SEEKING LIGHT

Evening Post, Volume CXXI, Issue 1, 2 January 1936, Page 8

SEEKING LIGHT

SJIAPLXG .V POLICY

BUSINESS PERPLEXITY

WHAT OF THE FUTURE ?

(By "Mcrcator.")

As a business man controlling the affairs of a large company, employing a staff of nearly 300, and carrying large stocks of goods, I am trying, as many other business people are, to look into conditions which, will rule in New Zealand next year. I take no part in politics, and am not proposing to criticise the policy of the Government or any other party. lam just an ordinary citizen interested in community and social service, church work, sport of all kinds (including racing), and am a member of various clubs. I am owner of certain property and tenant of another; I am both mortgagor and mortgagee. I direct the services of a staff, but am, myself, an employee —in short, lam just as other men are, and merely seek information to assist me in my own affairs, and to guide me in the management entrusted to me. So much by way of preamble. Now for the points on which I seek light. EXCHANGE AND CURRENCY. It has been stated that the exchange rate between London and New Zealand is to be reduced by gradual steps and at intervals to be announced. In the ordinary course, therefore. I should nqt buy goods from overseas beyond my immediate requirements from time to time, so as not to have in stock merchandise on which exchange has been paid beyond the rate ruling in the subsequent period. But several responsible Ministers have indicated that currency is to be controlled. This looks to me like inflation. If that policy is implemented the £N.Z. will depreciate in terms of sterling. Suppose the £N.Z. to be dfr predated to 15s sterling, would not the rate of exchange between London and New Zealand then be an actual rate of 33 1-3 per cent, instead of a pegged artificial rate of 25 per cent., as at present? It seems to me that internal inflation and exchange, reduction are contradictory terms and impossible to reconcile. If exchange is to be reduced, I must refrain from buying from overseas; if currency is- to be inflated, I must purchase at once. Which am I to do? Again, if the rate between Australia and London is 25 per cent., can the New Zealand rate be reduced? Would not New Zealand funds in London be diverted to Australia? Then to adjust the position between Australia and New Zealand we should have to import goods from Australia. That would reduce Britain's exports to New Zealand and nullify the benefit to Britain of reducing the exchange. Only Australia would benefit—at Britain's expense—unless the tariff against Australian goods into New Zealand be raised. That requires notice, and alteration of tariff is a very thorny subject. LOCAL INDUSTRIES. The Government it is understood desires to encourage local industry, but reduction of exchange would deprive the local manufacturer of part of his present protection. Local inflation would advance his costs but also raise the price of his products expressed in local currency. But I cannot see how both policies can be implemented. The sales tax, a misbegotten impost, has not a friend in the Dominion. Its gradual reduction is expected, or at least the list of exemptions will be extended. But this tax brings in nearly £2,500,000 per annum in revenue. Moreover, it comes to the Treasury month by month, and costs nothing to collect. I fear that expediency will overrule desire, and that our goods must continue to bear this tax. . By the way, though the tax is 5 per cent., the public pay, in the ultimate cost of the goods, anything up to 10 per cent. If I know what is to be done, I can shape my buying policy accordingly.

If we have inflation in New Zealand I presume wages will increase and people generally have greater spending power, expressed in our local currency. This, of course, will bring about increased internal prices. If 1 want to build a. house/ would it not be wise to get on with it now instead of waiting? And should I also buy all the goods I can lay my hands on at present prices, so as to have stock to sell later on at the increased prices? MONETARY UNCERTAINTY. I also owe money in New Zealand on mortgage and in other ways. The longer I wait, the easier it will be to pay those debts—l will be able to discharge a present debt of £1 with a pound note, which will be of the same value internally, but of less value in sterling. But if I owe money outside of New Zealand, should not I pay it at once, before the new depreciated exchange level is reached? Early announcement of the policy to be adopted by the Government would help to dispel my mental conflicts, and shape my policy. It would be the best New Year present for me. As to interest rates in the near future, here again I am uncertain. Will interest, the price of money, advance in sympathy with other prices, or is it to be pegged down? If it is pegged the price of securities, I presume, will fall. Should War Bonds or local body debentures, for instance, be sold now, with a view to repurchase later, or should one just let his investments remain where they are? Lastly, should I allow in my costs for next year for increased taxation? There is to be increased activity in public works, higher wages and pensions, more liberal relief. Naturally, the Government must have mon<=y to do these things. Will income tax be raised, graduated land tax be reimposed, unemployment tax increased, Customs duties be raised? For some years past, business has laboured under the handicap of uncertainly, than which there is no factor more adverse to industrial and commercial progress. People have now given a mandate to a new Government and high hopes are entertained that New Zealand is to embark on a new period of prosperity and activity. The whole Dominion eagerly awaits a declaration from the Prime Minister, of the policy he proposes to implement, and an early pronouncement on the subjects above mentioned will be especially welcome to business executives whose trading policy must, to a considerable degree, be governed accordingly. __