N.Z. WAR EXPENDITURE NOW OVER £240 MILLIONS

Grey River Argus, 4 June 1943, Page 5

N.Z. WAR EXPENDITURE NOW OVER £240 MILLIONS

PRESENT RATE NEARLY THREE MILLIONS WEEKLY

Finance Minister Urges War Loan Subscriptions

WELLINGTON, June 3. No further taxation was indicated jin the Financial Statement presented to the House of Representatives by the Minister of Finance (Hon. W. Nash) last evening. With a deficit of £50,000,000 in the War Expenses Account, however, the Minister strongly indicated the obligations of all sections of the community to subscribe to the new war loan and invest in National Savings. Mr. Nash says:— It is realized that the war can only be continued by the use of prior or current production and services. These goods and services are required for the prosecution of the war effort, the maintenance of civilians, the conservation of production facilities. and the continuity of civil life when the war is over. An examination of the estimated cost of the war will show the futility of attempting to take the amount required by taxation, but inside the objective (the maximum production of goods and services) taxation should be used to the extent that it will give the best results. The goal set by the Government has been to pay one-half at least of the cost of the war from taxation. Owing to abnormal capital expenditure during the year just past this goal has not been reached, although the proportions would have been closer had all income-taxes been collected The short collection has in many cases been due to the large proportion of experienced assessment and inspection officers who have been, and in some cases still are, engaged with the armed services. An adjustment of staff is being made and it is expected that reasonably large sums will be recovered, but it would ease the work and perhaps save the penalties if all who have doubts as to their liability would examine their incomes to ensure that the ■ full amount of their income has been correctly returned to the Commissioner of Taxes,

Under the circumstances, and as previously stated, the Government have decided not to increase incometax rates for the current year. This takes me to another method by which money can be raised —creation of credit. It has been suggested by many good citizens, who have not fully examined the effect of . their proposals, that the full cost of the war should be met by the issue of currency from the Reserve Bank. This is such an easv road that if it had good foundations we should follow it, but the facts of life • prove that it would lead to chaos and disaster. .' The standard of life in a community depends upon the amount and the kind of work done. If the right quantity of the right kind of goods, and services is produced and equitably distributed among the people, the standard of life is high, regardless of money. Conversely if the volume or quality of the goods and services declines or is unfairly distributed, th e standard of life falls, regardlesss of money. .. . Money is necessary as a medium of exchange, and if tnere is sufficient money in circulation already, the creation of more would not remedy a decline in production because in such a case the decline would not have been caused by a shortage of money. On the other hand an insufficient money supply may cause production to fall by reducing the effective demand for available goods. In such a case the supply of money could with advantage be increased. At the present time there is ample money in circulation to enable the people to purchase necessary goods and services as they become available day by day. Consequently harm and not good would result, in the further increase in the supply of; money, as would arise from the use of Reserve Bank credit except in extreme emergency —and for 'which even then the price would have to be naid. In fact what is wanted. is the off of any excess purchasing-power for Investment in war loans in order that di version of productive effort to war mav be matched bv a similar diversion of purchasing-power. Only by these means can we remove the pressure that, lihreatens to upset our econojnic stability. Other Governments are now realizing that currency and monetary policy must be under their control as thev uro in New Zealand—that the power to create credit must be used exclusively for the benefit of the people, and in particular to assist the expansion of production and services to maximum reouirements. Shortage of goods and services in a period when expansion of production is not possible calls for a totally different monetary policy than does a condition when expansion of production is both desirable and possible.

If wp are to make our maximum war effort, whilst ensuring good foundations for our post-war policy, it is essential that the currency and monetary system be wisely managed and controlled. At the present time the wisest course is to relv on subscriptions to the War Loan to meet the sum not provided by taxation at existing rates during the current year. There is thus an unprecedented opportunity t.o assist the war effort and place New' Zealand in this field also, in the van of the United Nations. If during the month of June every one determines to place all his or her surplus into the War Loan, the sum required will not only be obtained but further taxation will be unnecessary. The effect of subscription to the loan, if made by all classes and groups of people, will have the same beneficial effect on stabilization as if the same sum were raised by taxation. . Taxation takes from all largely in proportion to their ability to pay the moneys required to carry on the war and national activities. Creation ot credit under- certain circumstances takes away by unseen methods the value of work done and savings mad and ultimately in the forms of puce increases hits those most who- have to spend their incomes on necessaries of life. Loans borrowed hom those who have worked and saved the result of their labour diverts these savings to the war and national efforts and the amounts will be repaid when war needs are satisfied and production is once again based on civilian needs. STABILIZATION. It is essential that the value of stabilization should be understood by all our people. ~ , . Ta the extent that the sum distri-

