The Evening Star THURSDAY, MARCH 1, 1928. BORROWING AND UNEMPLOYMENT.

Evening Star, Issue 19804, 1 March 1928, Page 6

The Evening Star THURSDAY, MARCH 1, 1928. BORROWING AND UNEMPLOYMENT.

Among other passages in Mr Downie Stewart’s speech last night which drew spontaneous applause was the reminder that thus far the New Zealand Government had always been able to borrow what loan funds it needed without having recourse to the New York money market. The audience’s evident gratification may be regarded as springing from the realisation of New Zealand’s ci'cdit standing relatively high on the Loudon money market and from a feeling of loyalty in refraining from pledging our credit with a foreign country. Possibly, also, thcre / was a feeling of superiority to that spendthrift country, Australia. But it must be remembered that when the Commonwealth of Australia wont to America about two years ago for a portion of a fifteen-million loan it was at the direct request of the British Treasury, and the comment of the London ‘ Times ’ was that “ this departure would relieve London of the burden of limmeing Australia ” at a time when English financial circles were urging that the future of Britain de-

pended on her liuaiiciug the Continent of Europe back to financial stability. It was probably for the same reason that subsequently the New Zealand Government was given a hint by the London market to abstain as much as possible from reappearance there in the role of borrower, though associated with that reason there was doubtless a suspicion that, like Australia, tin’s dominion was over-borrowing, in view of the slow increase in population and the trend of our overseas trade balances. In his address Mr Stewart asked the question “Arc we borrowing too much?” and straightway answered it in the affirmative by saying ‘‘ I readily agree that our annual borrowing should bo reduced, and that is our main endeavor at the present time.” It is not impertinent to ask what is the cause oi the Government’s anxiety on the score of over-borrowing. Is it a question of security? This matter ol security is fundamental, and is no less serious lor the debtor than for the creditor. A given amount of borrowing or a certain rate of increase may be considered advantageous or not, as a matter of policy, having regard to the efficiency, the diameter, and the consequences of its expenditure; but, if the debt cannot be borne or is likely to impose intolerable burdens, it is obviously unsound to incur it. If the drift is allowed to go on indefinitely the lender may lose his money and the borrower his peace of mind. In the conditions existing at present in New Zealand the maintenance of the recent rate of borrowing must certainly not be regarded as advantageous. In normal circumstances the inflow of loan money is always accompanied by tiic outward signs of prosperity—industrial and trading activity, and an absence of unemployment. But, despite an inflow of loan money which the Minister of Finance virtually admits to have constituted over-borrowing, unemployment is rife, appears to be on the increase, and threatens to become chronic. And this is in spite of the Government’s efforts to 11 maintain and extend its public works and roading policy so as to absorb as many men as possible.” Mr Stewart stated that, whereas ten years ago the Government was employing 3,000 men on public works, the number has steadily risen until last vear it reached 12,000. It has been the Government’s aim to meet as much ns possible of tho expenditure on maintaining that part of the army of employees which is engaged on relief works out of revenue, instead of from loan funds, but past experience points to a continuation of that policy imposing intolerable burdens on the rest of the community. The alternative, if the Government is to take on its own shoulders this form of attempiug to solve the problem oi unemployment, is to meet the cost of relief works out of loan money. This w’ould necessitate increasing the present rate of debt-incurring, whereas the Government has determined to decrease that rate. Obviously tho experiment of providing relief work far in advance of the Government’s programme of developing the country, and admittedly nt a most uneconomic cost (getting much less than twenty shillings’ worth of value for every pound expended), cannot continue much longer. Tho fundamental, error in the past and present method of trying to cope with unemployment was touched on by Mr Stewart when he said that farmers in the country were complaining of inability to secure rural labor because of its being diverted to employment under tho Public ’Works Department. Thus even the under-rate wages so bitterly reviled by Labor advocates as attaching to relief works appear to attract men from employment on the land. The position seems to be that primary production is being retarded because public expenditure in advance of present needs and at excessive cost is being pushed on. As the funds out of which public expenditure is met are ultimately derived in the main from primary production, tho sooner a complete reversal of policy and practice is brought about the better. The Government’s realisation of this can best be expressed in Mr Stewart’s own words. When dealing with his own query, ‘‘ls Taxation High?” he said; “ A very serious burden of taxation in many districts is that of the local rates. These are often lumped together with the general State taxation to show the burden of the New Zealand taxpayer. They undoubtedly form part of his burden. but they are not imposed at the hands of the Government. But so onerous have the local, special, and general rates become in some districts that farmers are in danger of being called upon to pay by way of rates more than the full economic rent of the land. One of the most serious problems tho Government has to face is how to help these farmers where the special rates are so burdensome that it is impossible for them to carry on. It is of no assistance for the Government to write down tho value of their land, as the special rates must be made to yield enough to pay the interest and sinking funds on the loans, whatever the land may bo valued at.” It is highly probable that during the coming week-end in Dunedin Ministers will hear from a section of men on the land in Otago some of the effects of the application of, special rates more severe than the land can bear.