PRODUCE PRICES OVERSEA

Hokitika Guardian, 28 August 1931, Page 6

PRODUCE PRICES OVERSEA

SHEEPMEN S PROBLEMS. DIFFICULTY OF PRODUCTION COSTS. WELLINGTON August 26. Internal costs of production and overseas prices for New Zealand’s produce were declared, to be two of the major problein s faced by the sneepowning industry to-day by Mr—H. D. Acland,* delivering his presidential address at the annual meeting of the New Zealand Slieepowners and Farmers’ Federation this morning. The first problem he said/, was immediate to the l Dominion and was capable of local solution, but the second was entirely outside the control of New Zealand. “I feel that there are many matters vitally affecting our industry which require the very .careful consideration not only of delegates to this meeting, but also of the Government of the day, in the interests of the Dominion as a whole,” stated Mr Aeland. “Last year we had reason for grave concern over tlie large drop in the money value of our wool, meat and 1 pelts. Our worst fear s have been realised as I believe that no other branch of primary production lias been affected by the present depression to the same extent as in the case with the sheepowning industry. Since last year deflation of prices has continued, until to-day we find that the ratio of production costs to money received for our products has reached an impossible stage. The effect of this is reflected through the whole of our economic life.

“With regard to internal costs, it is imperative that all costs must be quickly and drastically reduced, and by costs, I mean wages, transport, ’stores, rates, axes, rent and interest The Court has already made a reduction of IQ per cent in wages on all -awards but rent and interest with rates and taxes must also lie materially reduced as, if tbi s is not done, then these items of cost will lie automatically reduced for the reason that farmers and the community generally will be quite unable to pay them on present prices frori overseas. The Federal Government m Australia, in reducing interest <n all bonds from 6 per cent and 5} per cent to 4 per cent., recognised that this was the only alternative to default or repudiation. Slieepowners are in this position in New Zealand at the prose d time. Rents, rates and taxi's must, id necessity, also be reduced, in the same way if disaster is to lie avoided.” DEFAULTING LOCAL BODIES.

Local authorities had, in some parts jf the Dominiou already defaulted owing to their inability to collect outstanding rates, while the position ol many others was very obscure in that respect, said .Mr Acland. r l he awards directly affecting the industry wmo those for shearers, shed hands and pi usurers. An application was being made to the Court for a reduction in regard to shearers and shed hands, hut as the law stood legislation- would :he required before an nmendfrnent ol the award for musteivrs could he obtained. Unless some relief was given in that respect, however, there was a grave risk of many high-country ninhoklers in li>

oiltli Islvml throwing up their country, tlto mustering costs under existing award rates being prohibitive, tak ng, in some cases, nearly 50 per cent of the O'oss wool clip to meet the foi mustering alone. That, ol course, affected the South Islan only, and did fected the South Island only, and did riot apply to the North. The considered policy ol the federation, extending over a great many wars, that the principle of statutory fixation of production cost s under compulsory industrial legislation "as against economic law and must tail on falling markets, was being fully justiicd at the present time. They had always contended that that prilie'oh' had. been a menace to the genuine worker, that it had lowered the starnlird of living for many, especial',}' those in the country districts, and was larg"lv responsible lor the unhealthy growth of the big cities in New Zealand'. The ultimate burden ol any award, whether pastrycooks, bricklayers, hairdressers, shearers or slaughtermen, was ultimately borne by the primary producer, those awaids being allied with what was called protection, i.e., restriction of imports. That had artificnlly kept up the cost of product on of primary products and leally hovered the standard of living, and was doing so still. It had imposed an immense burden ol taxation and costs upon the community, and especially cn all primary producers, and there was no doubt that at the present time it was preventing thousands of men from obtaining genuine economic employment. EXPIONSIVE PPOI)Uc n ON. tro long as Parliament,' which was, after all, only a teflex of the opimon of the electors, insisted through the Arbitration Act and restrictive legiskg tion on making , the production of things in New Zealand more and.' im re difficult and expensive, it was absurd to complain of poverty and lack of genuine employment, said Mr Acland. It present' conditions continued New Zealand must soon he forced hack to sou-d economic conditions, because the cut y of borrowed money was certain to stop abruptly. Those conditions must, of necessity, he much harder than any during the last thirty years, as during that period they had lived on overseas loans to an enormous extent. It would appear that there would be no overseas loan money available to continue pub ic works, and it would not be possible to obtain a sufficiency from the New Zealand taxes.

