .. .. 1,083:, 000 Loans Redemption Account (including £5,000,000 received from British Government and applied for redeeming war debt) .. .. .. 7,344j000 Total repaid .. .. .. .. .. 35,927,000 » Net increase .. .. .. .. .. £21,273,000 An item of outstanding importance, though not producing any variation in the total debt, was the repayment of loans of £16,107,000 on the Ist January, 1946, and £13,511,000 on the Ist February, 1946. Except for a small amount of £378,000, these two loans, carrying interest at 5 per cent, and 4 per cent, respectively, were domiciled in London, involving the payment of interest in sterling at the rates I have mentioned. These repayments were

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effected by the issue in New Zealand of stock totalling £29,618,000 at per cent., the stock being taken np mainly by the Reserve Bank, but partly by Treasury Accounts. The net saving in interest on this transaction is approximately £605,000, but the main benefit is the elimination of overseas interest totalling £1,330,000, which, coupled with the annual saving of £675,000 in connection with the Memorandum of Security repayment, gives a net reduction in overseas debt charges of over £2,000,000 per annum. ißank of N.Z. shares It will be noticed that £7,038,000 of the increase in the debt for last financial year was for purchase of Bank of New Zealand shares. Following the passing of the Bank of New Zealand Act, 1945, shareholders on the New Zealand register were given till the 31st January, 1946, to indicate the form of settlement desired, and ~fche major portion of the work was completed in time for incorporation in the accounts at 31st March last. The offers to the overseas shareholders in London and Australia closed on the 31st March, 1946, so that in neither of these cases is any portion of the transactions reflected in the accounts. The following shows the position to date of completed purchases:— £ Shares previously held by State .. .. .. .. 2,109,375 .Shares acquired under 1945 Act— £ In New Zealand .. .. .. .. 3,528,894 Overseas holdings .. .. .. .. 653,765 4,182,659 Overseas holdings still held privately .. .. .. 36,091 Total subscribed capital .. .. .. .. £6,328,125 An additional 6,640 shares have been purchased by the Government, but have not yet been actually transferred. The shares transferred have been paid for as follows: — £ Tax-free stock 3 per cent., 1957 .. .. .. .. 1,658,430 Ordinary stock 3 per cent., 1957-60 .. .. .. 6,466,925 London Register New Zealand Government stock 3£ per cent., 1962-65 .. .. .. .. .. .. 804,157 Cash .. .. .. .. .. .. .. 1,138,523 £10,068,035 Interest on stock issued will be offset by dividends received. I would take this opportunity of paying a tribute to the directorate and administration of the Bank, which have served for so many years as an integral part of the national economy of the Pominion, and to thank those directors who are remaining in office.

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The change to public ownership, as part of the Government policy, resulted in the transfer of some customers' accounts, although there has been an increase in the number of customers on the books of the Bank. The Bank is securing its share of the new business offering; no doubt some of the customers who transferred their accounts have now realized that the Government have not in any way interfered with the internal administration of the Bank and that the facilities offered are in every way comparable with those previously available. Domicile of Public Debt The war just ended was responsible for £221,775,000 of the total debt, while the amount still owing on account of the first world war is £58,297,000, including £32,738,000 nominally due to the United Kingdom Government, but in respect of which, under a general arrangement, all payments have been suspended for many years past. Thus all the effective war debt is domiciled in New Zealand and the London debt for other purposes has been reduced to £118,162,000, plus £32,738,000 or a total of £150,900,000 expressed in New Zealand currency. Overseas debt is a charge on our exports for payment of interest and repayment of principal and, therefore, means less imports for consumption by the people of this country. Payment on account of internal debt involves problems of taxation and administration, but no net loss to the country as a whole. The war debt does, however, represent resources that have been used for destruction purposes, and the capital so lost will remain a drain on current consumption until the debt is repaid out of taxation. The 1939-45 war debt alone constitutes a charge on the taxpayer in respect of interest and repayment of no less than £7,700,000 per annum. The total debt at 31st March last was domiciled for payment as follows: — £ £ "War Debt 1914r-18 (part London) 58,297,000 "War Debt 1939-45 (all in New Zealand) .. .. .. 221,775,000 280,072,000 Civil Debt, New Zealand .. 225,416,000 Civil Debt, London .. .. 118,162,000 Civil Debt, Australia .. .. 861,000 344,439,000 £624,511,000 It has been the policy of this Government not only to refrain from borrowing overseas for other than war, which as already mentioned has now all been repaid, but to repatriate the debt to the Dominion as quickly as circumstances permit, and since 1935 the civil debt held overseas has been reduced by no less than £47,645,000.

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Civil Debt The civil debt as at 31st March last, and amounting to £344,000,000 has been incurred for investment in the following assets:— £(m.) Railways development .. .. .. 77-3 Roads and highways .. .. .. 41-2 Housing .. .. .. .. .. 31-0 Land settlement and improvement .. .. 29-2 Hydro-eleetrie development ». .. . . 24-1 Pnblic buildings and schools .. .. .. 23-0 Post and telegraph services .. .. .. 18-0 State forests .. .. .. .. 4-2 Mining development .. . . .. 2-6 State Advances 1 Corporation .. .. .. 35-0 Bank of New Zealand .. .. .. 7*o Reserve Bank of New Zealand .. .. I*l Miscellaneous .. .. .. .. 50-3 £344-0 History of Public Debt ■ I should like to trace briefly the growth of the public debt since 1856 when the first loan of £500,000 was authorized by Parliament. This was partly applied to the redemption of the New Zealand Company's lien on the lands of the colony and to the purchase of Native lands. During the next ten years considerable sums were borrowed to finance Maori wars and for public works and immigration. In 1870 the total debt stood at £7,500,000, of which over £3,000,000 was provincial government debt. By 1877 the implementation of a vigorous public works programme had increased this to £20,500,000, of which £12,500,000 had been raised for public works. The debt continued to rise steadily after this as the country was opened up for settlement. At the outbreak of the first war the debt stood at some £100,000,000 and this had increased by 1920 to £200,000,000, of which 50 per cent, was domiciled overseas. In 1939 the total debt was some £340,000,000, and borrowing mainly for war purposes in the last seven years has brought it to its present figure of £624,000,000. As the country has progressed the relative importance of various types of public works has changed. Originally railways, roads and bridges were the main items; to-day, they are housing and hydroelectric power. Provision is made for the final extinction of all loans sixty years after their issue, and amounts are set aside annually from taxation for this purpose. It is also the policy of the Government, whenever possible, to repatriate debts domiciled overseas as they fall due, and by this means the annual interest and other charges payable from overseas funds have been reduced since 1935 from £7,156,000 to a figure for this year of £4,661,000.

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It will be appreciated, from an examination of the assets which I have just, described-that many of them are directly revenue producing and as such are little or no burden on the general taxpayer. The housing' policy, for which the present Government is responsible, •constitutes a worthwhile investment of the State's resources as -adequate housing facilities for the people are next, in importance to food and clothing. Hydro-electric development, which accounts for a public investment of £24,100,000, is entirely self-supporting; in fact, a profit has been earned each year in spite of the fact that electricity charges in New Zealand compare more than favourably with those in other parts of the world. EBasis of Budget The current year's Budget has been prepared on the basis that the peacetime costs of the Armed Forces will revert to the Consolidated Fund, and that the War Expenses Account will be provided with only sufficient funds to meet the expenses of the J Force, the portion of rehabilitation being charged to War Expenses Account, the outstanding commitments arising from the war and items which "will be eliminated entirely when the War Expenses Account is closed. All of these items will, it is anticipated, be covered by funds in "the account at the beginning of the year, National Savings receipts, moneys received from the sale of surplus assets, and miscellaneous receipts. The only new money being credited to War Expenses Account will be from the National Savings Scheme, estimated to produce £6,000,000 for the year. All taxation receipts, other than those for the Social Security Fund, are being credited to the Consolidated Fund. In regard to stabilization subsidies, which in the past have been met mainly from the War Expenses Account, a new vote is being included in the Consolidated Fund to meet these costs, together with other subsidies previously charged to various votes in the Oonsolidated Fund. CONSOLIDATED FUND Although war finance has of necessity attracted considerable in recent years, the Consolidated Fund still remains the most important section of the Public Accounts, as therein is reflected, oither directly or indirectly, the result of most of our financial transactions. The expenditure for last year, after taking into -account the amount authorized by the supplementary estimates, was estimated at £57,270,000, whereas the actual expenditure as •disclosed by the accounts was £57,252,000. The only material variation was under the heading " Debt Services," where interest was some £331,000 over the estimate, due to the payment before due -date of broken-period interest on debt paid off just prior to 31st

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March. This overexpenditure Was more than offset by reduced expenditure under the annual votes, so that the net expenditure as a whole was just within the amount provided. Revenue, totalling £58,506,000, exceeded the estimate under practically every heading. Income-tax, however, while still showing an upward trend as compared with the previous year, was approximately £500,000 under the estimate. The favourable balance of other items of revenue, however, produced a surplus for the past year of £1,254,000. It is proposed to leave this surplus in the Consolidated Fund to increase the working balance in the account to £4,510,000, which is still below what is considered a satisfactory amount for normal financing, as it is less than is required for one month's expenditure out of the Consolidated Fund. Allowing for the taxation reductions already in operation as from the beginning of this year and the further reductions which I will refer to shortly, and including the balance of war taxation now payable into the Consolidated Fund, the total revenue of that Fund during the present financial year is estimated at £100,382,000. On the expenditure side the estimates include the reinstated votes for the three Service Departments—Army, Navy, and Air —and the new vote to cover stabilization. Numerous minor items ancillary to our war effort and handled by various Departments of State as a charge against War Expenses Account have been transferred to the appropriate departmental votes. The total expenditure as set out in detail in the estimates is £99,465,000, leaving a balance of £917,000 for the supplementary estimates and contingencies. The following gives the estimated receipts and expenditure under main headings:— Receipts Taxation — £(000) £(000) Customs .. .. :■. „ . .. .. .. 14,500 Beer duty .. .. .. .. .. .. 4,200 Sales tax.. .. .. .. .. .. .. 14,250 Film hire .. .. .. .. .. .. 130 Highways .. .. .. .. .. .. 2,707 Stamp duty .. .. .. ... ... .. 8,000 Land-tax .. .. .. .. .. .. 930 Income-tax .. .. .. .. .. .. 30,750 National security tax .. .. .. .. .. 8,000 Miscellaneous .. .. .. .. .. .. 140 83.60T Interest recoveries from trading accounts, &c. .. .. .. 4,767 Profits of trading undertakings .. .. .. .. 1,507 Departmental receipts .. .. .. .. ~. 10,501 16,775 £100,382

