INFLATIONARY DANGER

Hawke's Bay Herald-Tribune, Volume 81, Issue 55, 27 November 1937, Page 11

INFLATIONARY DANGER

Banker's View on Labour's Policy of Spending IF PROSPERITY DECLINED Some commeht npon New Zealand's recovery from the dark days of the depression and the Labour Government's poliey of spending "money was made at the annual meeting of shareholders of the Bank of New Soath Wales% held in Sydney, by the president of the Bank, Sir Thomas Buckland*. 4 'The prosperity of New Zealand is almost entirely ' dependent upon the returns obtained from the sale of primary produets overseas," said Sir Thomas. "It is therefore encpuraging to note that the Dominion has enjoyea an extremely good export year, the value of exports for the year ended June 1937 being 20 per cent. greater than that for tne previous 3-ear. While wool was responsible for the. major part of the increase, the returns reeeived for most important commodities improved. ' ' Last year export prices _ were high and the total value of exports eonstituted a-reeoid, contimied Sir -Thomas. It shoald be expeeted, therefore, that as prosperity grew the Government would curtail its expenditure in pro.viding employment so, that private enterprise could !expand and take on those men fonnerly on relief work. But in spite of prosperity the New Zealand Government was still worried aboiit unemployment. This year, for example, expenditure on Public Works is to be increased by 66 per cent. That the Government sliould flnd it necessary to spend £17^000,000 (N.Z.) on public works at a time when export prices are high is a striking indi'cation of the straits to which- its policy has Tedueed private enterprise. Moreover, Sir Thomas considers this large expenditure will distort the whole structnre of production. A portion of the expenditure is to be flnanced from revenue, he said, but the larger proportion will come from the balance carried f orward from last year, together with borrowing from the Post Offiee Savings Bank. He added that he hoped the Government will no't f orget its responsibili,ties. It was the Government 's duty to see that the Post Office Savings Bank was always in a position to meet all the demands made upon it. In the event of * any great decline in prosperity these demands would be unusually large, and at such a time Government seeurities would not be readily Tealisable. As Sir Thomas pointed out, the Minister 6f Finance has stated that, provided men and materials are available work will not be held up for want of money. Presumably the Government will borrow from the Reserve Bank. "Such borrowing," ' Sir Tliomas concluded, "will be of an inflationary nature, and once a Government starts that form of finance it generally finds itself compelled. to resort to it at an increasing ratfe."