MR. F. P. WALSH SPEAKS TO DAIRY CONFERENCE

Chronicle (Levin), 28 June 1946, Page 8

MR. F. P. WALSH SPEAKS TO DAIRY CONFERENCE

-Press Association

By Telegraph-

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," saicl Mr. F. P. Walsh, who represents the Feclerat,ion of Labour on the Eeonomic Stabilisation Commission, in an address to the National Dairy Association conference today. He added that living standards were not raised hy inflating money incomes. o Tliey could be raised only by increasing the output of goods and services. So long as this output was increased costs could he held without damagc to the standard of living.

In dealing with the plaee of farming under stabilisation, Mr. Walsh said that the special place of farming in New Zealand \s economy had alwavs been recognised and it was signiticant that oue of the first important undertakings of the newly-appointed Commission was the negotiation of y an agreement on stabilisation between the Government and the Farmers' Federation. This agreement had provided the framework for all the Commission 's dealings with Farming interests and within the stabilisation policv it has alwavs been pos-. sible for the industry and the Government to reaeh eomplete agreement in Ihe yearly ncgotiations. "I would like to eorrect a misleading statement whieh appeared in the. National Dairy Association 's reeent annnal report, with reference to subsidies and stabilisation aceounts, " said Mr. Walsh. "Jt was stated there that 'the cosl of subsidies on fertilisers and other commoditics, farm and factory cost allowances, subsidies on stock feeds, subsidies on grain crops for pig feed to save importation of grgin and manv otliers are found out of these aeeoimts; aiul uot oue penny comes from the Consolidated Fund, the Wa>r Expenses Account, or any other pxiblic source. ' "The true position is that, for 194546, the amounts paid from the Dairy and Meat Btabilisation Aecounts are estimated to fall short of total paynients from tbe War Expenses Account, for subsidies on the items nientioned, bv about £1,000,000. The statement is also incorreet in that during the war years pnor to the stabilisation, agreement, the .Consolidated Fund had already carried aboiit £2,250,000 in superphosphate subsidv alone, of whieh about £1,250,000 could be eonsidered as

subsidv to the dairy industry. Further, 1 would point out that the liability of the Dairy Industry Stabilisation Account in respect of subsidies is definitely limited by the agreement of March, .1945, so that if wage costs rise aliove eertain levels, the increases are not cliargeable against the Dairy Indus'4ry Btaliilisation Account. In addition, it should be mentioned that all farmers get the benetit of general stabilisation subsidies, as distinct from those whieh can be classed as purely farming subsidies. General stabilisation subsidies not only benetit farmers as consumers, in the same way as tliey benefit all other consumers, but thev also benefit farmers as produeers because the hohling of cost of living items kceps the general level of wages down, tliys holding farm and factory costs. These points are commonly forgotten w.hen statements are made to the elTect that farmers pay all their own subsidies." Holding of Costs. This question of holding costs was fundamental to the stabilisation policv. We had Jearnt the futility of boom and slump conditions, and were deterniined not to endurc the social evils attendant on inflation if that could possibly be avoided. There were still atany critics who advocated the sliortterm and short-sighted policv of price increases to the extent that the pro-. eeeds from an overseas market would allow. : *&■ ■ "There are many answers to this form of criticism, but it will be' suf(icient to draw your attention to' the faet that higher prices would inevitablv have meant higher costs and that costs once incurred are very difficult to reduce. The nation with the low cost structure, particularlv the primary production country, has the position of advantage when the world market is in a state of readjustment. There is a particular advantage in the case of the dairy industry where major competition uiay come from niargarine as well as from other primary producing caimtries. "Stabilisation in New Zealand nieans 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. "Nothing is more eertain to lead to a contraction of markets for our foodstuft's than high costs and high prices. During the transition period of scareity the United Kingdom is compelled to grow a high proportion of foodstuffs regardless of prices and costs, because uone of the food-^roducing countries can export enough to ineet the demand in England and other countries. But wlien the scareity period is over, and the volume of production everywhere is greater, the United Ivingdom can and will reorganise its agriculture, plaeing chief emphasis on licjuid milk, eggs, and vegetables. At preseiit there is an over-emphasis on cereal production. Since the putbreak of war this had led to the killing of nearly 7,000,000 sheep, 2,500,000 pigs, and 20,000,000 fowls.- The pre-war livestoek population"' was 27,000,000 sheep, 4,500,000 pigs, and 69,500,000 fowls. The emphasis on cereal production will eventually be replaced by the development of pasture lands and market gardens. But this will hap

pen only if England can be assured that she can import all other needed food products — butter, cheese, cereals, and meat — at reasonable prices. Witl\ imports too dear, England will be forced back to producing a larger part of her basie foodstuffs and so reduce the "market open +o us. 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.