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Expenditure Permanent Appropriations— £(000) £(000) £(000) Debt services— Interest and management .. .. .. 18,153 Repayment .. .. .. .. .. 4,249 22,402 Other special Acts .. .. .. .. .. .. 2,985 25,387 Annual votes — Social Services .. .. .. .. .. .. 34,737 Reinstated vote for Navy .. .. .. .. .. 1,200 ■ Reinstated vote for Army .. .. .. .. 2,862 i Reinstated vote for Air .. .. ■.. .. .. 3,833 New vote for stabilization .. .. .. .. ..13,789 Other votes .. .. .. .. .. .. 17,657 74,078 99,465 Supplementary estimates and contingencies .. .. .. .. 917 £100,382 Receipts — 1 Commenting briefly on the major items, Customs duty, beer duty, and sales tax continue to increase, and I have allowed for this in the current year's revenue estimates. Highways revenue also is brought in at a higher figure due to anticipated increased consumption of petrol. Stamp duty, which last year was approximately £500,000 over the estimate, due mainly to increased receipts from racing taxation, is shown at a slightly increased figure. The incometax figure takes into account the upward trend that has been evident for many years, but due consideration has been given to the taperingoff of the rate of increase. The reduction due to the increased wife's exemption has been allowed for, as well as the new tax reductions which I will outline in a few moments. The remaining heading of taxation requiring any comment is the national security tax. Last year this was at the rate of Is. 6d. in the £1 and produced £21,738,000. One-third of that tax has now been remitted, one-third transferred to the Social Security Fund, and the other third will this year be payable into the Consolidated Fund towards meeting continuing war costs, such as war debt charges, war pensions, &c. Interest receipts will be lower this year due mainly to the adverse position of railway revenue, thus affecting the ability of that undertaking to meet interest on its capital. As an offset to this, however, we now have the increased revenue from dividends of the Bank of New Zealand, which are brought in under the heading " Profits of Trading Undertakings." These are now shown separately, and include Reserve Bank, Post Office, and State Advances Corporation profits.

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The heading " Departmental Receipts " at £10,501,000 shows a material increase over the previous year's figures of £3,154,000. This is accounted for by two factors—first, the change in accounting procedure whereby credits-in-aid have been abolished and revenue previously shown as a reduction of expenditure is now brought in as revenue. The amount involved exceeds £4,000,000. The second matter affecting this revenue heading is the change-over of items from War Expenses Account to the Consolidated Fund. Where expenditure has been so transferred, the revenue or recoveries in respect thereof is also brought into the account bearing the expenditure. The major item in this connection is recovery from the Marketing Accounts of portion of the subsidies now being met in the first instance from the Consolidated Fund. Expenditure Dealing now with the expenditure, it is pleasing to note that the first and, incidentally, the largest single item —namely, debt services—shows a reduction of £394,000 over the amount actually paid out last year, and this reduction has been effected, notwithstanding an increase of over £21,000,000 in the public debt during last year. Increased provision is made each year for repayment of the public debt, the amount this year being £4,249,000, an increase of £285,000. The interest charge, however, is substantially lower due to the Government's administration of the overseas debt, repaying out of revenue where possible or otherwise replacing overseas debt at high interest rates by internal debt at lower interest rates. The balance of the expenditure under the permanent appropriations in the sum of £2,985,000 is substantially the same as for last year. On this occasion the annual appropriations are hardly comparable with those for last year, due to the various major differences in the set-up which I have already explained. I do not think any comment is required at this stage on the reinstated votes for the three Service Departments. As regards the new vote for " Stabilization," this covers the items previously charged to War Expenses Account and certain subsidies which have in the past been met out of the Consolidated Fund. This applies, for example, in the case of the subsidy on wheat paid out of the " Industries and Commerce " vote and the carriage of fertilizers charged to vote, " Agriculture." The amount of the new stabilization vote —namely, £13,789,000 is, of course, the gross expenditure and will be offset by recoveries of approximately £3,400,000, which are brought in under the heading " Departmental Receipts." •

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The total of the annual appropriations this year is £74,078,000 ■compared with the net expenditure last year of £31,752,000, a net increase of £42,326,000. This is accounted for by—- £ : Transfers of items from War Expenses Account .. .. .. 19,741,000 Credits in aid now abolished .. .. .. .. .. 4,143,000 Increase in wheat subsidy .. .. .. .. .. 954,000 Increase in social security transfer .. .. .. .. 11,000,000 Special items — £ Transfer of film studios .. .. .. .. 85,000 Contribution to international organizations .. .. 176,000 Abolition of recovery by Land and Income Tax Department from Social Security Fund .. .. .. 132,000 Abolition of Recovery by Health Department from Social Security Fund .. .. .. .. 136,000 Decentralization of the Land and Income Tax Department 32,000 Drought relief .. .. .. .. .. 30,000 Transfer to Land for Settlement Account .. .. 100,000 General election expenses .. .. .. . . 120,000 Milk marketing expenses .. .. .. .. 450,000 Other items .. .. .. .. .. 191,000 1,452,000 Departmental expansion— Public Works Department .. .. .. .. 1,012,000 National Employment Service .. .. .. 404,000 Education .. .. .. .. .. 774,000 War pensions " . .. ... .. .. 654,000 Health .. .. .. .. .. .. 299,000 Rehabilitation .. .. .. .. .. 127,000 Police .. .. .. .. .. .. 198,000 Scientific and Industrial Research .. .. .. 112,000 All other Departments .. .. .. 1,456,000 5,036,000 £42,326,000 It should not be overlooked that Departments are now resuming activities which, through lack of man-power, were heavily curtailed ■during the war period. Full particulars of the proposed expenditure are set out in the printed Estimates. SOCIAL SECURITY FUND The part which social security now plays in the economic life of the community focuses increasing attention on the position of the Social Security Fund. Monetary benefits for last year totalled £16,552,000, an increase of over £3,000,000 as compared with the previous year. Medical and hospital benefits and administration -expenses amount to £6,408,000, an increase of approximately £500,000, making a total expenditure out of the Fund for the year of £22,960,000.

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This was financed by revenue payable directly into the Fund, comprising the social security charge, registration fee, and totalling £15,286,000, and by a transfer from the Consolidated FuncL of £7,000,000, as set out in the Budget last year. The balance of expenditure over receipts was met by drawing on the moneys in theFund. It will be necessary to rebuild the working balance in this Fund, and I shall refer to that aspect in a few moments. The anticipated expenditure out of the Social Security Fund for 1946-47 reflects the increased benefits granted during the latter part of last year and the family benefits which operate from the-; beginning of the present financial year. The revenue payable directly into the Fund will now be augmented by the increase in terms of last year's legislation in thesocial security charge from Is. to Is. 6d. in the £l. Notwithstandingthis, however, to meet the additional benefits, a substantial increase will be necessary in the contribution from the Consolidated Fund:. Moreover, as the contribution from the Consolidated Fund cannot conveniently be made at the full monthly rate in the earlier part of the financial year and the social security charge itself is payable in part at periodical intervals while benefits are mainly payable on a monthly basis, a working balance of slightly over a month's expenditure is considered essential. Provision is accordingly beingmade this year to strengthen the Fund to this extent, involving a greater contribution from the Consolidated Fund than would otherwise have been required. Summarizing the receipts and expenditure, we arrive at thefollowing:— Receipts £ Social security charge .. .. .. .. .. .. 19,900,000 Miscellaneous receipts .. .. .. .. .. .. 138,000' Transfer from Consolidated Fund .. .. .. .. .. 18,000,000 £38,038,000' Expenditure £ . Monetary benefits other than family benefits .. .. .. 16,512,000 Family benefits .. .. .. .. .. .. .. 12,620,000 Medical benefits .. .. .. .. .. 5,806,000 Administration expenses .. .. .. .. .. .. 730,000 Emergency benefits .. .. .. .. .. .. 120,000 £35,788,000 On the basis I have outlined and taking into account the opening balance of £1,716,000, we should close the year with a carry forward of approximately £3,900,000.

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NATIONAL DEVELOPMENT PROGRAMME Our loan programme for the past year, apart from borrowing for war purposes, visualized £16,650,000 being required, but shortage of materials and the fact that our man-power was only partially reabsorbed into civilian employment militated against fully developing the plans made for the year. As a result, our borrowing was reduced, the amount raised under this heading being £12,980,000. As has been the case for several years past, the whole of this loan programme has been financed by funds received from State Departments for investment. Now that the war has happily ended, the Government are able to resume their long-term policy of public works. My colleague, the Hon. the Minister of Works, has already announced the Government's plans in this connection, covering the whole Dominion. Housing is, of course, regarded as of first priority, and although we have much lee-way to make up, even at present our housing standards compare favourably with those of any other part of the world. After housing is the important question of increasing hydroelectric supplies. In the North Island, a chain of ten electric-power stations generating 800,000 kilowatts is in the process of being constructed on the Waikato River, which will have the effect of trebling present supplies. In the South Island the Clutha River scheme will be implemented, while the Tekapo Lake control and power-station and the Cobb River and Waitaki extensions will be completed. Irrigation and land development occupies a prominent place in the Government's plans, the objective being not only to bring additional areas under cultivation and to improve existing holdings by the provision of adequate water-supplies, but by further reclamation to provide additional land for industrial purposes. Main Highways Account Highways and roads have now reached a stage where a comprehensive overhaul is due. Both have suffered from diversion of labour and materials during the war years and if New Zealand is to maintain her standard of arterial highways and roads, considerable expenditure must necessarily be incurred in both delayed maintenance and new development. In regard to the main highways the Government have decided to provide additional financial assistance to the account. The revenue of the Main Highways Account fell from £3,060,000 for the year 1938-39 to £1,692,000 for the year 1943-44. Because of this heavy reduction in income the recoupment of interest to the Consolidated Fund was suspended from the Ist April, 1943, until such time as the revenue of the Main Highways Account recovered sufficiently to pay current interest and the arrears. Wartime postponement of main-

