PROBLEM OF INFLATION

Chronicle (Levin), 28 August 1947, Page 7

PROBLEM OF INFLATION

Freezing Of Bank Deposits Suggested WELLINGTON, August 27. Tlie freezing of trading banks' deposits as one means of correcting infiation, which lie deseribed as the most urgent problem of the day, was suggested by Professor A. H. Tocker, rector of Canterbury llniversity College, in an address to the Wellington branch of the Eeononiic Society last night. The proportion to be frozen, lie said, would need to be earefully calculated, but it would be substantially niore than the 20 per cent. suggested by a questioner. By freezing liabilities in this way they would get rid of the excess of money from the market, said Professor Tocker. Great Britain, for example, had more sterling than she could handle, and had been bargaining with some of the big holders to freeze some of it. If it were right for Britain to do this, would it not also be right for New Zealand to t'reeze a certain amount of money here? Money could be transferred to fixed deposit so that it could not be called up. "That might be extremely awkward for a Post Office Savings Bank investor who might need the money," said the speaker, "but possibly he could draw his money in the form of a Government security and sell it 011 the open market. This would not bring any more money into circulation. " Other Measures. ' Oue wav of curing infiation," eontinuecl Professor Tocker, "would be to allow the excess money to be absorbed by higli prices. That would cause a booin, and alinost certainly a slum]) would follow. A second way would be to keep the money off the market liy rationing, price control" and stabilisation. We do limit the" monetarv demand for certain goods in •this way, but we eannot liinit. such things as totalisator investments. Before the war these were from £6,000,000 to £7,000,000; the last figure I saw was £22,000,000. "Infiation is one of the most imuortant things the world has to face up to today. While we have this menace of too niuch money we' will not be able to get back to freer markets." In New Zealand they heard eonstant complaints about sliortages, the difiiculty of getting almost anything, delays, and a feeiing of frustration Women coniplained of "shoppers' elbow," they had lost the freedom of .-hoiee. and distributing" servites had been greatlv reduced. He did nol know what the future held. There might be more security in some direetions and very much less in. otliers. Overseas romlUions made it ditficult for New Zealand to get mauy of the things she irul enjuycil in.irre, hho it might make it.difii.ult to sell, '."ut it was the posbion internally that was uf immediate conceru. Pockets Weli Lined. New Zealand at the moment had three times as mucli money as it had before the war aua goods available per head of population were down 16 to 17 per cent. Some of that increased money had been absorbed in higher prices, which were up 50 per cent. "We would theref »re require £90.000,000 to Iniv now what we could have bouglit for our £60,000,000 before the war, and the Reserve Bank says we have £1X0,0(10,000," said the -speaker. "People are holding money off the market for various reasons — they do not like to pay high prices, and they are hoping to buy goods when they are available. Because of the excess of money we get sliortages and controls, and we are not allowed to spend our money on certain commodities. "Over a long period of years the private banks managed their affairs in such a way that there was never very much need for any interference in prices — the money balanced the goods. They got into difiiculties somethimes liut they got.out again. The exchange crisis that occurred in 1931 was cleaned up in three months, but that of 1938 has never been cleaned up — there are stiil exchange control and iniport control." v Touching on the question of local taxation, Professor Tocker said that at present taxation on incoine was about 8s in the £, which meant that the man working a five-day week worked two days for the Government and three days for himself. If taxation were cut in half, it would still be twice as high as in 1935. "Many people are not willing to work any liarder because of this high taxation," he said, "because the liarder they work the more taxatiou they have to pav. Oue in vestigation duryig the war showed that a point was reached in company taxation where a company could pay as high as 19s 11 5-6d in the £, which meant that out of every extra £1 it earned at" that stage the companv received oue-sixth of a penny. That was an extreme case, but the question I. wisli to pose is: Can we carry on under the present load of taxation?"