ECONOMIC POSITION.

Hokitika Guardian, 14 September 1922, Page 4

ECONOMIC POSITION.

REVIEWED BY PROFESSOR 1 CONDLIFFE. CHRISTCHURCH, September 7. The present economic position was reviewed by .Professor J. B. Condliffe in an address to the Canterbury Chamber of Commerce lust night. The yearjust ended, Professor Condliffe said, had been one of quiet readjustment after the severe crisis and credit stringency that followed the great fall in the prices of primary products in tire season 1920-21. That fall in prices was both sharp and sudden, and the effects of the straits to which the farming community were subjected were felt in all departments of industry and commerce. Being very sensitive prices, determined in highly-organised, speculative markets, the prices of primary products always felt the impact of world changes in the price-level before the more sluggish prices of manufactured imported goods. That fact was brought out clearly in an interesting table reproduced in the report recently presented to the Government by the Taxation Committee. From the first quarter of 1920 to the first quarter of 1922, the index, numbers of the total imports into Great Britain fell from 284 to 1-19, or in the proportion of 100.52, while the prices of British exports fell from 326.218 or in the proportion of 100.67. THE SELLING AND BUYING MARKETS.

As a result, the year 1920, and, to a less extent, the year 1921 saw importers still being loaded with heavy stocks at high prices from the great manufacturing countries. New Zealand was in the unfortunate position of selling on a falling market, and for some time, buying in a rising mnrkt. While wholesale prices had been falling in Britain since May, 1920, and rapidly since September, 1920, the fall bad not been either as sudden or as great as the drop in the prices of New Zealand produce. If the present downward trend - of

' prices continued till the world got hack to the gold-standard level of pre-war • times, New Zealand was likely to he constantly in the position of buying in a market which was not falling until after the more sensitive prices of New Zealand produce had fallen. The heavy drop in the prices of primary produce unfortunately was aggravated by two factors, tile accumulation of heavy stocks of wool and other commodities which resulted from the mismanagement of the war commandeer; and also by the exceptional harvest in the Old I World during the year 1920. Those prices accordingly weie dragged below the level of which other prices fell.

j Severe as the crisis had been, its effects were a great testimony to the stability of the Dominion and to the or- - gauisation of its industry and commKrcC. Tlie tieeessw.v rif-adjustmcut-Ilmil in most cases carried through with undue strain, and at no time had there !boen anything approaching a panic. The worst effect had been a degree of I unemployment which, though serious enough and productive of real distress | in many eases, had been only a shadow | of the distresses which visited other countries. j - STEADY REVIVAL. . All the prospects for the coming year pointed to a steady, though slow, revival of business and prices. Sueli a revival began in the United Statbs in the early part of the yoar and was foreshadowed by easier rates of credit. , The upward turn of. prices in America wa K followed by a similar development in Great Britain in April, 1922. There i was every reason to expect, that the season 1922-23 would show substantial rises jn the prices of New Zealand's primary' produce, and so give the Dominion time and opportunity to put its house in order. The rise was likely | to he greater in the prices of primary products than in manufactures in the proportion to which the prices of farm products were dragged below the gen- . oral level in 1920. The recovery due should not, however. he interpreted as a return to th_“ pre-war conditions of over-rising prices and continiiius prosperity. .Still less should it be made the occasion of a boom. The warning issued by the economists of Harvard University when the first signs of the revival became evident in the United States was curiously applicable to tlie New Zealand situation. “What has been said in regard to the probability of improved business and high general commodity prices in 1922-23 must not be interpreted to mean that a business boom is in prospect, because the numerous adverse factors in the situation make such a development highly improbable.” Incomplete liquidation a farming community with low purchasing power, excessive taxes, and the very critical European I situation are all obstacles which tend ' to retard business activity. The swing " of the pendulum will bring again a falling level of prices as soon as the natural reaction from the panic stage of the crisis is over. The tendency' must he for prices to fall in the long run as the depreciated paper currencies of tlie world arc brought hack- to normal. This tendency remains though revivals arc experienced such as the one we are just entering. THE COUNTRY’S OVERHEAD EXPENSES.

The importance of that fact for Now Xoalatul mv in the heavy burden of overhead charges carried by individuals and by the country as a whole.

The mortgages on land amount to £23f>.(KX),OOO, the public debt Ut £219,090,000; of the freehold land of Vow Zealand, 98.7 per cent was tinier mortgage; the annual interest hill tnd contribution debt was calculated n the Budget, as £10,875,185. Jiueli iabilites as those were not easly relueed, and some of them were likely ;o bo increased The prospect of fall'll prices, or even of a continuance of mything approaching the present low cvel of prices, must make every Now Seallnnder' give serious Consideration o the very heavy overhead expenses if the country. The only way in vhich the position could be met was iy counteracting the low prices by ettcr and more economical producion and greater output. MILLSTONE AROUND NECK OF INDUSTRY. The weak points in the; industrial tructure of the Dominion were the nrenl and inflated land values, •hich, in only too many,cases, would nve to ho reduced eiither by arrangelent or by failures; and the oxtreme,r heavy expenditure of the central ovennment, necessitating) taxation lat was a millstone around the neck F industry in aH Its forms, Not on-

ly fixed expenses such as interest and pensions, but also the ordinary administrative charges, were at a very high level, the former likely- to go higher. In finch circumstances the Government, unless it resorted to borrowing at a most unfortunate time, had to choose between high taxation and reduced expenditure. In both these respects the business community had a vital interest. The present methods of taxation urgently called for investigation . and readjustment. In particular, the income tax should be made a tax on personal income instead of upon company profits. Tlie fact that if the present unfair method of company taxation was repealed and direct taxation of personal income substituted, it would he necessary, if the same amount of taxation was to be obtained to double tlie rates of taxation upon incomes between £3OO and £2OOO. was the measure of the extent to 'which the small shareholder, and therefore the joint stock method of business, was penalised at present. The committee of business men recently appointed by. the . Government had made important recommendations, but its report was, in the nature of the case, confined to a few of the more pressing questions of. tlie moment. The time was overdue when a thorough inquiry into the taxation system as a whole should be made. On the expenditure side, apart from .matters of policy in State expenditure ,it was probable that a. competent scrutiny would reveal many possiblities of retrenchment and economy. The present system of budgeting and. expenditure, of public funds would not be tolerated by the management of any private business, and we ought to require from those who controlled the expenditure of public funds tjie same standard of care as the law demanded of trustees. Ministerial. responsibility in, a Parliament which had little or no sufficient guarantee cf efficient control of expenditure. The power of public opinion alone would keep both Ministers and members alive to their duty in that regard, hut no effective public opinion could be formed when data was lacking upon which to form a reasonable .opinion. _ t ,