'' Australia ha!7 in"effect", 'defaulted on her Federal issue bonds, and he was afraid that, New Zealand might be compelled to follow suit. In February, 1927, he made a statement before the Arbitration Court on behalf of the federation in the Freezing Workers’ l>is put-e, drawing attention to the danger of the effect of the general increase 1.1 costs for everything required in tne farming industry. He stated then that the farmer’s margin of safety had vanished, that when prices increased overseas wages were increased, and when prices receded no corresponding reduction in costs was made, the primary producer having still\to sell his produce in open competition with other countries where wages and production costs were considerably lower than in New Zealand. As the Dominion depended on the export of primary produce for its income, its prosperity or otherwise was determined by the relative costs of production balanced against the total of money received from outside the Dominion in return for primary products.

SCOPE OF ECONOMIC LAW. Economic law must be allowed to have full scope if primary production in this country were to be maintained. That requirement had been lost sight of with a result that the farmer found himself unable to, carry on. The statements he made in 1927 were then. accepted by the farming community as correct, but the ’Government of the day and the Arbitration Court apparently failed to recognise the seriousness of the' position. If present prices continued, it was manifest -that there would have to be a general readjustment of all financial contracts, whether public or private. Last year the Dominion had to carry a great increase in taxation on falling incomes. Obviously, if that process continued, taxation must ultimately take practically the whole ol the income. Further direct taxation, therefore, seemed out of the question, and yet t^ ie Budget now before Parliament had apparently only been balanced this, year by imposing additional taxation and by taking the last of the reserves set aside over a series ol years. The fallacious system of the land tax was becoming very apparent owing to the fact that huge sums were outstanding owing to inability to pay, and the policy of the Federation over many years that tile right principle of taxation was ability fo pay, was more than justified. it was frequently stated 'that the main difficulty farmers had to Bice was the high price paid for land, but, undei existing conditions, the question ot land value was hardly to be considered, as properties with a free title and no mortgage or bill of sale on their stock and plant could not produce sufficient to pay working expenses. In ♦ some cases the gross receipts tor the produce from the land had been insufficient to pay land tax and local rates without any question of wages, working costs o'r living expenses ot the nominal owner. Politicians of the predatory type, who had proved themselves to be the worst enemies of the community, confidently asserted that maintenance of high money wages would cure afl evils by maintaining purchasing power at a corresponding high level. Unfortunately, they did not show where the means to pay the high money wage fixed by statute, were to be found. Under present conditions, industry generally "as unable to absorb profitably all ai ailable labour. They could not place labour in cold storage without excessive loss, as labour, once unused, could not he recovered, but an added burden was laid on industry.

readjustment essential. “A readjustment of costs sufficient to enable the industry to pay its way is essential,” continued Mr Acland. ‘Demand creates price, and we must apply this to service in the same way that it applies to the produce of the service when it is placed on the world s markets. Unnecessary restrictions of all kinds on industry must be removed and the community given, a free hancf to. adjust its affairs .along economic lines. As I have said, rents and interest charges, taxation and payments for all service must be adjusted to meet the altered conditions if we, as a Dominion, are to survive and meet out obligations overseas. The gravity ot the situation cannot be over-stated, and immediate action is required if default is to be avoided, as there is no indication to-day ot any other than a period of low prices and very little prospect of any substantial increase in our national income.

“Heavv sacrifices have already been made by capital, and this is evidenced by the lowered values of investments and the writing off of interest by mortgagees on farm lanu. Mortgagees in most cases, unfortunately, mean benei&iaries in trust estates, i.e., the widow and orphans w7io depend upon the life savings of the husband or father. We can only hope that our Government will recognise its responsibility,- and take steps to ease the burden ot taxation and lower the costs of services to the community to a point which will enable the country to meet its obligations. If this is not done, then private effort must fail, and the community generally must ultimately suffer still greater hardships.