WELLINGTON NEWS

Hokitika Guardian, 13 February 1926, Page 1

WELLINGTON NEWS

DOMINION TRADE. FIGURES VERY DISCOURAGING. (Special to “ Guardian.”) WELLINGTON. February 10. Although the trade of New Zealand for 1925 runs into big figures, the returns are nevertheless very discouragin'''. because, the balance of trade in our favour is so small. The value of the exports last year was £55,262,272. or £2,649.561 more than in 1924, and was easily a record. This was principally due to the relatively high prices obtained for wool, frozen mutton and lamb and related products of the freezing works. The imports for 1925 were valued at £52,456,407, as compared with £49.527.603 in 1924, an increase of £3,928,804, so dint the imports have increased at a greater rate than the exports. The excess of the exports over imports last year amounted to £2,805.865, as compared with £4,035,104 in 192-1. and £2,505,810 in 1923. Omitting all consideration of the “invisible ” exports and imports of which there are quite a number, the amount payable in interest alone to foreign creditors by the N.Z. Government exceeds £6,000,000 annually and is stead ilv increasing. This obligation can be met by (1) an excess of exports over imports; (2) borrowing outside the Dominion, and applying the proceeds to meeting the interest obligation. The latter course has been followed during the past few years. In 1923 the New Zealand Government borrowed over

(W.(Kit).ooo. in the following year the loan raised amounted to £0,000,000 and last year £7,000,000 was borrowed in London. These loans plus the amounts raised in London and Australia by h cal bodies and power hoards enabled us to meet outside obligations and perhaps have a surplus at credit. Tt can easily be seen now that our economic position is somewhat perilous. Not only are the market prices of our principal exportable primary products lower, but there is also a contraction in the output and for this reason the volume of our exports must show a very appreciable contraction in the aggregate. Sir Harold .Beauchamp, who speaks with almost greater authority than any other individual, estimates this shrinkage at £12,000,000. Assuming that his estimate is somewhere near the mark, then the value of our exports for the current year will approximate to £13,000,000 instead of £35,000,000. This set back could he met by restricting imports, but that is not quite as easy a matter. If imports are reduced by 3 or 4 millions sterling it will lie as much as can be accomplished, for importers stand in a different position to exporters. The latter know when they ship their products, approximately what they are likely to receive for the goods, for most of our meat is sold on a c.i.f. basis, butter and cheese on f.o.b. terms and wool is sold practically for prompt cash, for a. fortnight after a sale the woolbuyers must tender cheques for their purchases. The importers are differently circumstanced and most of them are obliged to commit themselves from 3 to G months ahead, and they are, furthermore, tmder the disadvantage of having to estimate the probable demand for a line of merchandise at some future date. It is thus impossible to suddenly curtail imports to correspond with the shrinkage in exports. There is Thus a very strong probability that the current year will

show an adverse trade balance and it will depend largely on the amount Hie Government and local bodies borrow in London, whether the inevitable trade depression will be severe or mild. The trade figures explain, to some extent, the movements of the banking returns for flic December quarter. Ti will be remembered that the advances for that term exhibited an increase oT £2,017,073 over the corresponding quarter of 1021. As a general rule hank advances create bank deposits, consequently the free and fixed deposits for the December quarter should have shown an increase approximating to the increase in advances, but the actual increase in tlio deposits was only Cl ,353,803. or about half the incroase of the advances and the only inference that can ho drawn is that the balance lias been transferred abroad, that is to say there has been an export of capital. These adverse conditions have been manifesting themselves for some time past and many men in responsible positions have repeatedly urged the pressing need for stringent economy. Put the habits of extravagance, induced by the abnormally high prices of produce, have obtained such a hold on all classes of the community, that there will be great difficulty in effecting a radical change in those habits that have become so pronounced in recent years. There is every indication that the stress and stringency that we are now about to experience will last for some time. Tt will not he like the slump of 1920-21 which was sharp and of short duration and was quickly followed by advancing prices. This new slump will mean that New Zealand is at last to feel the aftermath of the war. Deflation will take some time to run its course, and will he painful and disastrous for a great number, and it may he that this is the only way to check the gross extravagance that is fashionable to-day, and bring us all back to the economic realities of the