FINANCIAL RECONSTRUCTION OF N.Z.

Hokitika Guardian, 29 September 1931, Page 2

FINANCIAL RECONSTRUCTION OF N.Z.

FIVE YEARS’ PLAN

NEW ZEALAND’S FINANCIAL POSITION. (X.Z. Financial Times). Zealand’s financial position, Loth public and private, is so grave as to demand urgent remedial measures. The Government finances are technically insolvent, and this Dominion. is laced with a position even worse than tfiat of England, where the leaders of th c Labour Government anti every other political party in the House V have combined, at t-lie personal request of the King, in a united attempt t° :a y ;lVe the Old Country from the unspeak«;ahle horrors of inflation. Our public "‘finances —both Government and local * ■.body— are so chaotic as to place this * Dominion, in a very similar position to where Australia stood two years ago. Can we not profit by the example ot Australia and save our people lrorn the * ’ghastly evils of imperilling the currency system? Must we be forced to ~,:be the victims of every conceivable * instrument of taxation until thousands 4 !of our people are living in public parks, '/■ (.without hope of employment, and the 'humiliation of national default on ini' -tercst payments and the inability to -•Vjay civil servants’ salaries is forced ilupon us, like New South Wales? The ’richest fit ato in Australia has been h .brought very nearly to a standstill by the unsound and insane finances of its

...Government. What can we do? What plan can be evolved to enable the country %Q carry on with a minimum of dislocation and inconvenience? What are the leiast drastic economies necessary to enable the people to carry on business as usual? •*“ First of all, we must understand that the solvency of the State is in grave peril. The‘ Government of this country is not within £10,000,000 a year of a balanced budget. Every political calculation ignores the fact that the affairs of State are so arranged that this country cannot proceed without borrowing. New Zealand is very nearly at th e limits of its overdraft. The national credit is almost exhausted, and unless we restore confidence very quickly, we shall experience the sudden cessation of overseas - lending, which would be a national disaster. Last year, New Zealand increased its National Debt £8,(530,015. Although a capital expenditure, this money is spent annually by the-Government, and is used in the employment of labour, which wail cease: witfi the exhaustion of national credit, psuch.an event would be doubly disaspfiA an . d make . confns ' ion even worse§|p>nfounded. The time in which to -readjust the matter is very limited. Our National Debt as and at March 31st was £276,033,358. Can we taper off this enormous tax on privuve enterprise before this millstone of debt ci ashes us The soundest policy is surely to consolidate our position and ■ "ttr”start paying back before the National Debt exceeds £300,000,000. WANTED -A FLAN. Now Zealand is a- democratic community. Democracy has never been a success in any civilisation in the wcfld for one hundred years at a stretch. Until such time as democracy b .nkrupts itself, the people of this country should 'elect the Government. Let an election be held by all means. It is vital to know whether a majority • of the people of this country are in favour of sticking to Great Britain in her hour of need or if we are to be inflicted with the further difficulty of a L mg, a Scullin, or a Theodore, or the canaille in England who have disowned t> eir Labour leaders there.- If the ] ople here are not prepared to make ' the necessary sacrifices to save what they have built up, then they have o ily themselves to blame if they lose e\ erything and are back to where they started from.

THE PLAN. The financial operations necessary to set this country on its feet again will he painful. They involve very heavy sacrifices from all sections of the community. Sacrifices were made in 1914. If they were not made in vain, further sacrifices must now he made. The following" plan is as simple as possible. It is spread over five years, v.hich would necessitate making; it clear to 'electors that the next Parliamentary elections will be held in 1937. The bru d outline only has been given, and some difficult and contentious points ]jft out as clouding the main issues. The plan has ten major points, which are: UNCONDITIONAL. 1. The Government and each local ,hod\ to reduce their borrowing expend--1 ituro 20 per cent, in each and every year for five years. No further capital construction or living on borrowed moni'ey at the end end of five years. ’ls s.o. Civil servants’ salaries and Arbitration Court Awards to he reduced 10 per cent in each and every year for .five years or uiitil such time ns the budget is showing a surplus arid the country is not living on borrowed money. 3. ’ Numerical strength of Civil Service and local body employees to be reduced 10 per cent in each and every year for five years by superannuation or retrenchment or until such r t-ime as the national finances are buoyant. 4. Pensions to be cut 10 per cent, in each and every year for five years or until national solvency is established. 5. One social service to he abandonpd each and every year for five years,

such suspensions to operate in the order in which the State undertook such functions.

