8.—6.

highways are classified as State highways, for the maintenance of which the Main Highways Fund is responsible. Since the present Government has been in office local bodies have been afforded considerable relief, in this manner, from the burden of highways construction and maintenance. Improvements have in addition been carried out in regard to the Railways Service. In particular the Government had to face the legacy of delayed maintenance from depression years necessitating heavy expenditure on permanent ways, rolling-stock and railway equipment, in the interests of efficiency and the public safety. In pursuance of its policy of safeguarding and, where possible, opening up new markets overseas for the Dominion's exports, the Government has entered into negotiations with a number of Empire and foreign countries. To date agreements have been successfully concluded with Germany, Holland, and Switzerland. The agreement with Canada has been extended and revised with immediately beneficial results so far as imports into Canada of New Zealand butter and meat are concerned; that with Australia has also been revised in New Zealand's favour. It is anticipated that discussions relative to trade matters which have recently taken place with the Governments of other countries—notably the United States of America and France —may result later in further agreements, while, as a result of lengthy negotiations with the United Kingdom Government, New Zealand's primary industries are now assured of scope for future expansion and development. These and the various other activities of the Government have naturally involved considerable additional expenditure, but it is satisfactory to note that they have all been carried out within the limits of a " balanced " Budget; in fact, in each of the years under review a surplus has resulted from the year's operations. The additional expenditure has been made possible almost entirely as the result of the expansion of the public revenues arising from the increased prosperity of the Dominion. I will not burden you with a detailed statistical review of the improvement in economic conditions during the present Government's term of office. I would, however, draw your attention to merely a few of the more outstanding latest results compared with those quoted in the 1935 Budget. Thus the value of total production shows an increase from £98,800,000 to £136,100,000, farm production from £63,300,000 to £88,600,000, salaries and wages payments from £65,700,000 to £98,600,000. Land transfers have increased from £12,200,000 to £23,300,000, and net ton-miles run on the railways from 420,000,000 to 561,000,000. Further comparative details will be found in the statistical summary included in the Appendix. May I, in conclusion, emphasize that the progressive development of the Dominion is dependent upon the extension of secondary industries —that, in anticipation of the completion of the major public works now in progress and those still to be commenced, we must have in being manufacturing establishments to make commodities that are exchangeable within the Dominion both for other forms of secondary production and for our primary products. This extension of secondary industries must synchronize with an increase in population and the gradual diversion of employment from the construction of means of communication to our land and our factories. Housing facilities must be made available on or near our farms so that comfortable accommodation will be available to our farm workers as landdevelopment and production are extended. There are innumerable avenues for the extension of production which must be explored and utilized to the full. The Reserve Bank of New Zealand has made and can make major contributions to the development of the Dominion —the financing of the Dairy Industry Account and the provision of funds for housing are cases in point. The knowledge that, inside sound economic financing procedure, whatever funds are required for development and production of goods, if not otherwise available, can be provided by this means gives a stability to the finances of the Dominion that could not be obtained from any other source. The cost of financing Government operations in the Dominion has never been lower than it is to-day.

Railways.

Overseas trade.

Balanced Budget.

Reserve Bank.

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