FALLING PRICES. "It must be remembered, too, that as world production increases and the scareity phase passes, the danger of falling world prices will inevitably emerge. The country that has kept its costs low and its effieiency high will meet that- danger half-way. Should the New Z.ealand dairy industry fail in these respects it will more and more become an assisted industry, kept ou its feet only by contributions from State funds. There are evident signs that New Zealand farming, while resenting Government interference, is not reluetant to seek Government assistance wlien it suits. Within every farming group there is the marginal man, the comfortable man, the rich, and the opulent man. But no farming group has yct devised a plan whereby the group as a whole wilL come to the rescue of the marginal man. The marginal man is, they tell us, the Sta'te's responsibilitj", ahd the State" is expected to help the marginal man in such a way that it also helps all otliers in the group that need uo help at all. The result is a spiral of State assistance to all and sundry, the good, bad, and indifferent farmers.

"All these things will help, but the point is that the holding down of costs in general will make the whole problem of helping the marginal man simpler. It will enable State assistance to be directed to those who need it most, and not wasted on those whose position is already sound. " Diseussing the cjuestion of bulk purcliasing negotiations in the British market, Mr. Walsh said that New Zealaud trade negotiations with the United Kingdom should not be based on inflated costs, of production, but on the relationship betAveeu price levels affecting trade between the two countries. He suggested that New Zealand should look for alternative markets. "Britain has been and may remain our best customer, " he said, "but it is good business and in no way unpatriotie to suggest that we should now look towards our nearer neighbours in the East for an expansion of our trade. Australia is already active in this field, particularly in the direction of marketing manufaetured goods. New Zealand should be there, too, promoting marketing opportunities for our primary produce. ' '

Security in Marketing. "Btabilisation policv, allied in the case of the dairy industry with the guaranteed price procedure, has given our primary produeers security in marketing for a nuinber . of ; years. Stabi-; lisdtJiorf. policy" &r iaimliifg. iinlml with an assurance that pfieeS would not be allowed to fall below 1942 levels. In addition, the Btate assumed the responsibility of marketing total production in some eases, such as apples and meat. Farmers tlius received assured markets and prices. The meat industry has built up reserves whieh will ensure that this security is maintained for a further long period." The speaker quoted ligures showmg the estimated balances of- the meat and dairy accounts as at July 31 this year: Dairy Industry Btabilisation Account, £4-, 000,000; Meat Industry Stabilisation Account, £3', 500,000; Meat Pool Account, £8,509,000; Meat Btabilisation plus Meat Pool Account, £12,000,000. "The meat industry has thus a reserve of £12,000,000 set aside. ■ Iu the case of dairy, the figure is £4,000,00.0, but I would remind you that at the beginning of the war the Dairy Industry Account was in debit to the extent of about £2,000,000. -The present improved position is the result of security m marketing. ".It is the experienee of the ordinary man whieh is important and the experienee of the ordinary dairy farmer in New Zealand over this period has, generally speaking, been one of assurea returns and a gradual bnt consistent reduction in indebtedness. " Mr. Walsh spoke of the danger of removing all eeonomic controls. "In tne absence. of all controls in today rs circnmstances, people would rush into tne production of luxury lines Yhich showed the best profits. f . "I have heard such people describea as 'the pied pipers of profit, leaamg the people to destruction, ' and I think it is an apt description. There will he a time when we can afford and enjoy luxuries, but that time has not arrived when we are still short of many of the essentiai needs/of life., Conditions of a free market do not exist in the world today, nor are they likely to exist for some time to come. "Today, as never before, we'!need to put forward our best effo.rts in production, farmers, manufacturers, and - workers. Our standard of living .. is

measured in the terms of the goods ann services we ourselves produce — iiot iu the amount'.of money we have in tfie bank or our prospects of credit. We niust ha.ve more goods and services created by the efforts of our own people if we are to remain a prosperous aua virile country. "I am eonfident that the great buiic of farmers will readily appreciate tne value that stabilisatiqn has been to our country and would be liappy to observe their side of the bargain, " added Mr. Walsh. "Unless all parties adhere to the stabilisation bargain, then we wili face a situation where econpmie groujis compete one with the other for temporary advantages." The ultiniate resulc would be a spiral of inflation and tne sacrifice of all the benefits we have alreacly gained from the policy of eeonomic stabilisation. Eeonomic stability and security can be maintained if we achieve understanding and co-operation between the major groups. 1" appeal to you for your co-opeiation, and for your understanding of indu.strial labour proulenis as, well as your own position, eonfident that this is the surfest method of safeguarding the. welfare of all our people/'