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tenance works now necessitates so large an expenditure, however, that the Government deem it preferable to use the available funds for essential maintenance rather than payment of arrears of interest. It ! has been decided, therefore, to write off not only the arrears of interest (£1,416,297) to 31st March last, but also the interest •of approximately £520,000. This is equivalent to a grant of £1,936,000. In addition to the foregoing concession, the Government have decided that the sum of £1,226,000, advanced by way of loan in 1930, shall also be written off so that the Main Highways Account shall have no liability with regard to either interest or principal on that amount. Provision accordingly will be made in the ensuing Finance Bill. With these very substantial concessions it is anticipated that the Main Highways Account, the revenue of which is already mounting rapidly, will, from April, 1947 onwards, be in a position to meet its full liabilities under all headings. 1946-47 Programme As regards the current financial year cost of works to be provided from loan-moneys is set down at £21,000,000, compared with loans raised for this purpose during the past year of £12,980,000. As an illustration of the main projects upon which these loan-moneys will be expended the following table sets out the position for last year •compared with the 1946-47 estimates: — 1945-46. 1946-47. £ £ Housing .. .. .. .. .. .. 5,710,000 7,500,000 Electric supply .. .. .. .. .. 2,920,000 3,100,000 Land for settlements .. .. .. .. 1,500,000 3,500,000 Education buildings .. .. .. .. 1,188,000 1,250,000 Railway improvement .. .. .. .. 851,000 1,156,000 Highways .. .. .. .. .. .. 100,000 1,500,000 Other public works, including public buildings ; irrigation, soil conservation, and roads ; State forests ; State coalmines ; and telegraph extension .. .. .. 711,000 2,994,000 Details of the above proposals are to be found in the estimates of expenditure. A further item to be financed out of the National Development Loans Account is the capital of the New Zealand National Airways •Corporation following the passing, last session, of the New Zealand National Airways Act. In terms of this legislation a New Zealand National Airways Corporation was set up for the purpose of ■establishing and operating national air transport air services, both in the Dominion and overseas. The interests of the largest private ■Operator—namely, the Union Airways of New Zealand, Ltd.—have already been acquired, and at an early date the whole of the civil air transport services will be under the control of the new Corporation. Another corporation, owned by the United Kingdom, Australia, and New Zealand Governments, is being established to operate an air

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service across the Pacific connecting Australia and New Zealand with Vancouver via Fiji, Honolulu, and San Francisco. Canada will also operate a service on the same route, their activities being-co-ordinated with those of the Corporation and these services will run parallel with a like service organized and operated by a UnitedStates company. The whole of the loans funds required for the National Development programme will be provided by the State Departments and from the 3 per cent. " tap " issue at present open for publicsubscription on the local market. This loan, maturing 15th July, 1961-63, was opened on the 3rd January, 1946, the proceeds being applied initially to meet part of the cost of repaying loans which matured in London on the Ist; January and Ist February last. This procedure was continued till 31st March, 1946, when £2,625,430 had been subscribed. Since Ist: April, £5,500,000 has been received and has been applied towards the current year's national-development-loans programme. The total receipts from this issue so far has thus been over £8,000,000. In submitting this loan programme for the current year, I would remind honourable members that for some time past the Government: have been engaged in a comprehensive survey of capital works, covering the whole Dominion and including State, local authority, and private works, with the object, firstly, of ascertaining the magnitude of the problem which has to be faced during the next few years, and,,, secondly, of establishing a system of priorities depending on the resources available and the relative importance of the works. This; co-ordination of State and private effort will be of material import- : ance in ensuring that adequate progress is made in meeting the nation's housing requirements, and that, by maintaining a properflow of labour and material to such works, the Government's policy in regard to full employment is safeguarded. Hospital rating The Government has given consideration to the recommendations of the Parliamentary Select Committee on Local Government with respect to hospital rating. The Government does not agree that the hospital rate should be abolished. It agrees, however, that; it is. desirable that the rate should be stabilized. It has been decided that from the beginning of next financial year the hospital levy in any district of New Zealand shall not exceed 05 d. per pound of" rateable capital value. While the amount levied on local authorities will be determined on the above basis, each local authority will allocate the sum required amongst its ratepayers, according to the system of rating in voguein its area, It is also the view of the Government that hospital districts should be enlarged in order to promote a more efficient system of health administration and that a greater measure of control of Hospital Board expenditure should be exercised.

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'Regrading of State Services The legislation governing the major State Services provides for the regrading of those Services at intervals of not more than five years. The last statutory regrading undertaken was in 1937, and this would have been followed by a further review in 1942. It was, however, necessary to postpone the regrading during the war years, but the Government agreed to it being put in hand immediately hostilities ceased. The Railways Service, the Post and Telegraph Service, and the Departments under the control of the Public Service Commissioner will all be regraded as at Ist April, 1946. This involves the task of reviewing the salary grading of all positions in these Services, and, where necessary, realigning them. New salary scales, incorporating the cost-of-living bonus, have now been approved by the Government for application with the regrading. The review of positions and the introduction of revised scales should do much to remove any anomalies that have become apparent since 1937, and enable the Public Service to embark on its post-war tasks with the staff position placed on a proper basis. In addition to the services mentioned, a report has recently been presented to the Government by a Consultative Committee •covering recommendations in connection with the salaries of both primary and post-primary teachers. This report is receiving the urgent attention of the Government and an announcement will be made shortly as to the new rates which will cover, in addition, the salaries of the University teaching-staff. As regards the Armed Services, proposals for a general regrading have been prepared by the Navy, Army, and Air Force and are now being considered by a co-ordination committee representative of the three Services. As' soon as these investigations have been completed, they will be reviewed by the Government and a decision announced. Superannuation of State employees Legislation was passed last session of Parliament, improving very materially the superannuation benefits payable to State employees. It is proposed to introduce this session, a general consolidating and unifying, measure, when any existing anomalies will be removed. THE FUTURE Before outlining in detail the new proposals with regard to taxation, I would take this opportunity of discussing some of the longrange plans for the economic and social developments of New Zealand. Housing The Government's housing programme envisages the construction of 12,000 houses per annum during the next five years. Timber

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milling will be stimulated and strict control maintained over supplies in order to ensure that priority is given to the most urgent requirements. More houses will come before bigger houses. Education In the field of education there will be a vigorous school-building programme to overtake the wartime arrears of school buildings. With more buildings and more teachers a further extension of the school-leaving age will be possible and greatly extended services for the health and education of our children will be developed. Improvement is also to be made in University education facilities and the necessary finance will be made available in the Supplementary Estimates. Coal Coal production, which is the basis of so many of our industries, has given much concern during recent years particularly since the supplies previously available from Australia have been discontinued. Open-cast mining has been of material assistance, but from time to time the Government have found it necessary to purchase coal-mines,, often as a result of impending closing down, but in any case to increase production. The Government's policy in this connection is to acquire by purchase the whole of the privately-owned coalmines in the Dominion and to run them entirely on a national basis. The importance of adequate coal-supplies cannot be over-emphasized and the Government are convinced that nationalization is the only satisfactory solution of this problem. Primary Industries New Zealand ranks high among food-producing countries and we have great opportunity and a moral obligation to increase our production to the maximum. The Government's efforts will be directed towards encouraging increases in the production of meat and dairy produce, and agricultural crops, as well as in special produce to serve our domestic markets. The Government visualizes extensive land development, irrigation, and swamp-land reclamation and the bringing about of considerable improvements in rural living and working conditions. Secondary Industries It is the Government's policy to encourage the establishment and development of worthwhile secondary industries. Partly due to the war we have successfully established many new industries employing many thousands of workers and the production of consumer goods on an economic basis. As I have said earlier, import selection will still be necessary to ensure the most economic use of the Dominion's overseas funds. Although the maximum quantity of goods will be imported within the

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available funds, clearly the most advantageous use of the funds is to import goods which cannot be made in New Zealand and to make the fullest use of our own industrial resources. Rehabilitation Remarkable progress has already been made in the rehabilitation scheme and the Government will continue to do everything possible to restore the opportunities of ex-servicemen and women lost as a result of the war. Priority is assured to them for State houses and building materials and liberal education and trade-training facilities are provided. On the land, it is estimated that 8,000 ex-servicemen will require to be settled; 2,380 of these have already been settled. The settling of the remaining 5,620 will be pushed ahead as quickly as suitable land can be acquired and developed. TAXATION I now come to the important matter of taxation. The reduction in war expenditure following the demobilization of our Forces has now made possible a reduction in taxes. It is reasonable that the amount available should, as far as possible, be applied in reduction of war taxes. Last session the first step in this direction was made in the reduction in the national security tax by 6d. in the £l, which became operative in the early part of the present financial year. This reduction will involve a loss of revenue of £7,000,000 per annum. The relief in this respect is enjoyed by all taxpayers. A further benefit to the taxpayer, though not in respect of war taxation, was made in the complete abolition of the social security registration fee, amounting to approximately £600,000 per annum. Continuing war costs Before considering further taxation adjustments, it is necessary to study carefully the continuing costs which the war has imposed on our financial position. The additional permanent expenditure resulting from the war and represented by the difference between 1939 and 1946 costs, under the four main headings, is summarized as follows: — £(m.) Interest, management charges, and repayment cost of war debt of £221,775,000 .. .. .. .. .. .. 7*7 War pensions: 31st March, 1939, £1,616,000, now £2,050,000; 1939-45 war, £2,240,000 .. .. .. .. .. .. 3-0 Rehabilitation (apart from loan-moneys) .. .. .. .. 3-0 Extra costs of Navy, Army, and Air: 31st March, 1939, £2,220,000; 31st March, 1947, £7,895,000 .. .. .. .. .. 5-6 Increase ~ ~ ~ ~ .. .. .. £l9-3 2—B 6

