PRICE GUARANTEE

Hawke's Bay Herald-Tribune, Issue 140, 30 June 1937, Page 15

PRICE GUARANTEE

Economist's Warning AUCKLAND, Jrune 23. "Control of marketing is a very different thi&g from direct fixing of prices. With the former I am in complete agreement, but the latter . may very Well result in serious dViloration, not only in the farming industry itself, but over the whole lleld of economic life of the community. The danger is ihereased becauae theSe effects take place indifeetly," said Mr H. R. Rodweil, leelurer in economics at Auckland tJnivereity Gollege, in An exteusiou lecture -in the eollege hall last night upon the GoYemmenti'8 scheme of gu&ranteed prices for dairy produce. After dealing with the strOng tendehcy for production to increase txnder a price guarantee, Mr Rodweil said that if saies produced a surplus in any year, great pressure would probably be brought upon the Government to have the whole of it distrfbuted in the form of a bonus payment, over and above the guaranteed price. This would hot matter if the market price were alw'ays above the guaranteed price, but such an assumption was not warranted, " What is to happon when the market price falls below the guaranteed price 1'" asked the lecturer. "I submit that it will be quite impossible . to lower tho guaranteed prico in a subsequent year to meet SUch a situation. Production costs will always rise to tho lovel of tho guaranteed price; it will, in fact, bo capitalisod in the prices paid for land, sfcoclc, etc., and consequently any reduction can be succesS fully roslsled on tho grounds of the costs invoived in efficient production, and on the ground that the farmers' standard of life will be lowered." If the current season's probable deficit were met by an overdraft in the dairy produce account of the Reserve Bank, and the overdraft were increased ,in subsequent seasons, this would tend (to raise general prices in New Zealand, and if the guaranteed price were raised, correspondingly the effect would be intensified. Imports would tend to rise and pressure on the London funds would result. To prevent the funds from becoming too depleted, it would be nCcesSary either to rAise the exchange rate or to ration exchange. If the price-level and the exchange rate were both raised, the guaranteed prico would have to bo raised also in order to maintain the farmers' relative positiou, and so the