GOVERNMENT ALLEGED TO BE PROMOTING INFLATION

Press, Volume XCV, Issue 28265, 1 May 1957, Page 18

GOVERNMENT ALLEGED TO BE PROMOTING INFLATION

(New Zealand Press Association/

WELLINGTON, April 30. A credit policy that closely fole lowed Social Credit theory was ® one of the factors that were con- " tributing to the Government's 5 promotion of inflation, said Mr j F. P. Walsh, in his presidential 5 address today to the annual con- . ference of the Federation of Labour. ; He said that although the Gov- ! ernment had promised to put . “some guts into the £” the value . of money had fallen 32 per cent, i since the Government had been in • office —£1 today would buy as > much as could be bought for 13s • 7d at the end of 1949. Mr Walsh particularly criticised I the methods used to balance over- ■ seas payments. He said the country’s income from overseas for the year ended March, 1957, amounted to £321,000,000, compared with ’ £311,000.000 in the previous year. Last year there was a deficit in the overseas exchange of £16,400,000, ’ whereas in the year ended this March the overseas exchange showed a surplus of nearly £BOO,OOO. Although these accounts showed that New Zealand's income was £10,000,000 greater this year than it was last year, they showed also that the amount received for the produce exported was only £2,000,000 greater, and that, under 1 the heading of “other receipts” there were, among other things, ■ Government borrowings of 1 £9,700,000. “The £10,000,000 increase in our income, according to this, is nearly all money borrowed, which will ' eventually have to be paid back,” . Mr Walsh said. “In the previous year the coun- ■ try’s receipts included £3,200,000 ( of the Government’s borrowings, < so that if these borrowings were excluded the deficit for last year i would be £19,000,000 instead of • £16,000,000. ; Cut in Imports “The amount paid out for private imports in the last three ] years was £232,100,000 in 1954-55. ( £242.100.000 in 1955-56, and ] £234,300,000 in this latest year. ; “The reduction in 1956-57, com- ; pared with 1955-56, was i £7,800,000, or 3 per cent., which i was not very impressive when it i is said that the purpose of the i present financial controls is to I correct the balance of payments position. < “So far from correcting it the ‘ Government has to count in its ( borrowings of £9,700,000 just .to 5 break even for this last year,” said * Mr Walsh. “Borrowing by the Government , to maintain its overseas reserves i is inflationary, and at present, - when the country’s income is the highest ever received, it should not be necessary. “To make matters worse, the 5 Government is itself borrowing c large amounts from the Reserve r Bank and also lending record I*

amounts through the bank to primary produce marketing or- ; ganisations. “At the end of February the ; State had borrowed £53,000,000 ■ from the Reserve Bank, and the marketing organisations had borrowed £32.000.000. “This money is lent at an interest rate of 1 per cent., and being put into circulation like this it is doing just what the Government proiesses to be checking by means of the credit squeeze,” Mr Walsh said. “Before this Government took office it made much of the fact that the previous Government used money from the Reserve Bank, and it pledged itself not to obtain credit from the same source. “Since it has been in power it has continued the creation of money for Government use through the Reserve Bank, with a total disregard of the pledge which it made. Social Credit “Not only has this Government criticised the Labour Government for its use of Reserve Bank finance, but it has also been highly critical of the theories put forward by Mr Owen and other supporters of Social Credit,” said Mr Walsh. ‘‘Taken all round, there does not appear to be very much to choose between the Social Credit theory of costless credit and the present Government’s method of obtaining credit from the Reserve Bank at the remarkably nominal figure of 1 per cent, interest. “The result of each one is the creation of money that is not backed by production, and which will reduce the value of money already in circulation. It will, in fact, steal from the people part of the value of their wages and savings.

“The use of created credit has pulled down the value of the £ further and further all the time, and dragged down the purchasing power of the people’s savings and wages,” Mr Walsh added. “By borrowing overseas to bolster up the country’s balance of payments and by creating money through the Reserve Bank at very low rates for its own use and that of the marketing organisations, this Government is promoting inflation, and by doing so is reducing the value of the money which the workers take home as wages. “It is no theoretical question concerning only the bankers, but a very live issue to the wageearners, because it affects the value of their wages, and consequently their standard of living.”

Bowls SYDENHAM WOMEN’S CLUB The championship winners of the Sydenham Women’s Bowling Club for the season were as follows: Singles: Mrs Russell. Pairs: Mesdames Gilmour and Ogden (si. Rink: Mesdames O’Donnell, Varcoe, Ogden and Russell (s). Colt: Mrs Sams; runner-up. Mrs Evans.