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As set put in Table No. 1 attached to this Statement, total receipts from taxation for all purposes during last financial year amounted to £ll4 9 millions. This was derived from the following sources:— On income— £(m.) £(m.) Income-tax .. .. .. .. .. .. 35-3 Social Security charge . . .. .. .. . . 14-6 National Security tax .. .. .. .. .. 21*7 7l-6 Other taxes— Customs duty .. .. .. .. .. .. 11-7 - Sales-tax .. .. .. .. .. .. 15-0 Beer duty . . .. .. .. .. 4-0 Highways revenue .. .. .. .. .. 2-3 Stamp duties . . .. .. .. .. 7-8 Land-tax . . . . .. .. .. .. 0 9 Social Security registration fee . . . . .. .. 0-6 Miscellaneous . . .. .. .. \ . .. 10 43-3 £ll4-9 This shows an increase over the previous year, 1944-45, of £6,250,000 at the same rates of taxation. It is realized that the high taxation rates, which had necessarily to be imposed in connection with the war effort, may militate against the establishment and extension of industries, and we cannot hope to maintain a policy of full employment nor improve living standards without a balanced development of industries and sufficient incentive for industry to forge ahead. Our guiding principle is the encouragement of production, and to that end it is proposed to reduce or abolish first those taxes which tend to discourage work and enterprise; secondly, to reduce those which are reflected in production costs and the cost of living, while retaining those taxes which may be regarded as the. permanent sources of State revenue and which reflect less adversely on the nation's productivity. The practical solution of our tax and debt problems is a high level of production, employment, and national income. By these means we will not only lighten the burden of taxes and debt charges, but will achieve even higher standards of living than we have previously attained. The high level of production during the war years has given us a conception of what is possible. The problems confronting us are by no means easy ones. The economic machine must run smoothly, incentives must be given both to labour and to capital, there must be an equitable distribution of the national income, and the tax system must be so adjusted as to contribute to the maximum in attaining our objectives.

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Excess Profits Tax To provide a new stimulus to industry, thus benefitting all sections of the community, excess profits tax is to be abolished. This tax was imposed solely for war purposes, and its retention can no longer be justified. The object of the tax was, of course, to obtain for the State the greater proportion of the profits arising from wartime activities. The continuation of such a' tax would be a definite deterrent to industry, and, as I have already explained, the Government are particularly anxious to assist industry towards rehabilitation and expansion. The discontinuance of the excess profits tax will result in a loss of taxation of approximately £500,000 per annum. Income-tax Income-tax bears directly on the incomes of the people, and it is accordingly proposed, in respect of tax payable this financial year, to reduce the war surcharge from 33£ per cent, to 15 per cent. This concession will absorb an estimated amount of £4,750,000. Attached to this statement are schedules showing the effect of this reduction, together with the reduction from 2s. 6d. to 2s. in the £1 in the combined social security and national security tax, in so far as a typical married taxpayer and company profits are concerned. Tables 11 and 12 show in greater detail with regard to a wide range of incomes the tax to be paid and the residue remaining after payment of tax.

A married man with a dependent wife obtains a further reduction in income-tax through the increased amount of exemption for a wife—viz., from £5O to £lOO. This amendment has already been effected in the Land and Income Tax Amendment Act, 1945. His position is as follows: —

The married man with a wholly dependent wife and children for whom the universal family benefit is paid obtains the advantage of the social security benefit of 10s. per week for each child —paid

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Fixed Gross Income. Total Tax Payment during Last Year. Total Tax Payment during Current Year. Increased Residue. £ 400 500 600 800 £ 76 107 140 212 £ 54 80 107 166 £ 22 27 33 46

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regardless of the parents' income—and the two reductions in taxation rates, with the increased exemption for a dependent wife. The combination of these factors gives the following result: —

It will be observed from this last group, that a taxpayer with an income of £5OO and a dependent wife and three children would have a residue after payment of all income taxation during the financial year ended 31st March, 1946, amounting to £421. The amount which will be available in the same family during the current financial year will be £521. This additional £lOO represents an increase of 23 per cent, over the sum available during 1945-46. The rate of income-tax on companies will be restored to that which applied up to March, 1942. Companies will thus pay the basic rate of company income-tax plus 15 per cent., and will also pay social and national security tax at the reduced rate of 2s. in the pound. The effect of these reductions gives a much more favourable incentive to increased production than existed under the higher war rates of tax. This is demonstrated from the following table which shows a comparison of the amount available after payment of income-tax, social and national security tax.

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Fixed Gross Income. Residue Last Year, after Payment of all Income Taxation. Residue for the Current Year, including £26 per child Family Benefit, and including £50 per child exemption. Increased Residue. Taxpayer with dependent wife and one cMld £ £ £ £ 400 334 378 44 500 403 454 51 600 470 528 58 800 600 670 70 Taxpayer with dependent wife and two children 400 342 412 70 500 413 488 75 600 480 562 82 800 612 706 94Taxpayer with dependent wife and three children 400 376 J, 438 62 500 421 & 521 100 600 490 ill 596 106 800 624 , 742 118

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These adjustments, it is hoped, will provide that measure of encouragement for workers and employers alike to assist in the restoration of peacetime industry to the maximum extent possible. Gold Export Duty Another tax which was specially imposed for war purposes was the additional gold export duty imposed in 1939. Under the circumstances it is now proposed to abolish the whole of this additional charge which should assist materially in gold-mining operations in the Dominion. Primage Duty on Books and Periodicals In response to representations made at the conference of booksellers on 19th March last, the Government have decided to remove the 3 per cent, primage duty from books and periodicals on the understanding that book-prices to the public will be reduced by 5 per cent. The necessary Order in Council has been passed and will come into operation to-morrow, the 16th instant. Sales Tax The present rates of sales tax are high and were designed, firstly, to provide portion of the revenue required for war purposes, and, secondly, tb discourage expenditure on consumer goods during the war period. The Government proposes to make the maximum reductions possible with the funds available as quickly as possible. One method would be to reduce all items bearing a 20 per cent, sales tax to, say, 10 per cent. Such an adjustment, however, would have tlje disadvantage that it would not benefit such < items as timber and clothing, which are already taxed at the rate of 10 per cent. The Government are particularly anxious to reduce building costs, while clothing is an essential item in living costs, and any savings would be of direct benefit to the public. Consequently, as an alternative to a general reduction from 20 per cent, to 10 per cent., the Tariff Schedule has been carefully examined, and it is proposed to make individual reductions according to the necessities of the particular items with the object of benefiting families and home-builders. To this end it has been decided to abolish entirely the sales tax on (a)

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Total Taxation Residue Increase in Assessable during Year Present under Residue over Income. ended 31st Residue. Present Previous March, 1946. Proposals. Year. £ £ £ £ £ 2,000 805 1,195 1,321 126 5,000 2,847 2,153 2,583 430 7,000 4,673 2,327 2,990 663 10,000 7,028 2,972 3,968 996 , . ...

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all building materials, including timber, cement, building paper and wallboard, glass, hardware, wallpaper, paint, bricks, and roofing materials; (b) clothing of all descriptions; (c) household furnishings of all kinds, including perambulators; and (d) a miscellaneous number of items including dried or dehydrated fruits and surgical and dental instruments. The total taxation reductions for a full year is estimated at £7,000,000. To the extent that the items concerned are at present being subsidized for stabilization purposes, the subsidies will be discontinued as soon as administratively possible, but nevertheless the net effect of these adjustments will be substantially to reduce living costs generally. A complete list of the items concerned is shown in the Resolution which will be submitted to the House at the conclusion of this statement. The exemptions from sales tax which I have mentioned will involve a loss of revenue for a full year of £7;000,000, but as these will operate for six months and a half only of this year the concessions this year will mean a reduction of £3,800,000. Summary of Tax Reductions These taxation adjustments may be summarized as follows, showing the effect for a full year and also the loss of revenue for the present financial year:— Full Year Present Year Already in Operation — £(m.) £(m.) Reduction in national security tax .. ..7*o 7-0 Abolition of social security registration fee .. .. o*6 o*6 Reduction due to increased wife exemption ... I*3 I*3 8-9 8-9 Proposed — Reduction of income-tax surcharge from 33£ per cent. to 15 per cent. .. .. .. .. 4*7 4-7 Elimination of excess profits tax .. .. ..o*s o*s Reductions in sales tax .. .. .. .. 7*o 3-8 Reductions in gold duty and primage duty .. 0-1 0-1 l2-3 9-1 21»2 18-0 Honourable members will appreciate that taxation concessions amounting in a full year to no less than £21,200,000 during what may be described as the transitional period represents a very material relief from the burden of taxes imposed on account of the war, and at the same time should encourage all sections of the community to produce to the maximum of their ability and so ensure that New Zealand plays her part in the re-establishment of world economy.

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Double Taxation An additional measure of relief is afforded by an arrangement recently made with the Chancellor of the Exchequer of the United Kingdom for the elimination of double taxation of income. I am pleased to be able to tell you that complete agreement has been reached with the United Kingdom Government on all important points. A formal document is now in course of preparation, and it is hoped that this will be finished at an early date so that the terms of the agreement may be announced and made operative as early as possible. The agreement will prove of real assistance to traders and others with interests in both countries. Conclusion And now, Mr. Chairman, my task for this evening is reaching an end. That task has been more agreeable than any in recent years, because this is the first Budget since New Zealand, with the Allies, emerged victorious from the most desperate war ever fought to preserve human rights and justice against savage and brutal forces seeking to subjugate the world. In opening I said that to-day is a great anniversary—a year ago to-day was VJ Day. It is equally fitting to recall that this is also another notable anniversary. Five years ago to-day the world was thrilling to the announcement of the terms of the Atlantic Charter, which had been adopted on the previous day as embodying the guiding principles of the United Kingdom and the United States of America. That Charter was the foundation on which the construction of the machinery of international co-operation was commenced. It was the beginning of the road to United Nations, and recognition of the hopes and ideals of mankind. Many recognized the great step forward it made, and its terms only required more careful definition and elaboration to make it the Magna Carta of all nations. That Charter recognized the desire to bring about the fullest collaboration between all nations in the economic field with the object of securing for all improved labour standards, economic advancement, and social security. New Zealand has already indicated for a decade that it recognizes the need for considerable advances to a better world and a richer life for mankind. Whether we work in the field, factory, or office, or whether our dealings are with other nations and their citizens, the way to true happiness and prosperity lies along the road where the maintenance of our rights is matched with the realization and observance of our community responsibility. Many great leaders have expressed their faith in national and international organization capable of giving mankind the chance to ensure that the vast suffering of the conflict through which we have passed shall not have been in vain.

