NO EXCUSE!

Bay of Plenty Beacon, Volume 10, Issue 76, 22 January 1947, Page 5

NO EXCUSE!

COMPLACENCY IN N.Z.

BANK PRESIDENT’S VIEWS “New Zealand emerged from the war relatively stronger than most ~ Allied countries, and prices have been held in check by the stabilisation policy, but the existing situation there should give no excuse for complacency, for inflationary pressures are merely bottled up and involve the continuance of controls.” This was how the president of the Bank of New South Wales, Sir Frederick - H. Tout, MLC. referred to New Zealand’s economy in his presidential address at the bank’s annual meeting in Sydney recently. “London funds,” he said, “have increased to a substantial level and the Government has repaid a large amount of overseas debt. In acldi-. tion, primary industry is assured for the present on a market at profitable prices, for all it can produce under f the extended bulk purchase agreements.”

The period of transition in New Zealand had been rather similar to, that in Australia. Both countries were inclined to doctrinaire ideas of government and were contemplating nationalisation in fact or in effect of several key industries and services. In external 'economic relations they seemed reluctant to commit themselves, although their permanent interests clearly lay in international collaboration to restore world trade.

“The immediate danger factor is the rise in the cost of essential imports but no less disturbing is -the trend in internal costs. Inroads into the policy of stabilisation were allowed last year in the form of sectional wage increases, and then a general wage increase. The 40-hour week will also add substantially to costs.

“These matters, however, have been regarded in New Zealand rather more self-critical than in Australia. In seeking to preserve price stabilisation in these circumstances, the Government is. confronted with a mounting bill for subsidies which add to the size of the budget and increase the burden of the taxpayer. This situation is causing concern, for the alternatnve policy will be to allow a rise in prices, Which in. _ turn will provoke further demands for higher wages. Obviously, price stabilisation cannot operate effectively without wage pegging,” he continued."

Improve Productivity

The real foundation for preventing an embarrassing rise in internal prices,, was an improvement in pro-* ductivity. There existed in New Zealand, as elsewhere, a large sur-v'_. plus of spending power over the supply of goods and services available, and the pressure on prices 7 thus set up would be lessened only . when the majority of demands were satisfied. Real living standards would improve only through an increase in the output of goods to satisfy demand at reasonable prices.

“The future of internal costs is also important for appraising the prospects of primary industry,” add-v ed the president. “At present, exten-' sion of bulk purchase agreements with the United Kingdom allows a useful interval for agricultural reorganisation,- but within a few years when world agriculure is restored, competition for the British market is likely to be keen, and • Britain, will be obliged to purchase in the* cheapest market in order to protect her balance of-payments. “New Zealand then may not be • > able to rely on such favourable treatment and may'find that she. , will have difficulty in selling the whole, of her exportable surplus afc profitable prices.

“The immediate outlook is therefore hardly ■ a satisfactory guide to the future, and as New Zealand must, still rely on imports for essential manufactures, the balance of payments will continue to be the Dominion’s chief preoccupation,” he concluded.