Inflationary Policy

Gisborne Herald, Volume LXVI, Issue 20014, 12 August 1939, Page 16

Inflationary Policy

Sir,—The general tone of your leader in 'Monday’s issue of the Herald lends to show a degree of disappointment in the financial arrangements of the Government. That they are not interpreting literally the advice contained in the' report of- the directors of the

Reserve Bank in regard to their financial arrangements for the coming year shows after all that we are being governed by Parliament and not, as in tiic past, by a banking institution. May 1 suggest that your interpretation of that passage quoted from the Budget, "We are not suffering from a shortage of money in New Zealand, but from a shortage of what money will buy,” is not an “admission of inflation,” if the correct meaning is taken from it. We are in need of development, houses, backblock roads, secondary industries, a drastic overhaul of our primary industries, all of which “money will buy,” and London reserves will not do this 'work, only our own currency, which the Government is prepared to provide. Again the term “inflationary” appears in criticising this policy, which after all is only employing our own citizens to develop our comparatively young country. The Government is apparently not afraid of this position developing, believing as I do that

import regulation avid price control are reliable safeguards. SERIOUS. [Since the Reserve Bank is required under the Act to give effect to the policy of the Government, it is to be assumed that the report of the ibank expresses the pot icy of the Government. The difficulty with expenditure on capital works to which the correspondent refers is that it does not produce consumer goods, with the result, as the Budget stated, that there is a shortage of what money will ibuy. It is import restriction —the withholding of goods—that gives an impetus Lo the inflationary trend and forces up prices. The price control measure has been in operation since 193 G, but it has not prevented prices from rising —Ed., Herald.]