THE 1939 BUDGET

Dominion, Volume 32, Issue 151, 22 March 1939, Page 12

THE 1939 BUDGET

“Unusual Interest And Some Anxiety”

BANKING JOURNAL’S SURVEY

Complicating Factors This year's Budget prospects are being reviewed in New Zealand with more than usual interest, md with some anxiety. The Minister of Finance, Mr. Nash, has had a relatively simple task in his last three Budgets, states the monthly summary of the National Bank of Australasia in a review of conditions in New Zealand.

Though he has had to provide for heavy increases in public expenditure, the rise in the national income has enabled him to do this out of taxation . without imposing any serious check on economic activity. Mr. Nash can also claim credit for the fact that over this three years there has been no increase in the funded national debt, and, in fact, some decrease in debt charges. ‘‘Recently, it is true, internal borrowing for public works, mainly from State departments, has begun to impose some strain on the credit structure,” the summary states. ‘‘Fop the financial year, which begins on April 1, a variety of factors are complicating Mr. Nash’s task. One is the social security scheme, which comes into operation on April 1, and is estimated (somewhat provisionally) to cost £17,800,000 in the first yea.r. In a recent statement Mr. Nash announced that, allowing for the proceeds of the wages tax of 1/- in the pound and the quarterly levy, and also for the existing cost of pensions and allowances, the scheme would impose an additional burden of £2,000,000 on the Budget.”

Import Control.

Increased expenditure on defence is inevitable; and if New Zealand’s defence effort is in proportion to efforts being made by other Dominions, the additional charge on the Budget is likely to be not far short of £1,000,000. On the side of revenue, Mr. Nash is faced with a steep decline in his main tax item, customs, because of the import restrictions. If it can be assumed that imports in 1039-40 will be £2,000,000 less than in the previous year, then customs revenue in the 1939-40 Budget will be nearer £7,000,000 than the figure of £10,000,000 in the previous Budget.

“What makes the budgetary situation of peculiar importance this year is its bearing on the new system of exchange and import control. It is obvious that the possibility of lifting these restrictions when London funds have been restored to a safe level, depends more than anything else on Budget policy. A period of deficit financing must inevitably make any prospect of a return to a free economy remote. Reduced Public Works. ‘‘The Government hopes, however, that the cost of public works, which amounted to £20,000,000 in the last Budget, will this year be substantially decreased. In his last Budget, Mr. Nash spoke frankly of the need for transferring men from public works, which, he admitted, had been undertaken partly as a solution of the unemployment problem, to more productive employment. Import restriction, with the consequent need for increasing local production if prices are to be kept at a reason.qble level, has strengthened the incentive to put this aspiration into effect.

“It was revealed by the president of the Manufacturers’ Federation recently that within the next six weeks the Government hopes to transfer 8000 men from public works to secondary industry. At present manufacturers and the Government are discussing the possibility of working extra shifts in factories for the purpose of training adult male labour.

“The Government, again according to the president of the Manufacturers' Federation, is prepared where necessary, to encourage these plans by means of subsidies.”