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In a memorable address a short time ago Field Marshal Smuts, Prime Minister of South Africa, said: — " People are searching their own souls for the causes that have brought us to this pass. May it be our privilege to see that this suffering, this travail and search of man's spirit, shall this time not be in vain. Without feeding on illusions, without pursuing the impossible, there is yet much in the common life of the people which can be remedied, much unnecessary inequality and privilege to be levelled away, much common-sense opportunity to be erected as the common birthright, and public atmosphere for all to enjoy as a right. Health, housing, education, decent social amenities, provision against avoidable insecurities —all these simple goods, and much more, can be provided for, and thus a. common higher level of life achieved by all." May I also direct your minds to what I feel are the deep-seated and abiding realities affecting this country of ours as a Sovereign State, and as a member of the world family of nations. We are a new country. There are people now living who can remember our early beginnings. We have, through our own strivings and development, and through our steadily maturing sense .of national responsibility, achieved our adulthood as a nation. As an adult nation we stood shoulder to shoulder with our friends in the conflict now ended. It is as an adult nation that we stand face to face with friends and former foes alike to ensure that the sacrifices of war bear good fruit in time of peace. I am more than ever convinced that the key to success in this great aim is the wholehearted adherence to the maxim that, to a just observance of our rights and privileges, we must unite a firm resolve to shoulder our every obligation and responsibility—individual to individual, individual to nation, nation to individual, and nation to nation. These are sentiments that must strike an echo in the hearts and souls of our people in New Zealand for here those ideals have been steadily growing and flourishing. Because of our natural bounties and our general appreciation of the necessity for community responsibility in the attainment of those ideals New Zealand is among the fortunate nations. Let us bend ourselves further to the task of implementing a programme that is designed to entrench our gains in the field of national and international practical idealism.

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Table No. 1 Revenue of the Consolidated Fund, Social Security Fund, and War Expenses Account for the Year ended 31st March, 1946, and for the Year ended 31st March, 1945

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I

1946. 1945. Consolidated Social Security War Expenses , P . , Consolidated Social Security War Expenses , Fund. Fund. Account. • L0 ' ;ai • Fund. Fund. Account. AUWU * Taxation— ££££££££ Income-tax .. .. .. 26,465,912 .. 8,821,971 35,287,883 25,686,050 .. 8,562,017 34,248,067 Land-tax .. .. .. 937,395 .. .. 937,395 952,622 .. .. 952,622 National security tax .. .. .. .. 21,737,527 21,737,527 .. 20,526,552 20,526,552 Social security charge .. .. .. 14,557,460 .. 14,557,460 .. 13,663,858 .. 13,663,858 Registration fees .. .. .. 585,713 .. 585,713 .. 574,436 .. 574,436 Customs duties .. .. .. 8,800,016 .. 2,861,443 11,661,459 8,471,679 .. 2,788,310 11,259,989 Beer duty .. .. .. 2,308,600 .. 1,712,578 4,021,178 2,074,458 .. 1,535,003 3,609,461 Sales tax .. .. .. 4,505,443 .. 10,558,975 15,064,418 4,063,558 .. 9,539,368 13,602,926 Highways tax .. .. .. 2,324,068 .. .. 2,324,068 1,929,618 .. .. 1,929,618 Stamp duties .. .. .. 2,802,089 .. 5,024,014 7,826,103 2,282,152 .. 5,060,548 7,342,700 Postage .. .. .. .. .. 600,000 600,000 .. .. 600,000 600,000 Other .. .. .. .. 227,195 .. 100,339 327,534 229,259 .. 120,554 349,813 48,370,718 15,143,173 51,416,847 114,930,738 45,689,396 14,238,294 48,732,352 108,660,042 Loan-moneys .. .. .. .. .. 37,182,884 37,182,884 .. .. 54,418,343 54,418,343 Reciprocal aid .. .. .. .. .. 26,836,516 26,836,516 .. .. 24,545,702 24,545,702 Interest receipts .. .. .. 5,857,264 .. .. 5,857,264 5,363,806 .. .. 5,363,806 Disposal of surplus assets .. .. .. .. 11,269,753 11,269,753 .. .. 3,478,643 3,478,643 Other receipts .. .. .. 4,277,833 143,020 1,774,377 6,195,230 3,194,596 38,112 1,606,617 4,839,325 58,505,815 15,286,193 128,480,377 202,272,385 54,247,798 14,276,406 132,781,657 201,305,861 Transfers from Consolidated Fund .. —7,000,000 7,000,000 .. .. —10,700,000 4,500,000 6,200,000* 51,505,815 22,286,193 128,480,377 202,272,385 43,547,798 18,776,406 138,981,657 201,305,861 previous year's surplus.

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Table No. 2 Statement of the Actual Net Expenditure of the Consolidated Fund (Ordinary Revenue Account) for the Financial Year ended 31st March, 1946, compared with that of the Financial Year ended 31st March, 1945.

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— Year ended 31st March, 1946. Year ended 31st March, 1945. Increase. Decrease. Permanent Appropriations— Under special Acts of Legislature— Civil List £ 95,441 £ 79,451 £ 15,990 £ Debt Services— Interest Sinking Fund Repayment of Public Debt Act, 1925 .. Transfers to Loans Redemption Account Payments on guaranteed loans Administration and management 18,584,434 3,914,184 50,000 247,760 17,323,346 3,585,147 182,546 Gr. 3,948 296,606 1,261,088 329,037 3,948 132,546 48,846 Total—Debt Services 22,796,378 21,383,697 1,594,073 181,392 Other Services—• Highways Other special Acts 2,319,130 288,942 1,916,948 4,608,298* 402,182 4,3i9,356 Total —Other Services 2,608,072 6,525,246 402,182 4,319,356 Total —Permanent Appropriations Annual Appropriations— VoteLegislative 25,499,891 27,988,394 2,012,245 4,500,748 126,994 121,506 5,488 Prime Minister's Department 41,346 35,628 5,718 External Affairs 208,670 177,023 31,647 Finance — Treasury Customs Land and Income Tax Stamp Duties Audit 73,787 176,307 328,226 177,965 90,977 94,837 156,842 211,112 136,407 43,896 19,465 117,114 41,558 47,081 21,050 Total—Finance 847,262 643,094 225,218 21,050 * Includes transfer of £4,000,000 to War Expenses Account.

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Table No. 2 —continued Statement of the Actual Net Expenditure of the Consolidated Fund, etc. —ctd.

III

— Year ended 31st March, 1946. Year ended 31st March, 1945. Increase. Decrease. Annual Appropriations—continued V ote —continued General Administration — Public Service Commissioner's Office Internal Affairs Island Territories Printing and Stationery Marine Labour Native Valuation Electoral "Census and Statistics National Employment Service Rehabilitation £ 27,190 649,887 384,873 352,726 231,948 132,983 275.345 75,345 28,283 71,233 182,020 293.346 £ 20,574 585,815 286,706 409,035 183,851 239,143 330,586 48,491 11,225 32,988 142,080 £ 6,616 64,072 98,167 48,097 26,854 17,058 38,245 182,020 151,266 £ 56,309 106,160 55,241 Total—General Administration 2,705,179 2,290,494 632,395 217,710 Law and Order — Justice and Prisons Crown Law Office Police 311,186 9,841 730,973 267,261 8,476 759,193 43,925 1,365 28,220 Total —Law and Order 1,052,000 1,034,930 45,290 28,220 .Maintenance of Public Works and Services 1,942,344 881,715 1,060,629 Development of Primary and Secondary Industries — Organization for National Development Lands and Survey Agriculture Scientific and Industrial Research .. Mines Transport Industries and Commerce Tourist and Publicity 14,742 509,144 1,067,463 331,275 67,651 114,330 998,539 258,240 7,582 380,810 1,130,315 228,545 97,585 83,236 644,927 231,323 7,160 128,334 102,730 31,094 353,612 26,917 62,852 29,934 Total—Development of Primary and Secondary Industries Social Services— Health Mental Hospitals Education War and other pensions Social Security National Provident and Friendly Societies Total —Social Services 3,361,384 2,804,323 649,847 92,786 2,692,389 863,808 6,460,623 4,172,633 7,000,000 112,448 2,162,551 563,546 5,067,571 3,840,335 4,500,000 109,100 529,838 300,262 1,393,052 332,298 2,500,000 3,348 21,301,901 16,243,103 5,058,798 Unauthorized Expenditure— Services not provided for 164,694 812,869 648,175 Total —Aanual Appropriations 31,751,774 25,044,685 7,715,030 1,007,941 9,727,275 5,508,689 5,508,689 Total Expenditure 57,251,665 53,033,079 4,218,586

Table No. 3 SOCIAL SECURITY FUND

IV

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— Year ended 31st March, 1943. Tear ended 31st March, 1944. Year ended 31st March, 1945. Year ended 31st March, 1946. Estimate for Year ending 31st March, 1947. Receipts Registration, fees Social security charge Miscellaneous receipts Balance from previous year Transfer from Consolidated Fund .. Expenditure Administration expenses Emergency benefits Hospital benefits, &c.— Maternity benefits Hospital benefits Medical benefits Pharmaceutical benefits Supplementary benefits Monetary benefits— Age Widows Orphans Family Invalids Miners Maori War Unemployment Sickness Universal superannuation Balance £ 540,921 11,624,046 48,673 3,023,835 3,800,000 £ 551,064 12,796,108 44,913 3,086,801 4,100,000 £ 574,436 13,663,858 38,112 2,945,139 4,500,000 £ 585,713 14,557,460 143,020 2,389,701 7,000,000 £ 25,000 19,900,000 113,000 1,716,302: 18,000,000 19,037,475 20,578,886 21,721,545 24,675,894 39,754,302 518,030 118,923 505,219 1,539,282 1,016,032 563,247 97,399 7,783,084 866,597 20,628 790,719 1,036,374 80,100 189 49,639 362,088 603,124 3,086,801 509,294 115,573 513,939 2,133,389 1,179,331 762,198 137,823 8,101,669 949,099 22,442 876,858 1,067,409 76,653 118 32,316 376,878 778,758 2,945,139 563,676 105,834 530,734 2,266,688 1,287,023 980,237 170,032 8,492,015 985,451 23,253 1,405,112 1,072,619 74,367 78 27,822 351,866 995,036 2,389,702 721,587 121,959 600,209 2,173,460 1,427,309 1,133,366 229,971 9,817,615 1,043,593 24,178 2,611,759 1,183,537 88,359 101 31,661 565,420 1,185,508 1,716,302 730,000 120,000" 621,000 2,195,000 1,496,000 1,206,000 288,000 11,530,000 1,506,000 23,000 12,620,000 1,415,000 98,000 10O 30,000450,000 1,460,000 3,966,202 19,037,475 20,578,886 21,721,545 24,675,894 39,754,302

