WELLINGTON NEWS

Hokitika Guardian, 4 February 1930, Page 2

WELLINGTON NEWS

USE MORE WOOL. (Special Correspondent.) WELLINGTON, Jan. 30. The depressed state of the wool market, and it is very much depressed, is forcing wool growers and others to look about for ways and means of improving the market, that is to get values to* move upwards. So far the best suggestions have come from. Australia where the idea is gaining strength that by means of scientific research and publicity wool can be made to recover its position in the world’s economy. These views are strongly supported in. New Zealand, but the suggestions remain suggestion, and no steps have been taken to give practical force to the scheme. Mr B. Tripp, the well known pasturalist, is a strong supporter of the research and publicity proposal and maintains that all that is needed is a fund to carry on research work in wool and to' engage in a publicity campaign. That of course is obvious, alul Mr Tripp believes that an adequate fund should be established and this could be done by making a small levy lon wool producers, and in order to save expense in this matter he suggests that the New Zealand Meat Board should act as agents for the wool growers. The Meat Board had all the requisite machinery to 'carry out the work and there 'was no need to set up another board which would cost a great deal of money. In this suggestion Mr Tripp envisages a compulsory levy anti that is a debatable* point. C'qmpulsion involves 'legislative interference and red tape which are not helpful factors. The Meat Board with its excellent machinery for collecting funds, and its wide powers of compulsion has been totally unable to stave off a drop in meat prices nor prevent our,freezing companies from making heavy losses. The woolgrowers in Australia are strongly averse to any Government interference and evidence of this was afforded recently’. The Commonwealth Minister (Mr Scull in) called a conferepee of representatives of wool growers to obtain their views as to improving conditions. Wool growers .agreed jto meet the representatives of the Ministry, hut they were not prepared to put forward any concrete suggestions. They contended that they had been able to manage their own affairs in the, past and they would he satisfied to he left alone. The Government it was held could best help them by reducing taxation on the industry direct and indirect! The history of Government interference in industry has not been marked by any great achievements and most of' the producers who have sought the assistance" have not been particularly well satisfied with the result. Anything in the mature of compulsion would b© harmful-—voluntary efforts are the best, and as yet no efforts have been made to ascertain what support would be accorded a scheme of voluntary levy. Research would take time to establish but propaganda could be engaged in at once, and the need lor publicity is urgent.’ Funds for a publicity campaign should . .nOt be difficult to obtain, more "especially if the “wool kings*’/ inaugurated the funds with substantial, subscriptions. Up to the present there has been a good deal of talk about advertising and research, and it is time something definite was undertaken especially with regard to advertising. In the meanwhile there are suggestions that offerings should be restricted. the sales prolonged and wool held over. In many cases the wool is withdrawn from sale because the prices bid have not come up to the expectation of the growers. It is apparent from/the history of controlled industry, that any . attempt to increase the price of wool by restricting offerings will not achieve its object. :7 This plan has .been suggested in Australia, and y,thi> “Sydney Morning Herald’’ points out that if restric- '' tion were placed on offerings 1 so that a large quantity. of (Wool was carried over t-o the next season it' is doubtful whether the present market would be affected; but it is, undoubted that next season’s market would feel that carry over as an incubus weighing down prices. The market would always be anticipating this wool being placed on offer, or else it would lead to a still heavier carry-over, to the succeeding season. From year to year the carry-over would then grow until it got to the • dimensions of an entire dip. Each year the banks would have to finance not only -the dip of the year but would lend on'the carry-over, and would eventually !>e financing the equivalent of two clips. In that way money would be withdrawn that should be used to finance current production without any benefit accruing because buyers discount prices on account of supplies which they know must one day be available for the market. ATool has, fallen in price because supply has overtaken demand. High, prices encourage additional production, and additional production ha,s helped to down jprioes. Consumption of (wool ‘needs to be stimulated and that (An l>e done by a campaign qf publicity. •

THE MONETARY POSITION. WELLINGTON, Feb. 1. There is no doubt that the money position both here arid in Australia is becoming increasingly stringent. For a long time, the London banks have had their . London balances drawn, upon mainly because Australia

lirts not been able to borrow in London. Furthermore' produce prices have declined, and because of this producers have been inclined to withhold their produce from the market thus causing bank erqdits to become frozen. The Associated Banks in New Zealand raised their exchange rates on London in December last and have found it imperative to again raiso their rates the effect of which is !to greatly favour exporters and penalise the importer. Anyone wishing to telegraph money to London now must pay 52s Gd per cont while previously the rate was 42s Gd per cent. The high rate must check imports, and il it. checks the inrush of luxuries such as motor vehicles it will have done good. The exchange rates on London have been high for some time, hut that is not so had as the actual advance in the lending rates which have occurred in Sydney. The Associated Banks there have raised the overdraft rate from per cent to 7 per cent minimum, and the immediate effect has been to depress Stock Exchange seem i ties. There has been a pressure to* sell on the Stock Exchanges and there has followed substantial declines in prices, many bank .shares losing ground heavily. No doubt the sliaio market in New Zealand will be affected, for shares that are uealt in on the inter-State markets cannot rule higher here than in Australia, there must be a parity. Investors in New Zealand are bound to be offered shares at bargain prices from Australia but any active buying resulting in the transfer of funds from New Zealand to Australia will cause the local money market to become stringent, in any case, in view of the movement in Sydney, the banks in the other Australian States and New Zealand are bound, to advance their rates.

A 7 per cent minimum overdraft rate was imposed by the New Zealand banks in May, 1927, and was not lifted until July, 1928, the minimum rate still being 61 per cent. As a rule hanks do their utmost to avoid disturbing the ' money market until absolutely forced to do so, but it is difficult, to see how the New Zealand banks can avoid coming into line with Sydney and therefore it would not he surprising if there is an advance in the overdraft rates in Apt il or immediately after the. banking returns for March quarter are available.

’The fall in the price of produce and the inability of the governments to borrow in London have been the main cause of the present stringency of the money market, and the increasing dullness of trade. The income from overseas through the sale of produce and a complete cessation of the inflow of borrowed funds has brought about the present situation which is rendered more difficult hv many producers pursuing the policy of holding their, produce, This is particularly the ease in respect to wool. Many of those closely associated with the wool trade advocate lestricting the offerings at the wools sales, and some go further and suggest that the sales should be postponed for three or four mouths the object being to force up the market price by creating, an artificial shortage. In the ultimate the hanks have to finance the wool, and every bale held over means so much frozen bank credit.

It is doubtful whether the policy suggested will achieve object for the fundamental cause of the decline in wool value is based on the old and unchanging law of supply and demand. According to the wool expert of the “Sydney Morning Herald” during the last seven years the quantity of wool produced in the. world .annually has advanced from 8,479,000 bales to over i 1,000,000 hales, or approximately 30 per cent. Investigations into consumption by the U.S. Bureau of Statistics revealed that consumption had dectreased' half a pound per capita. The wool position to-day. would be very much worse thrfn it is, but for the fact that consumption of wool in Japan has extended enormously.

The supply of wool is more than ample to meet the current demand and the tendency is for supplies to increase. To carry over any large quantity of wool into the next season would aggravate the position. It is obvious that ,one of two things must happen, either supplies must be suppressed or consumption increased. To reduce the supply of wool would involve the' wholesale slaughter of sheep, which is unthinkable, and therefore attention must be concentrated in stimulating consumption. Publicity would yield prompt results, which is what the growers want, and scientific research would yield deferred results which would continue to stimulate the demand for wool.