buted in wages, salaries, and other income exceeds the total value of goods and services available for civilian consumption as measured price we run into a dangerous position unless the surplus of income IS either taken out of circulation by taxation or is invested by the recipient in war loans or National Savings Bonds or Accounts. . If surplus moneys are invested m war loans the Government is enabled not only to meet all its accounts for war services and equipment, but to hold price levels at points that will be good foundations for the post-war period. The transfer of productive activities into goods and services for civilian consumption and the use of war savings in the post-war period will stimulate demand, whilst the stabilization procedure will ensure a continuance of even prices. To the extent that we consume less of our. own production the more there will be available for those in need in Britain and other United Nations. _ To the extent we save our shillings and pounds we will' hold up the demand for imported products and ease the load on shipping and the pressure on production in the United Kingdom, releasing more workers there for a; 100-per-cent. war effort. The need is so great, the advantages so real„ that I make no apology for again emphasizing the imperatives of stabiization, & the consequent necessity for all sections of the community to invest to the limit in the war loan and National Savings. , The proposals to provide the aged and other beneficaries with a fixed sum of £1 12s 6d per week is to offset some of the costs of commodities that have increased since th e outbreak of war.

The alteration in the widows’ bene- ‘ fit is for the purpose of meeting I some of the extra load that comes to mothers when the breadwinner has passed away. The extension of the family benefit is to increase the incomes of the homes where the wage, salary, oi’ other income is not sufficient to provide those things which ail parents desire to make available to their children. The other minor adjust-ments-dn the social security procedure are made to remove anomalies which have been revealed since the passing of the Act. We must not relax our war effort. Everything that life holds which is good depends on a right conclusion to Hhe present conflict, and such a conclusion is the first essential to all progress, but having provided for those who have been through the ordeal of battle and the dependants of those who gave their all in that •ordeal we must not avoid our responsibility to those who laid the foundations of this Dominion and •who are now in their declining days, nor the widow and those suffering ills beyond remedy from their own efforts. Our collective responsibiity to these people remains. It is because we have accepted that responsibility, and because freedom, security, and good living standards have been so long available in this Dominion, that our boys overseas have done so well. It is due to what they have done overseas and what has been done here that the name of New Zealand shines so brightly to-day in all parts of the British Commonwealth. and the other United Nations. The records of our country and our people give just cause for modest .pride—others have done well & some may have done better—but when the full story is told perhaps! those who weigh the progress and efforts of the nations will give a place of honour to this little country and its people. Measured in figures, no less than £230,000,000 has been spent on the war over a period of three and a half years by less than 12 million people, whilst the fact that the aged, the sick, the widow, and the family have been fully cared for, sneaks well for the future. The correct measure of progress is reflected in the quality of our men in the face o* the hardships and dangers of the present campaign; in the record volume of goods produced by the men and women in our factories; in the extraordinary work of our primary producers who. in face of unprecedented difficulties, have made a great contribution to the feeding ' of the people in the United Kingdom during Britain’s greatest heroic years; and in the men on the sea who continuously carry and guard the food and other goods that sustain the life of Britain. We must see to it that our plans are well laid to care for our soldiers, sailors, and airmen when they return and at the same time build anew an economic system that will provide reasonable standards for our own men and also make a contribution to the expansion of life in less fortunate areas of the world. This country is greatly blessed by the fertility of its soils, its climate, and bv its beauties, but these blessing bring great responsibilities We haye lived up to and met these responsibilities in the years that have passed. The evidence is that we will i accept and live, up to like responsibilities in the future. We have a great opportunity to lay the foundation of a productive and distributive system in which all who serve with hand and brain may so serve without the fear of poverty, unemployment, -or the menace of uncared for ill health. We should remain the country to which all may turn for an example of what can be done, where all are willing to do their share of the work which makes a full life possible.