LONDON FUNDS

Evening Post, Volume CXXVI, Issue 137, 7 December 1938, Page 6

LONDON FUNDS

POSITION DISCUSSED

OUTPUT IN DOMINION

"FACTS MUST BE FACED"

Positions that might arise in Newj Zealand because of the reduction that has taken place in London funds were discussed by members of the council of the Wellington Chamber of Commerce last night and varied opinions were expressed. The Dominion's income had been reduced, it was stated, and facts should be faced. Everyone should co-operate to meet the position and the workers should help the Government that i had given them better conditions by, increasing their labour output. No doubt New Zealanders generally, as well as the Government and the commercial community, were alarmed at the serious and rapid diminution of the Dominion's overseas funds, said the president (Mr. P. E. Pattrick), who opened the discussion. The Reserve Bank's liquid funds in December, 1935, were £26,000,000, and, on November 28, 1938, only £4,828,000. The trading banks' assets in London in December, 1935, were £12,000,000, and on October 31, 1938, only £4,115,000. The country, therefore, had a serious problem to solve. New Zealand must have careful regard for the fact that it already enjoyed a favourable balance of trade with Great Britain of £20,435,608. Assuming that approximately half this balance was offset by invisible imports, such as interest payments there was still remaining such a sum, approximately £10,000,000, as would render a reduction of imports from the United Kingdom a precarious matter for New Zealand. CAUSE OF PREDICAMENT. "The principal cause of our present predicament is that the general standard of our living has been in excess of our income," said Mr. Pattrick. "Our income has been reducing and our expenditure increasing, and the country as a whole has been slipping, in spite of the exceptionally good prices ior our exports. "The Government, moreover, is being faced with a serious shortage on account of the guaranteed price. For example, butter, which has been guaranteed at £124 a ton in London, has been realising only £105. It is estimated that there are 130,000 tons to be dealt with, which, on the present basis, would show a loss of £19 a ton. The excess of the guaranteed price for cheese over the rates being realised is £4 a ton, which at an estimate of 90,000 tons would show a deficit of £360,000. As regards wool, the 1937-38 season brought the Dominion £6,000,000 in New Zealand currency less than did the 1936-37 season. "Our income has been restricted also because the introduction of the 40-hour week has not been attended by the X'equisite concomitant of increased production. The go-slow policy of certain organisations, strikes, and generallack of co-operation between employer and employee I aye further reduced the country's production. It has been most gratifying to read recent statements of Ministers of the Crown, drawing attention to the fact that recourse to strikes must be withheld and production speeded up. "Then, too, expenditure, both public and private, has been excessive. The Government has been spending inordinate sums on public works, which are much beyond the country's capacity to carry. For the year ended Mdrch 31, 1930, the public works expenditure was £8,948,609. In 1938 the expenditure was £17,113,896, and for the current year authority has been obtained for £20,719,700. "Individuals, too, have been living too extravagantly. More particularly is this the case with young people, to whom considerably increased purchasing power has been given before they have undertaken family responsibilities. WITHDRAWAL OF CAPITAL. "With regard to the withdrawal of capital from the country one can only say that the best corrective would be for the Government to give business interests confidence. The ever-increas-ing burden of taxation and the general feeling of insecurity as to what the Government • will do next make both local and overseas investors wonder what next will be sprung upon business enterprise. , "There is no doubt that the country is faced with a serious problem and the best thing now is for each of us to do our part, the Government to put efficient industry at a premium, to encourage private enterprise, to put extravagance at a discount, and ~to induce the people to take up occupations which yield the country the production it requires; and the people, for their part, to learn how to avoid dissipation and to cultivate the habit of using their leisure in a healthy, and profitable manner." "GOVERNMENT LET DOWN." Mr. R. H. Nimmo said it was significant that the nine months ended September 30 had shown a favourable trade balance with Britain of over £20,000,000. New Zealand traded with twenty-nine countries, fifteen of which were foreign, and if imports had to be restricted the restriction should be applied to those countries where there was an adverse balance and should not apply to Britain. One of the most disquieting things he had noticed upon returning to New Zealand, after surveying labour conditions in several other countries, was that the tempo of labour had slowed down, said Mr. Nimmo. The Government had reduced hours and increased wages and had a right to expect an accelerated tempo of labour, but there had been a reduction. The Government had been let down by the people it had legislated for and that was not fair to the Government. An Internal loan would relieve the position, but it would be inflation. In 1940 approximately £20,000,000 of national and local body loans would have to be converted, and New Zealand should put her house in order, and try and get the works to play the game with the Government that had given them improved conditions. If the Government was going to deal with exchange it should consult representatives of the banks and commercial concerns. If it would ask for the co-operation of the chambers of commerce, the commercial community, and the industrialists it would 'receive it and they would all get somewhere. Mr. C. W. Mack said it was not only the working man who was not working hard—the same applied to the employers. New Zealand had all the social amenities of the older countries and others in addition, and the result was an overhead that was hard to bear. NO NEED FOR ALARM. Mr. S. Cory-Wright said that he did, not think they should be alarmed be-1

cause the London funds had dwindled. The position might look alarming, but as long as New Zealand's credit was good there was nothing to fear. The drop in the funds was serious, but it should be remembered that when those funds were held in reserve they earned very little —probably less than 1 per cent. —and when they were absorbed they earned interest to the ultimate good of New Zealand. If everyone had confidence in the future of the country the position would adjust itself. There was certainly need for a greater labour output and the return of labour to the land, because the Dominion's prosperity depended on its production. REDUCED INCOME. Mr. W. Hammond said New Zealand was faced with a reduced income and the position should be faced. There was no need to lose confidence in the country. Mr. W. H. Hindle said he did not know that he could agree that imports should be restricted where there was an adverse trade balance. An adverse trade balance indicated that the other I country was producing something that New Zealand required. There might be some practical way of meeting the j position, and if the Government would allow interest rates to follow the market demand it would probably attract more capital to the country. Some i of the big business concerns would not lend money in New Zealand because they could get higher rates elsewhere. Mr. Pattrick said that in the ultimate trade was only a matter of barter, and if a country would not buy, the other country could not be expected to import unlimited quantities of goods.

The discussion then lapsed,