6. Voluntary Conversion Loan, without penalties, for interest rates, on existing National Debt to lie reduced one half per cent., in each and every year for five years, the interest- on 51 per cent Government Bonds to be 5* per cent for 1931, 5 per cent, for 1932, 41 for 1933, 4 for 1934, 3d for 1935, and 3 per cent for 1936 onwards by a refinancing of the National Debt in the same manner as Australia. Each local body to carry on or compound according to their financial position. Private enterprise to be left alone to battle along under the Mortgagor’s Relief Act, 1931, and the Distress and Replevin Amendment Act just passed. N.B.—V.olai.n of contr. ct is only justifiable when there is no alternative. The voluntary conversion and wage reduction of 20 per cent, tried out in Australia are therefore preferable in the first instance to a compulsory compounding with creditors. Although credit in London is of vital importance, it is unsound tj distinguish in favour of people residing overseas on the ground that they, had no say in the Government of the county. At least an appeal to convert should be made. In a compounding with creditors, no differentiation should be shown. 7. income Tax (on individuals only) to be increased 10 per cent in each and every year for five years or until such time as the country is in a healthy financial condition.

8. All other taxes to be reduced 10 per cent, or as near thereto as practicable, in each and every year for five years. This applies to customs taxation, company tax, land tax, and numerous other forma of State taxation which in, crease the cost of living and the cost flf Governments e.g., postage to he 2d in 19f12, 13d in 1933, l}d in 1934, lid in 1935, Id in 1936, 9. The number of Parliamentarians and the number of local bodies to b.* reduced 10 per cent, in each and every year for five years. 10. Unemployment relief works by Government and local bodies oil borrowed money to cease forthwith. A dole sufficient to prevent starvation to be paid through the Police Department. All the relief schemes to- operate, but as secondary only to the main scheme set out at length. Tlie scale to be £1 per week per single man, 30/- per week per married man and wife, plus the scale of allowance for children under the Families Act.

The fanners to be appealed to for each farmer to take as many unemployed as lie has food and shelter for, such farmers to be paid one-half of the allowance for board and the unemployed to assist the farmer.

It is suggested that it is costing the country more than £1 per week per unemployed, not only in the relief pay, but also in the free gifts by the Hospital and Charitable Aid Boards.

It is further suggested that two or three days a week on works which are of little value is demoralising. The pay is not sufficient to live in the cities without a grave risk of undermining the health of the unemployed and of their women and children.

It is believed that such a move would mean a few shillings of ready money in the house each week for the fanner and his family, for which he gives full value in board and lodging at a fis m 'e which would not be possible in the towns.

Production should he enormously increased, while the farmers’ labour problem would be solved. There would he no breach of awards, and the unemployed would have plenty of work to do and a bed and three full meals a day with a few shillings for clothing, tobacco and luxuries. The correct proportion between the town and the country would he more likely to be obtained. The unemployed would be able to keep their health and strength and work in such a way as would keep their self-respect and supply their material wants. If it is desired to assist the !*.rmers and the unemployed, it seems that this scheme is wortly, a trial to increase the production of the soil. This large increase of the rural population would not only increase production, but would also give more work to the people in the cities and, at the same time, remove undesirable growth from society. The farmers would have no difficulty in finding .work on the farm o fsueh a nature as to fit in with the strength and capacity of each individual case.

If. £50,000 per week was sufficient to keep the unemployed, the annual cost would be £2,600,000, which is the amount of revenue estimated under the latest Unemployment Act. It could therefore be financed from revenue. Some sufficiently wide financial scheme of reconstruction must he adopted to give the country a chance to pull through and business and farming a chance to get on their feet again, if a plan to which the country will rally and make the necessary sacrifices can he found, there is no reason why New Zealand should not forge ahead out of her difficulties. Should the measure outlined be not sufficiently large to save the position, the plan could he speeded up. ft’ the country turned the corner earlier, any remaining part of the plan could cease. By taking the long view, everybody will know the worst, which is half the battle. It is the uncertainty of the financial outlook which lias undermined confidence, and hand-to-mouth Parliamentary measures are dropping like bombshells into the business world. Let the people know what thev are to expect and they can make their commitments accordingly. There is only one reliable way m which to get money, and that is to earn it. Borrowing involves the painful necessity of paying hack or failing. Lotteries and even Premium Bonds have therefore been rejected as a

means of State revenue, except as an additional emergency measure. The tinkering with the currency by toying with the exchange rate has also been discarded as fraught with dire consequences and likely to get out of hand, ft is inflation. Customs duties to restrict imports have also been rejected as another quack remedy, only justifiable, as an emergency and temporary measure. Both these latter suggestions will only breed unhealthy internal conditions for local industries, when what the country needs is to get its feet on sound bottom and (o emerge from the harassing restrictions of heavy taxation and debt.

The suspension of Arbitration Court awards or the abolition of that institution, which would enable private enterprise to find permanent economic* occupations for thousands of unemployed at a figure greatly in excess of the present relief schemes, but at a lower figure than existing award rates, has also been reluctantly abandoned New Zealand can emerge from the present world slump in a far better condition titan older and more densely settled countries, which are not so capable of further economic expansion. As a food-producing country, with too many town houses, there is no need foi anybody to starve. Food and shelter can be provided for everybody. Conditions within the State, however, must he so arranged that the country ban expand without undue restrictions and intolerable State burdens,, which are already too heavy to be supported by the farming industry or the trade and commerce of the country.