CHEAP MONEY AND FARMING.

Hauraki Plains Gazette, Volume XXXX, Issue 5478, 23 September 1929, Page 2

CHEAP MONEY AND FARMING.

Sir, —Several communications, some of them very lengthy, have appeared recently in the newspapers of the Dominion affecting to show that “cheap money” resulting in “dear- land” is prejudicial to the interests of farmers. These communications deal only with cheap money for farmers, and I admit that cheap money for the community as a whole would be vastly more beneficial to farmers than if it were restricted to land orily. If the available land of New Zealand were all taken up, reduction of interest rates might be capitalised fully in the price of land. Even that means only that farmers, instead of money-lend-ers, would get a win. As the rate of interest has increased, the converse is true. It was frequently said before the war that the average equity of farmers in the land they farmed was one-third. A rise of interest amounting to 50 per cent, and applied to mortgages alone would then have completely wiped out the pre-war equity of farmers, who must have continued to farm, if they did continue to farm, by using more intensive methods, helped only by increase in selling price of their produce. As to the purchase of farms, a 50 per cent, rise of price, multiplied by a 50 per cent, rise of interest, would compel the farmer who finances on borrowed money to pay twice as much for any unit purchase. As there is about three-quarters of New Zealand’s area undeveloped, any reduction in the rate of interest must act in a two-fold way to assist development. If reduction were to pre-war rate, price of commodities would be reduced and cost of development would be reduced, the money borrowed to pay for development being also reduced. The effect of this, with better prices to help, would be greatly increased development of land, more land would be thrown upon the market,, large blocks would become economically developable, and this land would enter* into competition with the older settled land, having a tendency to prevent land prices from rising. This is the ordinary and acknowledged action, of the law of supply and demand. At the present time we have a ring fence of prohibitive costs around the better land of New Zealand. The posts are high costs of goods, the barbed wire is high cost of money, and dependent on this are the battens of necessarily increased wages, since the law of the land aranges wages according to the cost of living. If New Zealand takes down that fence it need not worry about farmers getting more than their share of the results of production. Increased prosperity will come in like a flood. Let the producers of New Zealand first deliver the goods, then tax the rusults as much as may be considered fair. There seems no valid reason why farmers should not be encouraged to make taxable incomes, even at the expense of some of those who at present fill in returns. How to do it is, fortunately, not for me to say. A. E. ROBINSON. Auckland, September 19, 1929.