DAIRY INDUSTRY

Press, Volume LXXXII, Issue 24913, 28 June 1946, Page 8

DAIRY INDUSTRY

MR WALSH’S ADDRESS TO CONFERENCE

SUBSIDIES AND COSTS DISCUSSED

(P.A.) WELLINGTON, June 27. ‘‘My advocacy of reducing unit costs arises from my belief that farmers and farm workers are entitled to have their standard of living increased in a manner commensurate with that of the rest of the community—and if we organise our economy wisely we can, now that the war is over, progressively raise the living standards of our people,” said Mr F. P. Walsh, who represents the Federation of Labour on the Economic Stabilisation Commission, in an address to-day to the National Dairy Association. He added that living standards were not raised by inflating money incomes. They could be raised only by increasing the output of goods and services. So long as this output was increased, costs could be held without damage to the standard of living. Mr Walsh said he would like to correct a misleading statement which had appeared in the National Dairy Association’s recent annual report with reference to subsidies and stabilisation accounts. “It was stated there that ‘The cost of subsidies on fertilisers and other commodities, farm and factory cost allowances, subsidies on stock feeds, subsidies on grain crops for pig feed to save the importation of grain, and many others are found out of these accounts, and not one penny comes from the Consolidated Fund, the War Expenses Account, or any other public source.’ The true position is that for 1945-46 the amounts paid from the dairy and meat stabilisation accounts are estimated to fall short of total payments from the War Expenses Account for subsidies on the items mentioned by about £1,000,000. The statement is also incorrect in that during the war years before the stabilisation agreement, the Consolidated Fund had already carried about £2.250,000 in superphosphate subsidy alone, of which about £1,250,000 could be considered as a subsidy to the dairy industry. General Subsidies “Further, I would point out that the liability of the dairy industry stabilisation account in respect of subsidies is limited by the agreement of March, 1945, so that if wage costs rise above certain levels the increases are not chargeable against the dairy industry stabilisation account. In addition, it should be mentioned that all farmers get the benefit of general stabilisation subsidies, as distinct from those which can be classed as purely farming subsidies. General stabilisation subsidies' not only benefit farmers as consumers, in the same way as they benefit all other consumers, but they benefit farmers as producers, because the holding of the cost of living items keeps the general level of wages down, thus holding farm and factory costs. “These points are commonly forgotten when statements are made to the effect that farmers pay all their own subsidies.” This question of holding costs, Mr Walsh continued, was fundamental to the stabilisation policy. “The nation with the low cost structure, particularly the primary producing country, has the position of advantage when the world market is in a state of readjustment,” he said. “There is a particular advantage in the case of the dairy industry, where the major competition may come from margarine, as well as from other primary producing countries. Stabilisation in New Zealand 'means a divorce of internal prices from overseas parity. If stabilisation is to be held in New Zealand, fortuitous increases or decreases in overseas prices must not be allowed to play havoc with internal prices and costs. There is a definite link between farm incomes and the general wage level. If one goes up, the other goes up, and there is a needless upward pressure on costs. The purpose of pool accounts is to avoid shocks of this nature being administered to the economy.” British Market Nothing was more certain to lead to contraction of markets for New Zealand’s foodstuffs than high costs and high prices. Britain’s emphasis on cereal production would eventually be replaced by the development of pasture lands and market gardens. But this would happen only if England could be assured that she' could import all other needed food products—butter, cheese, cereals, and meat—at reasonable prices. With imports tofr dear. England would be forced back to producing a larger part of her basic foodstuffs, and so reduce the market open to New Zealand. The same effect would be achieved by a concentration on the production of margarine. “This means simply that New Zealand can be its own worst market enemy if it does not fight for lower costs of production and higher efficiency,” said Mr Walsh. “As world production increased, and the scarcity phase passed, the danger of falling world prices would inevitably emerge. The country that had kept its costs low and its efficiency high would meet that danger half-way. “Should the New Zealand dairy industry fail in these respects, it will more and more become an assisted industry, kept on its feet only by contributions from State funds.”