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Table No. 4 WAR EXPENSES ACCOUNT Statement showing the Net Expenditure for the Year ended 31st March, 1946, compared with the Year ended 31st March, 1945

V

— Year ended 31st March, 1946. Year ended 31st March, 1945. Increase. Decrease. Navy— Pay and allowances Accommodation, victualling, and clothing War and other stores Medical services Educational and vocational services Land, buildings, and ships Docking, repairs, maintenance, and rent Transport Miscellaneous effective services Non-effective services £ 3,527,039 561.315 182,947 16,044 4,262 744,833 346,802 i 285,454 108.316 237,481 £ 2,950,412 432,148 1,238,578 10,049 8,797 713,907 904,600 330,076' 156,588 193,926 £ 876,627 129,167 *5,995 30,926 43,555 £ 1,055j 631 4,535 557,798 44,622 48,272 ArmyPay and allowances .. .. Accommodation, victualling, and clothing War and other stores Medical services Educational and vocational services Land, buildings, and fortifications Repairs, maintenance, and rent Transport Miscellaneous and effective services Non-effective services 6,014,493 6,639,081 1,086,270 1,710,858 23,183,540 2,398,504 Or. 7,022,410 558,400 19,195 307,952. 295,513 3,871,426 368,525 36,879 23,136,937 2,665,124 20,358,248 481,025 14,849 695,307 364,305 2,959,997 285,970 7,415 46,603 77,375 4,346 9ii,429 82,556 29,464 266,620 27,380,658 387,355 68,792 24,017,524 50,969,177 1,151,772 28,103,4£6 Air — Pay and allowances Accommodation, victualling, and clothing War and other stores Medical services Educational and vocational services Land, aerodromes, and other buildings Repairs, maintenance, and rent Transport Miscellaneous effective services Non-effective services 9,297,772 1,595,862 15,515,117 66,641 2,401 484,623 97,405 465,442 4,532,257 64,909 10,451,540 2,127,039 18,223,341 62,663 7,888 957,808 143,365 863,513 321,348 124,599 '$,978 4,21.0,909 1,153,768 531,177 2,708,224 "5,487 473,185 45,960 398,071 59,690 Ancillary— Primary producers' subsidies Stabilization subsidies Grants and subsidies for promotion and expansion of war production E.P.S. and other security measures Services for Armed Forces (recoverable) Reserve stocks, indents, and manufactured goods (recoverable) Soldier' financial assistance, patriotic, and similar grants Bulk purchases and sales by Pood Controller National Service Department UNRRA Miscellaneous (recoverable in part and whole) Miscellaneous (non-recoverable) 32,122,429 33,283,104 4,214,887 5,375,562 1,498,296 3,033,057 362,288 354,903 Gr. 877,036 Or. 4,066,041 2,459,369 2,559,324 150,746 214,394 2,207,396 0.5,246,406 473,733 211,542 140,509 1,180,365 961,073 3,084,432 379,869 762,742 382,873 Gr. 1,761,899 297,277 1,078,443 221,720 1,119,364 103,108 348,962 76,825 1,253,351 1,078,443 144,895 1,865,007 51,685 133,987 1,640,241 4,889,811 3,229,487 6,479,057 Rehabilitation advances, <fcc. Reciprocal aid : Reverse lend-lease Gratuities Transfer to Loans Redemption Account 2,572,967 22,777,672 18,000,000 27,500,000 1,243,318 26,734,595 6,250,000 1,329,649 18,000,000 21,250,000 3,956,923 70,850,639 34,227,913 40,579,649 3,956,928 50,262,065 45,625,825 45,625,825 Total 134,645,326 130,009,086 4,636,240

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Table No. 5 PUBLIC DEBT Maturity and Domicile of Debt outstanding, 31st March, 1946

StnvtMARY op Departmental Investments £ Investments held by accounts within the Public Account .. .. 21,059,265 National Broadcasting Service .. .. .. . 1,950,000 Marketing Department .. .. .. .. .. 14,451,755 Government Life Insurance .. .. .. .. 4,187,075 Native Trustee .. .. .. .. .. .. 242,010 Post Office .. .. .. .. .. .. .. 143,340,771 Post Office: National savings .. .. .. .. 35,031,000 Public Trustee .. .. .. .. .. .. 20,030,056 Reserve Bank .. .. .. .. .. .. 45,571,965 State Advances Corporation .. .. .. .. .. 3,010,000 State Fire Insurance Office— Accident Branch .. .. .. .. .. .. 572,500 Fire Branch .. .. .. .. .. .. 1,035,600 £290,481,997

VI

Due in Loans maturing in Financial Year ending 31st March.* London (in Australia. New Zealand. Total Debt (Nominal Amount). New Zealand Currency). Public. Departmental. / £ £ £ £ £ Overdue 4,130 4,130 Treasury bills 18,000 54,982,000 55,000,000 Funded, debtf 30, i.25,249 30,125,249 Interest freei 367,446 367,446 1947 3,523,823 164,271 3,688,094 1948 14,177,011 82,300 6,583,630 1,839,250 22,682,191 1949 12,491,760 355,425 12,847,185 1950 9,375,000 18,786,815 9,337,280 37,499,095 1951 1,562,500 779,000 2,341,5001952 2,612,985 10,704,130 13,317,115 1953 11,352,695 9,393,505 1,126,385 12,479,080 1954 9,i.53,224 346,475 18,893,204 1955 2,613,636 6,141,870 357,130 9,112,636 1956 15,000,000 17,604,745 1,723,950 34,328,695 1957 30,128,530 7,530,245 37,658,775 1958 24,031,831 19,570,195 139,118,778 182,720,804 1959 10,171,980 55,678,098 65,850,078 1960 7,250,705 1,306,510 8,557,215 1961 7,889,599 17,651,415 2,162,120 27,703,134 1964 9,174,570 8,613,710 3,749,950 21,538,230 1966 21,547,734 21,547,734 1972 6,250,000 6,250,000 Totals 150,900,354 861,300 182,267,939 290,481,997§ 624,511,590 * In respect of many of the loans the Government has the option to redeem the securities at an earlier date. For particulars, see B.-l [Pt. I]. t Imperial Government i advances funded in terms of section 8, Finance Act, 1922. Payments at present suspended. t Interest-free loans are for various periods, the hulk being for the duration of the war and stipulated . periods thereafter. § Includes holdings by Reserve Bank previously shown under " Public."

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Table No. 6 IMPROVEMENT IN NEW ZEALAND ECONOMIC CONDITIONS Most Recent Information compared with Earlier Periods

VII

Depression low. 1935-36. 1938-39. Latest Figure. — Unit. Year ended 3l8t March. Amount. Year ended 31st March. Amount. Year ended 31st March. Amount. Year ended 31st March. Amount. Production — Value of total production Volume of total production (1938-39 = 100) £(m.) .. Index No. 19321 83-3 1936 1 1936 1 113-8 93 19391 19391 136-1 100 19461 19441 184-5® 107 Value of farm production Volume of farm production (1938-39 — 100) £(m.) .. Index No. 1932 1 49-2 19361 1936 1 72-5 101 19391 19391 82-6 100 19461 19461 112-0 5 107 6 Value of gross farming income £(m.) .. 1933 1 38-1 19361 57-8 19391 69-0 19461 94*5® Wool production (bales) .. .. .. (000) .. 19361 717 19461 1,006 Butter production (tons) (000) .. 19361 168 19461 126 I Cheese production (tons) (000) .. 19361 89 19461 90 Meat production (tons) .. (000) .. 19361 440 19461 507 Value of factory production 2 Volume of factory production 2 (1938-39 = 100) £(m.) .. Index No. 1933 1 17-7 19361 19361 23-2 76 19391 19391 30-5 100 19461 19441 44 -0 s 129 Total factory employees (000) .. 1934 85-8 1936 102-3 1939 123-7 1946 141-8 Electric-power production (units) Million.. 1936 1,031-7 1939 1,413-5 1945 2,273-8 Gas production (coal-gas sold) (cubic feet) Million.. 1936 3,324-4 1939 3,591-4 1945 4,533-5 Coal production (tons) (000) .. 1933 4 1,821 1935 4 2,115 1938 4 2,222 1945 4 2,834 Timber production (superficial feet) Million 1932 154-2 1936 293-1 1939 316-7 1944 350-7 For footnotes see end of table.

