WELLINGTON NEWS

Hokitika Guardian, 21 June 1928, Page 4

WELLINGTON NEWS

TRADE AND CONFERENCE,

(Special to ” Guardian)”)

WELLINGTON, Juno 18.

In the latest bulletin issued by the Department of Economics of Canterbury College, the trade of the Dominion for the year ended March 31st last is analysed and reviewed and the con-1 elusions reached are decidedly optimistic and cheerful. The bulletin states that tho most important single cause of the improved trade figures is the increase in the price of wool. A comparison of volume and value of wool as officially recorded for the March quarters of 1927 and 1928 indicates that on average over the whole of New Zealand this year’s prices are about 28 per cent better than last year’s. Similar comparisons indicate that prices of other important exports, butter, cheese .and frozen lamb have improved appreciably. In addition all these items show increases in volume which indicate that production has also been expanded. It is, however, in the conclusions reached after analyzing the trade and banking returns that the most optimistic note is struck. It is stnted-.thnt in view of the big increases in receipts from exports combined with the reduction in expenditure on imports, and the consequent great improvement in the purchasing power available within the Dominion, the present outlook is much brighter than, at any time since the end of 1925.

present favourable balance of trade is too large to bo continued, for it exceeds considerably the surplus needed to meet the margin of payments due abroad for interest, etc. Hence either exports must decrease or imports increase. A decrease of exports (allowing for seasonal variations) is very improbable, unless export prices fall considerably, arid there is no immediate prospect of such a fall. But the expenditure of the enhanced purchasing power within the country must increase demand for local goods and services and for imports, hence importations are likely to increase very considerably before the end of the year. Little is. to be feared from increased imports if they are of the right kind, and tfieir nature depends on the manner in which the increased purchasing power now available is expended. If it is spent on non-essentials and wasteful consumption, we shall be in no better condition to meet the next fall in export prices. But il it is used to liquidate indebtedness, to build up reserves; and improve production then the country as a whole will be in a stronger and sounder position. Its expenditure must, however, stimulate demand, and the same demand which increases imports must first be reflected throughout the country as a stimulant to greater business activity in general. New Zealand is being lifted out of the depression of the last two years, by a number of factors, by the efforts of her farmers who have achieved greater production for export, by the lucky chance of higher export prices, and by the economy in consumption of imports which relntivo poverty, consequent on over-expendi-ture effected. It is possible that wool prices may remain high for another season, it is equally possible that they may fall, but it is truer to-day than at any time since 1920 that the prosperity of the future lies in expanding production and improving quality at present or lower price levels, rather than in speculative reliance on the vain liopo of higher prices. The bulletin asserts that confidence at present is lower than is warranted 'by the improving trade and monetary situation. It appears that some indication more concrete than improving trade and banking figures is needed to stimulate confidence. The authors suggest the reduction of the bank oveiciraft rale. The rate was increased by i per cent in the June quarter of 1927, when the figures showed that from the banking point of view, the country uas at the lowest phase of the cycle. Had the banks felt justified in raising the rate a vear earlier, despite the unpopularity of such a step, some part of tho depression at least might have been avoided, and it is added: “There seems no reason beyond the higher rates noi\ being paid on fixed deposits by both banks -and rival institutions; for the maintenance of the higher overdiaft fate, and there is much reason for a reduction which might have very salutary effects in promoting greater confidence and hastening recovery. The Chairman of the Bank of New Zealand ill Ms address to shareholders on Friday crushed all hopes of any reduction in the overdraft rate which was raised to its present level not because of tho adverse trade figures or the excess of advances over deposits,” the determining cause was the intense competition, Government aiul private, for deposits and as there has been no relaxation m that competition there is no prospect of the overdraft rate being reduced immediately - as some people expected.