UNHEEDED WARNINGS

Sun (Auckland), Volume 1, Issue 40, 10 May 1927, Page 12

UNHEEDED WARNINGS

Minister Reviews Dominion’s <* Financial Ups and Downs

PROSPERITY—WITH THRIFT

COUNTRY’S APPETITE FOR BORROWING (.Special to THE SUN.)

mainly for the edification of certain critics, that the Government was living within its income and the Treasury was paying its way. DEAD-WEIGHT DEBT The debt which is being paid off was a dead-weight debt that did not earn any interest, and fresh loans which were being raised were expended, as far as possible, so as to earn their own interest and not to be a burden on the taxpayers. The present years would be difficult, but nevertheless the country is essentially sound and there is no reason why people and the Government should not be quietly confident, although economy and thrift were necessary during the year. Production has been well maintained, he said, and in some districts the production of butter-fat had been phenomenal, while the value of the exports had decreased. Tills was due to the lower prices, but as against this there has been a handsome increase in the volume of exports, cheese, lamb skins, coal, seeds, apples, potatoes, and other items. The relative trade position of exports and imports had improved substantially as compared with the previous year, and is tending to the restoration of a better trade balance. The wheat crop was bountiful, wool prices were satisfactory. Many manufactures had shown substantial progress. “While the picture is not all sunshine,” he said, “I think we can look forward to the future with confidence.” THE PEAK YEARS In visualising New Zealand’s requirements for the future, Mr, Stewart looks past the next few years when heavy expenditure will be necessary, and sees the period at which, by judicious handling and administration of the Dominion’s affairs as well as by a careful watch upon private economy, expenditure will be reduced to such small dimensions that the country will be able to give up overseas borrowing. The next few years, however, he pointed out to-night, are the peak periods of expenditure in finishing hydro-electric schemes, railways, and other improvements. “It would be possible to stop borrowing at any time,” he declared, “if people decided that they no longer wished, as a matter of national policy, to extend and own hydro-electric works and to own railways and other public utilities, and if they decided that it was no longer the duty of the Government to assist in solving the housing problem, or to lend cheap money to farmers. Not only this, but if people went a step further, and decided to get rid of public ownership of these undertakings, we could without a doubt reduce the debt within 12 months to about one-

FEILDING, To-day. Just how fortunes, good and ill, reflect upon this country and influence its prosperity, was revealed by the Minister of Finance, the Hon. W. Downie Stewart, in reviewing the financial position of New Zealand in his address here this evening. “A curious and unexpected windfall,” is how he described the effect of the comparatively small drop in imports last year which resulted in a drop in revenue of £131,000 instead of £725,000, as had been predicted. Customs revenue did not fall in proportion to the decreased imports, and whereas he had anticipated that revenue and expenditure would about balance a substantial surplus had been revealed. This windfall was partly due to the British coal strike, which forced importers to buy from foreign countries when they could not fill orders in England. REVENUE CHARGES A few details as to the principal increases and decreases in revenue and expenditure, as compared with the previous year are: Postal and telegraph, £148,800; income tax, £53,700; interest on railways, capital liability, £130,100; departmental receipts, £57,400. In addition to the decrease in customs revenue of £131,300, land tax declined £37,500.

Expenditure under the naval defence vote increased by £85,800, due to expenditure on H.M.S. Diomede for the whole year. That under the defence vote increased by £33,900, this having been mainly due to the purchase of big gun ammunition. Education expenditure increased by £99,800. Reductions in expenditure included Post and Telegraph working expenses, £63,300; Industries and Commerce Department, £56,500; and Electoral Department, £91,400.

Mr. Stewart said that public expenditure cannot be expanded and contracted with the same ease as a concertina without intensifying unemployment and serious dislocation of public services.

third of its present magnitude. So far, however, from any tendency in this direction, year by year there is a more insatiable demand for further expenditure by the Government. Everyone is tending more and more to lean upon the State and to regard the Government as the only money lender and the only house builder. MILLIONS FOR LENDING It is impossible for us to go on raising unlimited millions for these purposes, even if the money is wisely and carefully administered. Government loans to people aggregated about £75,000,000, which is an enormous sum to lend to a population the size of New Zealand.” Referring to the public debt the Minister revealed that in 1925-26 the net addition to the public debt was £11,000,000, whereas for 1926-27 it fell to £ 6,900,000. It was only fair to say, however, that in the £11,000,000 was included a large part of the special loan raised to try to catch up on the applications for loans from State Advances Department.

“When the Government cut down expenditure by some millions during the previous slump it did not observe that the public followed the good example of the Government,” he continued. “In fact, the moment the depression showed signs of lifting everyone seemed to assume that we had turned the corner. I issued a note of warning in 1923 and said that the recovery was only temporary, and that owing to the fluctuations of post-war conditions, we would certainly be faced with another drop within two or three years. Critics discounted my statement and said that I could not have been fully' reported as the recovery was too obvious to give ground for the note of caution which I struck. However, we see the position as it exists to-day.” Mr. Stewart added an assurance,