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Table No. 6—continued IMPROVEMENT IN NEW ZEALAND ECONOMIC CONDITIONS— continued Most Recent Information compared with Earlier Periods— continued

VIII

Depression low. 1935-36. 1938-39. Latest Figure. 4 4 4 4 —' truit. %%% g-gg g-gg Sua Amount. Amount. ©ug Amount. $-ag Amount. b-l « >H fl tH fl >H 8 8 S 3 3 M 03 CO M Production —continued Building permits issued in urban districts — Total value all buildings .. .. .. .. £(m.) .. 1933 2-5 1936 5-9 1939 12-1 1946 16-4 Private dwellings .. .. .. .. .. Number 1933 1,496 1936 4,140 1939 8,093 1946 7,736 Government housing construction: Dwellings commenced Number .. .. .. .. 1939 3,432 1946 2,623 (included above) Membership of workers'unions .. .. .. .. (000) .. 1933 4 71-9 1935 4 80-9 1938 4 249-2 1944 4 223-0 Transport and Communication — Value of exports (excluding specie) .. .. .. £(m.) .. 1932 33 • 9 1936 49-7 1939 57-9 1946 88-9 Volume of total exports (1936-38 = 100) .. .. Index No. .. .. 1935 4 96 1938 4 97 1945 4 95 6 Value of imports (excluding specie) .. .. .. £(m.) .. 1932 24-8 1936 37-4 1939 54-4 1946 57-0 Post and telegraph: Volume of business handled .. .. £(m.) .. 1933 153 1936 220 1939 286 1946 655 Radio-receiving licenses .. .. .. .. (000) .. .. .. 1936 3 192-3 1939 3 317*5 1946 3 393-0 Railways — Passenger journeys .. .. .. .. .• Million.. 1933 18-4 1936 20-4 1939 23*3 1946 32*4 Net ton-miles run .. .. .. .. .. Million.. 1933 363-4 1936 443-6 1939 574-5 1946 842-5 Motor-vehicles licensed .. .. .. .. Number 1933 3 195,019 1936 3 228,247 1939 3 307,931 1946 3 315,5009 Finance — Aggregate private income .. .. .. .. £(m.) .. 1933 91-8 1936 124-6 1939 185-8 1945 304-0 6 Salaries and wages payments (included above) .. .. £(m.) .. 1933 58-9 1936 72-5 1939 109-5 1946 185 -2 6 Trading bank deposits (excluding Government) .. .. £(m.) .. 1932 51-0 1936 62-1 1939 64-1 1946 133-7 Weekly bank debits (excluding Government) .. .. £(m.) .. 1933 10*4 1936 13-8 1939 18-0 1946 27-6 Net bank-note circulation .. .. .. .. £(m.) .. 1932 5-8 1936 6-6 1939 10-4 1946 35-7 Net overseas funds of banks (New Zealand business only) .. £(m.) .. .. 7 1936 8 44-1 1939 8 9-3 1946 8 98-4

JB—6

IX

Finance —continued Post Office Savings-bank — New deposits Amount to credit of depositors £(m.) .. £(m.) .. 1933 1933 3 16-9 42-0 1936 19363 25-6 . 52-9 1939 1939 3 30-4 60-7 1946 1946 3 67-9 128-5 Trustee Savings-banks — New deposits Amount to credit of depositors £(m.) .. £(m.) .. 1933 1933 3 5-7 10-5 1936 1936 3 6-7 11-8 1939 1939 3 8-6 13-9 1946 1946 3 16-0 27-3 National Savings Accounts : Amount to credit £(m.) .. 1946 3 26-9 Mortgages registered Mortgages discharged .. .. .. Land transfer transactions £(m.) .. £(m.) .. £(m.) .. 1934 1933 1934 7-8 8-1 9-6 1936 1936 1936 16-2 17-6 15-6 1939 1939 1939 20-0 16-6 23-7 1946 1946 1946 22-5 23-3 38-4 Sales-tax receipts (ordinary revenue) Sales-tax receipts (war taxation) .. £(m.) .. £(m.) .. 1936 2-5 1939 3-6 1946 1946 4-5 10-6 Miscellaneous — Totalizator investments £(m.) .. 1933 3-3 1936 4-5 1939 7-8 1946 " 16-4 Marriages (rate per 1,000 of mean population) Births (rate per 1,000 of mean population) 1932 4 1935 4 6-81 16-17 1935 4 1935 4 8-23 16-17 1938 4 1938 4 10-09 17-93 1945 4 1945 4 10-06 23-22 Prices Index Numbers — Exports (1909-13 = 1000) Number 1932 4 892 1935 4 1102 1938 4 1367 1945 4 1857 Wholesale (1926-30= 1000) Number 1932 4 878 1935 4 936 1938 4 1036 1945 4 1584 Retail — Food groups (1926-30 = 1000) All groups (1926-30= 1000) .. .. Wartime price index (15th December, 1942 = 1000) Number Number Number 1933 4 1933 4 732 795 1935 4 1935 4 835 837 1938 4 1938 4 991 951 1942 4 1942 4 19461 0 1127 1109 1009 Wage-rates — Nominal: Adult males (1926-30 = 1000) Effective : Adult males (1926-30= 1000) Number Number 1933 4 1932 4 833 1031 1935 4 1935 4 858 1025 1938 4 1938 4 1081 1137 1945 4 1942 4 1381 1102 Share prices — Industrial (1938= 1000) .. .. .. All groups (1938= 1000) Number Number 1932 4 1932 4 667 769 1935 4 1935 4 1102 1112 1938 4 1938 4 1000 1000 1945 4 1945 4 1285 1346 1 Production year —approximately twelve months ended June. 2 Does not include factory processing of primary products. * As at end of March. 4 Calendar year. * Advance estimate. 8 Preliminary estimate. ' Not available. 8 As at last Monday in March. * Vehicles used by the " Armed Services " not licensed. 10 15th March.

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Table No. 7 TAXATION AND PRIVATE INCOME

X

Year ended 31st March, Average per Head of Population. Reconciliation with Retail Price Index. Private Income. Taxation. Net Private Income. Retail Prices Index Number* (1931-32 = 1000). Gross Private Income. Taxation. Net Private Income. 1932 .. 1933 .. 1934 .. 1935 .. 1936 .. 1937 .. 1938 .. 1939 .. 1940 .. 1941 .. 1942 .. 1943 .. 1944 .. 1945 .. £ 65-7 600 65-6 68-6 79-6 99-8 108-7 115-3 122-5 132-3 141-5 161-2 178-5 182-6 £ 11-5 12-9 13-9 15-9 16-3 19-8 23-1 23-5 27-2 37-5 41-8 53-6 61-6 65-3 £ 54-2 47-1 51-7 52-7 63-3 80-0 85-6 91-8 95-3 94-8 99-7 107-6 116-9 117-3 1000 915 896 913 944 983 1047 1072 1126 1172 1210 1257 1267 1270 £ 65-7 65-6 73-2 75-1 84-3 101-5 103-8 107-6 108-8 112-9 116-9 128-2 140-9 143-8 £ 11-5 14-1 15-5 17-4 17-3 20-1 22-1 21-9 24-2 32-0 34-5 42-6 48-6 51-4 i £ 54-2 51-5 57-7 57-7 67-0 81-4 81-7 85-7 84-6. 80-9 82-4 85-6 92-3 92-4 * Wartime price index linked on to Censtis and Statistics Department's retail prices series.

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AGGREGATE PRIVATE INCO ME— TOT ALS

XI

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AGGREGATE PRIVATE INCOME-PER HEAD

XII

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Table No. 10 RETAIL PRICES OF BASIC FOODSTUFFS

Table No. n COMPANY INCOME Kate of surtax 33J per cent., reduced to 15 per cent., and the combined social security and national security rate reduced from 2s. 6d. to 25., both reductions operating: for income derived by companies during the year ended 31st March, 1946, the positionis :

XIII

Retail Price (in New Zealand Currency). Commodity. Unit of Quantity. New Zealand (June, 1946). Australia (Sydney), (May, 1946). South Africa 1 (May, 1946). Great i Britain (May, 1946). 1 1 Canada ! (February, 1946). United States of America (January, 1946). Bread Flour Tea Sugar Milk Butter Cheese Beef (prime ribs) Mutton, leg Mutton, shoulder Bacon 2 lb. loaf 25 lb. bag lb. lb. quart lb. lb. lb. lb. lb. lb. s. d. 0 5f 4 4 3 lOi 0 4 - 0 6f 1 6 1 0 0 7f 0 10 0 7 1 S. d. 0 5| 5 3| 2 3 0 4 0 lb 1 8" 1 5| 0 8 0 9i 0 5$ 1 10 s. d. 0 8£ 8 1I| 3 1 0 4J 1 o| 2 11 2 3£ 0 10 1 3 1 Oi 2 10 s. d. 0 of 6 6i 3 6i 0 5 0 Hi 2 1 1 4£ i n 1 10 0 10 2 41 s. d. 0 9 5 9J 4 41 0 5f 0 7 2 H 1 11* 2 31 2**71 s. d. 1 11 9 111 5 ll| 0 5 0 llj 3 4f 2 21 2 0£ 2**61

Assessable Income. Income-tax. Social Security Charge and National Security Tax. Total. Residue left. Increase in Residue under Budget. Proposals. £ £ s. d. £ £ s. d. £ s. d. £ 1,000 191 13 4 100 291 13 4 708 6 8 55 2,000 479 3 4 200 679 3 4 1,320 16 8 126 3,000 862 10 0 300 1,162 10 0 1,837 10 0 213 4,000 1,341 13 4 400 1,741 13 4 2,258 6 8 313 5,000 1,916 13 4 500 2,416 13 4 2,583 6 8 430 6,000 2,587 10 0 600 3,187 10 0 2,812 10 0 564 7,000 3,309 8 9 700 4,009 8 9 2,990 11 3 663 8,000 4,025 0 0 800 4,825 0 0 3,175 0 0 797 9,000 4,528 2 6 900 5,428 2 6 3,571 17 6 896 10,000 5,031 5 0 1,000 6,031 5 0 3,968 15 0 996

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Table No. 12 MARRIED TAXPAYER-DEPENDENT WIFE AND TWO CHILDREN

XIV

Fixed Gross Income per Annum. Tax Payment during Financial Year ended 31st March, 1946 : Residue includes Family Benefit paid subject to Means Test. Tax Payment during Financial Year ended 31st March, 1947: Residue, including universal family benefit £52. Increase in Residue. Tax Residue Tax Residue £ £ £ £ £ £ 400 .. 58 40 342 412 70 500 .. . 87 64 413 488 ~ 75 600 .. 120 90 480 562 82 800 .. 188 146 612 706 94 1,000 .. 263 207 737 845 108 1,500 .. 480 391 1,020 *1,161 141 2,000 v .. 738 613 1,262 *1,439 177 ! Income-tax at basic rate, plus 33} per cent. Combined charge at 2s. 6d. Income-tax based on income derived during year ended 31st ' March, 1945, and paid in Febru1 ary, 1946. Wife exemption, £50. Child exemption, £50. Income-tax at basic rate, plus 15 per cent. Combined charge assumed at 2s. for whole of year. Income-tax based on income for year ended 31st March, 1946, and payable in February, 1947. Wife exemption, £100. *Maximum rebate in tax, £26. Child exemption, £50.

