"SEVERE SHOCK"

Evening Post, Volume CXXVI, Issue 137, 7 December 1938, Page 15

"SEVERE SHOCK"

(Special to the "Evening Post.")

CHRISTCHURCH, This Day.

"The decision of the Government to establish complete control of the external trade of New Zealand and to suspend the obligation of the Reserve Bank to exchange New Zealand currency for sterling will come as a severe shock to those who have in the past accepted the Government's assurances that the economic and financial horizon was cloudless and that those who prophesied disaster were animated by political spite," says the Christchurch "Press." "New Zealand is now involved in economic measures hitherto confined to totalitarian States, measures which must inevitably restrict external trade, enclose domestic industry and commerce in a hampering network of restrictions, and damage Ithe country's credit abroad. The tragedy of the situation is that it need never have arisen. Since the present Government came into power, economic conditions have been uniformly favourable, and, even takiug into account the recent, recession in the prices of some export commodities, the export income is still large enough to support a high general level of prosperity. Given a reasonably prudent financial and economic policy, it would not now be necessary to create an export pool and suspend free dealings in foreign! exchange in order to avert a default I on loan payments. But from the time it came into office, the Government pursued a policy which made inevitable an excess of importing and a shortage of London funds. It snubbed even the most friendly and disinterested critics, and it ignored all danger signals, even when they were raised by banking experts and economists in its own employ. It is necessary to say these things because upon whether the Government admits its past errors depends the duration of the present stringency. If the Prime Minister persists in blaming other people for the Government's mistakes, if the rise in State expenditure continues, if labour and capital continue to be diverted from productive enterprise into public

works, then the drain on London funds must continue. If, on the other hand, it. recognises that excessive expenditure on public works Jeads inevitably to excessive importing and to reduced primary production and acts accordingly, there is no reason why the present crisis in its financial affairs should be of long duration." The "Press" says there is a disturbing hint in the statement by the Minister lof Finance that the.; Government does not intend to remove the system of import control, and possibly the system of exchange control, even when the | present stringency has passed. "These I measures, it is suggested, will probably [become the basis of a scheme for exJpanding secondary production. To do this would be a gross breach of faith with the electorate. During the recent election campaign the whole tenor of I statements by Cabinet Ministers' was to the effect that drastic economic changes were not contemplated; and it is certain that had the Government promised in its election programme to do what it is now doing the result of the election would have been very different."