THE ECONOMIC SITUATION.

Press, Volume LXVI, Issue 20106, 9 December 1930, Page 10

THE ECONOMIC SITUATION.

o DOMINION'S PROBLEMS. ADDRESS BY LORD BARN BY LTHE PHESS Special Service.] WRLLTNGTON, December 8. Economic; problems, which a re engaging the attention of Governments in all parts of the world, were dealt with by Lord Barnby. a distinguished figure in finance and industry in England, when speakin" at the luncheon tendered him by tbo Wellington Chamber of Commerce to-day. He paid special attention to New Zealand conditions, and made a number of interesting suggestions. "So great has been tho hospitality I have received, and so cordial tho conversations in so many directions, that 1 feel 1 should not be considered impertinent were I, as a visiting industrial ist, fired with admiration ot New Zealand's I'uluie possibilities, to be frank in expressing current opinions." be said. "The world is experiencing a cycle of declining prices in terms of gold. Primary producing countries like New Zealand must tind Iho income from the sale of their produce severely reduced. Their spending should be correspondingly at least as much or moro reduced. This is unfortunate, I admit, for countries from which they buy manufactured ■ oods, and, above all. Great Britain. That is why wo are vitally interested in seeing the situation corrected as ou'ckly as possible. Deflation of the prices of produce carries with it the imed of deflation of services, that is. the unit cost of labour in all its fo nils. Overhead Costs. "World factors govern the prices ot produce. New Zealand is Lrymg ny arti.icial means to neutralise, or at least to delay, the reflection of the local natural movement ill the remuneration lor services renuered. Obviously, it a reduction ol' nominal wages, that is, money currency rates, is not made, then all wago earners are experiencing an ac.iial real wage increase by Hie higher purchasing power of what they are receiving. Now, times oi adversity are not tile time for in.Teased production costs by higher costs. The extenL to which individual earnings need not bo reduced owing to the substitution where possible of 'payment bv results,' and so attaining lower wage unit costs, is entirely a local matter, but to attempt to hinder the natural play of ec nomie forces is only to postpone tho inevitable correction and delay tho return of prosperity. As I understand it the situation would call for legislation bv agreement making t>os c iblo 'imultaneoiw aicendnicnts in all existing awards of the Court. 'lbis, like other aet'ons, recc-so rily requires courage and the snbniorg<*iico of Party interests by local r,tate<unen. Kelief Works. It would follow, though almost a platitude to all thinking men, that with equal courage the railways should be reorganised as an ordinary ea.mnereial undertaking and made free from poli licit I . influence. .Why try to evade the unescapable logic that it is no loi gc-r a monopoly, since road transportation, private and collective, is an irrepres-ib'.o competitor who has come to stay? Again, social service legislation and the extension of bureaucracy, however desirable in prosperity, must in the current adversity be rigorously denied, even ruthlessly curtailed. '1 he payment"! made for relief work should he"limited to a basis sufficiently below current intes for normal employment to nut such relief work into tho proper relation to the general wage rate and remove risk of such relief payments di-turbim: the existing employed. Action bv New Zealand along these and ether obvious linwould alone appear likely to give confidence to roanholders and. again in due course when correction has been effected, make avai'nble to Xew Zealand the funds which she, like all new and developing countries, must have to ensure sound and prudent progress. Land Values. •'Everywhere 1 have been impressed with the scope for increased production, dairy products meat, fruit, etc. National eflicicncy and intensive research are collaborating to accomplish this, incidentally New Zealand must in any case courageously face a substantial diflation of laiul values. The deflation of services, that is, wages, will also carry with it a deflation ot the value of buildings. Incidentally, I can with confidence state that as production costs are definitely falling in Great Britain, while they are rising in competing countries like France, New Zealand importers can to-day buy in Great Britain with greater confidence than evor that they arc getting f->r thoir money the best values in die world Tn your national life, if J may add reflections without trespassing on your hospitality, there appears a, need in many directions of rationalisation. commercial and industrial. A falling price level compels readjustments and the elimination of many units whoso development and perhaps existence the prosperity of a rising price level alone make possible, and the shorter the delay in recognition and correction the greater the contribution to the general readjustment. Agreement by the central banks of the issue to a bettor use of existing gold reserves would, I admit, lighten the present pressure, but until an upturn in the curve of world prices occurs the need for universal readjustments to lower levels remains imperative.''