NEW ZEALAND TRADE AND FINANCE.

Dominion, Volume 6, Issue 1709, 28 March 1913, Page 6

NEW ZEALAND TRADE AND FINANCE.

ANOTHER VIEW. [By "Debenture."] Now that tho Empire Trade' Commissioners have departed, there are points in tho evidence given in Wellington that admit of closer examination. Perhaps the witness who created the greatest impression was Mr. A. E. Mabin, president of tlie Chamber of Commerce. Mr. Mabin luid in his mind, apparently, the "balanco of trade," and tne questions put to mm urew irom mm the statemcm, that we were not paying our way. I'or stating this tact Air. Mabin hud the Official Year Book hurled at him, and a great deal of irrelevant evidence was given by those who disagreed with Mr. Mabiii. The question attempted to be dealt with by the-president of the Chamber of Commerce is an important one, and the better it is understood the better will it be for the community, and especially the business section. , . .

National book-keeping, so far as it pertains to foreign trade, lias its debit mid credit pages, and the result of their comparison is the balance' of trade. The amounts of the exports and imports must ill tho long run tend to an equality, for it is impossible for a nation to continue indefinitely to import more than it exports. A time must come when the creditors will insist on payment. It may be taken for granted that trade finally balances, although it may take much time I'or the balance to be repaid, but it is paid and often, by well-uigll invisible means. The various elements- of indebtedness, some, or ail of which, must be taken, into account in connection with the balance of trade of any particular country, may be summarised as follow :— 1. Imports and exports of goods. , 2. Loans obtained and loans given. 3. The interest on loans du& to or by the country. 4. The dividends on share capital invested in or by the' country. '5. Repayments of loans to or by the '°6. Tlie earnings- of native merchants living abroad. 7. The expenditure of the Government abroad. 8. Tributes due to or by the country. 9. Expenditure of citizens travelling abroad. , 10. The expenditure of foreigners or tourists in the country. . 11. Profits and commissions on agencies. 12. The transfer of securities such as shares, bonds, and debentures to or by the country. 13. The cost of services rendered by the country' where it has a largo mercantile marine.

■ There are four stages in the evolution of a country's trade: Tho first: The equipment stage, in which the people of a country are borrowing heavily from the people of some other country to get the means to eouip their land for production. During this period the imports greatly exceed the exports. ' jThe second: The interest-paying stage; during which ordinary wants of import consumption are paid for by exports, and in addition other exports are sent out to pay interest, wherefore ■ tho interestpaying stage has a surplus of exports over imports. ; . .

The third: The foreign investment staije, which only' applies to older countries, during which the country is sending out goods for the building of factories, railroads, and other equipment in/other countries in the first stage. During this third stago also, the exports are likely to exceed the imports. 'file fourtn: The interest-receiving stago and the return of ihvestment stage, when the. loaning country is receiving interest payments and possibly occasional returns of capital ill the form of produce. This makes the imports greatly exceed the exports. England is in this position. New Zealand's trad© is in the second stage; that is, we are paying interest on borrowed money, and occasionally returning the capital, or principal sum, <to the lenders. Our exports, therefore, should be sufficient to pay for cur imports, . plus the interest and other outgoings, on our foreign obligations. Mr. Mabin estimates this latter at .£4,000,000, and lie is not far out. Assuming that ,£4,000,000 is correct, then our exports should be equal to the value of our imports,- plus this .£4,000,000. The' exports and imparts of New Zealand for the calendar years,, 1902 to 1912 inclusive, of merchandise only {exclusive of specie), show as under:— '

Excess of Imports. Exports. Exports. y<*ar, <£ 1902 '. 10,958,038 13.635,459 2,677,421 1903 12,075,959 14,971,926 2,896,967 1904 •...... 12,900,030 14,738,750 1,838,720 1905 12,481.178 15,642,061) . 3,160,891 190G 1i,303,170 17,992;'480 3,659,310 1907 16,539,707 20,061,641 3,521,934 ■1908 17,247,102 16,075,205 *1,171,967 1909 . 14,817,462 19,636,151 4,818,689 1910 1G,748,223 22,152,473 5,404,250 19U 18,782,608 18,980,185 .197,577 1912 ...... 20,575,051 21,511,288 930,207 *Exccss of imports. Prom the above figures it will bo seen that during the past ten years the imports have increased by .£9,017,013, while the increase in the exports is only •£7,875,329.- Taking tho last five years, the imports have increased by ,£4,03!j,374, while the exports show an expansion of only The tendency is for a steady expansion in imports with violent fluctuations in exports. i It will bo noted in'the above that the excess pf ( : exports over imports was not _ sufficient to pay for tho imports plus the interest in any year, except in '1909. and 1910, and there wero special circumstances to account for the exception. Notwithstanding this the fact remains that we paid for our imports and discharged our interest obligations; for the difference was made up out of borrowed money. It is this continued reliance on borrowing that constitutes the danger of the community. In the last ten years the public debt has increased by ,£30,355,G79, while the increase in tho last five years has been .£20,056,338. The pace has been pretty stiff in recent years, and nearly the whole of the money has been obtained outside New Zealand. Some of the municipalities and harbour boards havo also borrowed heavily. If from any causo whatever this stream of borrowed moneyis checked in its inflow, tho result would be very grave financial disturbance in New Zealand. |\Ve m.ust face this possibility, for flic markets of tho world are stringent, and give indications of remaining stringent for somo time to come. Already there has been somn difficulty in borrowing, and it is safe to predict that the Minister -for Finance in his next liudget mill be forced- to preach strict economy, and tlip loan proposals will lie greatly restricted. Wo will bo tumbled off the perch of extravagance, and will be forced to recast our views and estimates.

This does not imply that wo aro bankrupt or "going to the dogs," it merely means that we are entertaining exaggerated notions of our prosperity, and indulging in extravagances that are not warranted by the fact, and for this we will have to pay very dearly.