[?]ROIC MEASURES NEEDED

Rotorua Morning Post, Volume 2, Issue 442, 28 January 1933, Page 5

[?]ROIC MEASURES NEEDED

jvpecial Commissioner) .

IHE PREMIER'S STATEMENT IENDS HIGHER EXCHANGE WILL I ASSIST IN RECOVERY jjUSTIFIED BY CONDITIONS • |0en the House of Representatives resumed yesterday |.;[1 detailed surveys of the finaneial position of the. country Ijen by the Prime Minister, the Rt. Hon. G. W. Forbes, and « I.Mei' of Finance, Rt. Hon. J. G. Coates.

Ejes contented himself with reviewing along ||ies the cireumstances which had actuated i^ei'nment in its deeision to raise the ILrate and briefly outlined the advantages |je Government considered would be derived of thjs step. ■ In the course of his ■the Pi'ime Minister emphasised the f act that plast review of the position, conditions had ijfting from bad to worse and said, that phe did jt reluctantly, he was forced to l-Iusion that only emergeney measures could

lcrisis in New Zealand's primary industries. Igc quoted figures to show that export prices had been l|declining and said, that figures obtained from the State I, Departments indicated that a very large number of farmIjin a most precarious position and required the most urgent Ise. Ijlr. Coates surveyed the problems on more detailed lines iplemented, at some length, the arguments advaneed by the liiinister in favour of the Government's deeision to peg liiange rate.

Wellington, Friday. j -j$e of his oificial review ition of the Government's legthe exchange rate the ler, Rt. Hon. G. W. Forb|i members will recolleet ftaber 1 last, in intimating jiioposed to move the ad[:f Parliament until JanJilated tliat the intention | Cabinet to give a fuller I'iorough examination of j lecting the general econoIsfthe Dominion and parIdifficult conditions of the litry owing to the further les of export produce in Imarkets than was poslinisters were closely enjjiament work. iHouse adjourned on Dejie Government lost no ti; the necessary arrangeGjthe fullest information i to the effect of the low • -ba Igets of the farming asd :n this connection Dr. Professors Belshaw and lasked to come to Welie a report on behalf of iicommittee, of which they \ s in February, 1932. j i -which they have furnishG'ance with this request, J 5t helpful to the Governl -Hy in arriving at the depinet to bring about an ■ ihe rate of exchange. j nation supplied by farm|iies and by the various iig departments showed Siborrowers had slipped i seriously in their payprincipal and interest • last twelve months. bjaourable members some 'aagnitude of the arrears ( oaloans to settlers in re11 : State Advances Departiie Lands Department, I 3 :3ttwing figures : — ach 31, 1931, the amount ! atlers to the State Adbe was £411,740. At 332, it was £835,760, and 1 3 30, 1932, the total had Ml, 05(5, 830. :is Department, £1,522,137 : rent and interest in arqember last, and in ad:;stponements of rent and ::unted to £283,650. I ] oi' the House will ' the figures supplied by | itate departments furnish :as to the position of mort■srs generally in the Do-

wth of Arrears. ftli of these arrears on (ithe farming community iarticularly rapid, during p months owing to their J reserves becoming exp the more recent dejthe prices of their propecially dairy products, pt accelerate thisi slide. |: readily seen that a serib has arisen which will |a further problem for the pweighted Consolidated -of the economic position • ti the economic committee it had become pi'ogres'isince their report in Feb- ' The following figures "e this. Taking the index jfl Kew Zealand export |the period 1909-1913 as P1928 it had increased to Mer, 1932, it had fallen. ti or a deerease of 49 per k vears. I may mention, pt the further recent de|tj' produce prices is not Ssccount in the figures. I pted.

P external trade, the most p of this decline in exjpay be seen in the overpturns. I'he values of our exports fwillions, whilst in 1932 |i6 millions. The value | rts and 53 per cent. in fUillions and £22.8 milm figures represent a P per cent. in the value forts and 53 per cent. in rfJtional Income. I? fall in imports is, of Idii'ect effect of the conSports. I will now take 311 relation to national in- , g astimate of national in- i ipimately made by add- | per cent. to the oificial i total production. taken that the national Pe which constitutes the *Power of the community yjby at least one-third of I income. Pternal Trade. I regard to internal trade |- it is inevitahle that a jPis magnitude should be

reflected in the volume of internal trade. The best available indication of internal business is the return of total debits per week to all bank aecounts in the Dominion published by the Government Statistician. These show in 1929 the average debits were £20.9 millions and in 1932 '£13.5 millions, oi* a decline of 35 per cent. in the total volume of finaneial business in the country. The figures I have given to the House present a striking record of the decline that has occurred in New Zealand income and trade. Effects of Bepression. The effects of the depression have been cumulative. Felt first by the farmers, they have passed on to the producers of local goods and serviees of all kinds. In their efforts to maintain production, producers have drawn upon resources of capital and credit. Now, largely, they have to depend solely on income from the sale of their products. As the resources upon which they can draw become progressively exhausted, their purchasing ixower must decline further and the effect on the cities and towns must he felt more severely. It becomes apparent, therefore, that the essence of the present diffxculty is in the progressive disappearance of profits and in the inerease of losses. The restoration of sound business conditions, the expansion of produc- ' tion, the absorption of the unemployed, the inerease in purchasing power and in demand and the revival of general business activity, all these must depend on the creation of such conditions as will permit profits to reappear. Decline in Prices. i Profits depend on the relation of costs to prices, Since 1929 export prices have declined by 4 per cent., retail prices have fallen by only 19 per cent., wholesale prices hy 14 per cent., and wages (ncminal) hy 16 per cent. A reduction of internal prices and costs of about 35 per cent. is required to bring about the same relationship to export prices as existed in 1929. The main problem is to reduce the disparity between costs and selling pifices. To let matters drift and allow nndirected deflation to have full sway would be obviously unthinkable and could not be countenanced by the Government. Suggested Remedies.

Such a policy would dangcrously aggravate our already serious difficulties. Cabinet, in its consideration of the position has examined various suggested remedies, having for its objeetive the inereasing of prices such as a rise in the rate of exchange, various forms of internal credit expansion, including a grant or bonus to primary producers and also a grant or subsidy to farmers financed by taxation. After mature deliberation, the Government came to the conclusion that an inerease in the rate of exchange from 110 to 125 would be more advantageous to the country as a whole than any other method in easing our present difficulties. Tlie Government approached the banks and requested them to take the necessary action to give effect to this deeision. In its arrangement with the banks, the Government has undertaken to indemnify them against any loss that may he incurred on the sale ,o£ exchange purchased at the new I figure and a bill will be introduced ac- ; cordingly to obtain the necessary Parliamentary authority to give e6ffect to this undertaking.