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Copy of Prospectus of Conversion Loan Dominion of New Zealand

NEW ZEALAND GOVERNMENT CONVERSION LOAN Issue at par op 3-per-cent. Stock maturing 15th April, 1960-63, in exchange for 4-per-oent. Stock and Debentures maturing 15th April, 1946-49 Public notice lias been given in the New Zealand Gazette of intention to repay on the 15th April, 1946, stock and debentures of the 4-per-cent. loan maturing 15th April, 1946-49. The Minister of Finance having declared the securities mentioned in the preceding paragraph to be convertible in terms of section 15 of the New Zealand Loans Act, 1932, the Reserve Bank gives notice that on behalf of the Minister it is authorized to receive •applications for the conversion of such securities. Conversion Offer. —In accordance with the terms of this Prospectus holders of convertible securities are offered conversion at par as from the 15th April, 1946, into—-3-per-eent. stock maturing 15th April, 1960-63. Interest on Convertible Securities.—A full half-year's interest on the convertible securities will be paid on the 15th April, 1946, after which date interest on the convertible securities will cease. Applications. —Holders accepting the offer of conversion must transmit their applications on the prescribed form to the Reserve Bank of New Zealand, Wellington, or lodge them with the District Treasury Officer at Auckland, Christchurch, or Dunedin, •or with any branch of any trading bank, postal money-order office, or trustee savings-bank in the Dominion for transmission to the Reserve Bank. Applications for conversion may be for the whole or a part of any holding to which the offer applies, bat must be for a multiple of £5 and must be accompanied by any relative documents of title such as debentures (with interest coupons intact in respect of the period subsequent to the 15th April, 1946) or certificates of title to stock in cases where such certificates have been issued. Assented Stock. —From the date of the closing of the lists for conversion applications until the 11th March, 1946, holdings in respect of which conversion applications have been received will be regarded as " Assented " stock. Closing of Registers.—The register relating to the 4-per-cent. 1946-49 stock will be closed for transfers on the 11th March, 1946. Repayment of principal and the final payment of interest will be made to the registered holders of the stock as at that date, and conversion will be effected only in the names of the registered holders of the stock on that date. Securities not converted.—Convertible securities subject to this offer and not converted will be repaid at par on the 15th April, 1946, on presentation to the Reserve Bank of New Zealand of a request for redemption on the prescribed form, accompanied by the relative documents of title such as debentures (with interest coupons intact in respect of the period subsequent to the 15th April, 1946), or certificates of title to stock where such titles are on issue. Redemption requests with documents of title, such as debentures, may be lodged at the District Treasury Offices at Auckland, Christchurch, or Dunedin, or at any branch of any trading bank or trustee savings-bank in New Zealand, or at any postal money-order office in the Dominion, for transmission to the Reserve Bank. New Securities.—Ordinary registered stock tendered for conversion will be replaced by ordinary registered stock in accordance with the application submitted.

XV

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Death Duty stock will be replaced by stock having the same condition of availability for the payment of death duty attaching thereto. Debentures tendered will be replaced by ordinary registered stock. Holders of ordinary registered stock in the new issue may, by making application on the prescribed form, exchange such stock for Bearer Stock Certificates with interest coupons annexed. Interest on New Securities. —Interest on new securities issued in conversion will be paid on the 15th April and the 15th October in each year. The first payment will be made on the 15th October, 1946, and will be for the half-year ending on that date. Interest on stock will be paid free of inland exchange by means of interest warrants, which will be transmitted by post. Existing instructions for the payment of interest in the Dominion will apply in respect of stock in the new issue. Interest on stock certificates to bearer is paid free of inland exchange by means of coupons annexed to the certificates. Interest coupons may be presented at the Reserve Bank of New Zealand, Wellington, at any branch of the Bank of New Zealand, or at any postal money-order office in New Zealand. Transfers. —The Register of stock for the new issue will be kept" at the Reserve Bank of New Zealand, Wellington, where transfers will be registered without payment of any fee. Stock certificates to bearer (until the name of some person is inserted therein as the holder) are transferable by delivery. Certificates of Title. —Certificates of title surrendered with applications for conversion will be cancelled. Any holder requiring a certificate of title for stock of the new issue must make separate application on the prescribed form. No fee is payable for the issue of a certificate of title. Repayment. —The Minister of Finance reserves the right to repay the 3-per-cent. 1960-63 loan at par at any time during the period 15th April, 1960, to the 15th April, 1963, on giving at least three months' notice in the New Zealand Gazette of his intention to repay. If not previously redeemed, the loan will be repaid at par at the Reserve Bank of New Zealand on the 15th April, 1963. Commission. —Commission at the rate of ss. per £lOO nominal value of convertible securities will be allowed to bankers and registered sharebrokers on conversion acceptances bearing their stamp. Copies of this Prospectus and forms of application may be obtained from—(1) The Reserve Bank of New Zealand, Wellington : (2) The District Treasury Offices at Auckland, Christchurch, or Dunedin : (3) Any branch of any trading bank or trustee savings-bank in New Zealand : (4) Any postal money-order office in New Zealand : (5) Members of the New Zealand Stock Exchanges. The lists for the loan will be opened forthwith and will be closed on the evening of the 15th February, 1946. The Reserve Bank, however, is authorized to accept applications after the closing-date specified in any case where in the opinion of the Bank application prior to such date was impracticable. Reserve Bank of New Zealand, Wellington, 15th January, 1946.

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Copy of Prospectus of Internal Loan Dominion of New Zealand NEW ZEALAND GOVERNMENT LOAN • Issue at par of 3-per-cent. Stock maturing 15th July, 1961-63 Interest payable 15th January and 15th July Authorized to be raised in accordance with the provisions of the New Zealand Loans Act, 1932, whereby the interest and principal are a direct charge upon the'public revenues of the Dominion. Trustees may invest in this Loan under the powers of the Trustee Act, 1908, unless expressly forbidden by the instrument (if any) creating the Trust. The Reserve Bank of New Zealand gives notice that, on behalf of the Minister of Finance, it is authorized to receive applications for the issue of stock in terms of this Propectus. The proceeds of this issue will be used partly to extinguish some of the liability incurred in New Zealand to provide funds for the redemption of London Loans amounting to £23,392,000 sterling, and partly for National Development purposes. 1. Applications. —Applications, which must be accompanied by a remittance for the full issue price of the stock, may be lodged at the Reserve Bank of New Zealand, Wellington, at any Branch of any bank in New Zealand, including trustee savings-banks, at the District Treasury Offices at Auckland, Christchurch, or Dunedin, or at any postal money-order office in New Zealand. Applications must be for a multiple of £lO, with a minimum of £5O. 2. Securities. —New Zealand Government Stock will be issued in either of the following forms, as may be directed by the applicant in the form of application : (a) Ordinary Stock, transferable by Memorandum of Transfer without payment of any fee and free of stamp duty unless the transfer is by way of gift. Ordinary Stock may be exchanged for Stock Certificates to Bearer free of charge : (b) StocJc Certificates for any amount of not less than £5O, with interest coupons annexed. When issued, Stock Certificates will be payable to bearer and will be transferable by delivery. The first or any subsequent holder may insert the name of a nominee, after which the Stock Certificate will not be transferable. Stock Certificates payable to bearer or to a person named in the Certificate may at any interest date be converted into Ordinary Stpck without the payment of any fee. 3. Registration.—The Register of Stock will be kept at the Reserve Bank of New Zealand, Wellington, where transfers will be registered free of charge. Any minor of the age of ten years or upwards is entitled to be registered as the holder of Stock and to execute transfers thereof. Ordinary Stock will be registered in the names of the applicant, and Registration Certificates will be issued as soon as registration has been effected. If a Certificate of Title is required, application should be made on the prescribed form. 4. Interest. —Interest will be paid half-yearly on the 15th January and 15th July in each year, and the first payment, representing interest from the date of the lodgment of the application moneys up to the 15th July, 1946, will be made on that date. The first payment ivill in every case be made to the original subscriber and will be paid by means of warrants forwarded by post from the Reserve Bank of New Zealand. Subsequent payments on Ordinary Stock will be made by means of interest warrants forwarded to the stockholder as at the due date of payment. The Reserve Bank of New Zealand, however, will accept directions from stockholders for payment of interest to any agent in the Dominion, and existing instructions for the payment of interest will apply to Stock issued in terms of this Prospectus, iv—B 6

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Interest on Stock Certificates, other than the first payment which will be paid in accordance with the provisions outlined in the second paragraph of this section, will be paid by means of coupons annexed to the Certificates. 5. Repayment. —The Minister of Finance reserves the right to repay the 3-per-cent. 1961-63 Loan at par at any time during the period 15th July, 1961, to the 15th July, 1963, on giving at least three months' notice in the New Zealand Gazette of his intention to repay. If not previously redeemed, the Loan will be repaid at par at the Reserve Bank of New Zealand on the 15th July, 1963. 6. Exchange on Remittances. —Cheques in payment of amounts subscribed to this Loan will be accepted free of inland Exchange. 7. Commission. —Commission at the rate of ss. per £IOO of Stock issued will be allowed to Bankers and registered Sharebrokers. Copies of this Prospectus and forms of application may be obtained at the Reserve Bank of New Zealand, Wellington ; at any branch of any bank in New Zealand, including trustee savings-banks ; at the District Treasury Offices at Auckland, Christchurch, or Dunedin ; at any postal money-order office in New Zealand ; or from a member of any Stock Exchange in the Dominion. The list of applications will be opened forthwith and may be closed at any time ■determined by the Minister of Finance. Reserve Bank of New Zealand, Wellington, 3rd January, 1946.

By Authority: E. V. Paul, Government Printer, Wellington—l 946. Price Is. 3c?.]

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