“UNWARRANTED SPENDING”

Sun (Auckland), Volume IV, Issue 1003, 20 June 1930, Page 1

“UNWARRANTED SPENDING”

BANK CHAIRMAN’S WARNING NEW ZEALAND ADVISED TO ECONOMISE SIR GEORGE ELLIOT ANALYSES THE POSITION From Our Resident Reporter ■ ■ ■■ t.p . I ~ l. . WELLINGTON, Today. EXPENDITURE, public and private, is on an unwarranted Jj scale. This criticism of the general economic conditions of New Zealand, with particular reference to the risin°indebtedness of the Dominion, was made by the chairman of the board of directors of the Bank of New Zealand, Sir j George Elliot, in his address to the proprietors this morning.

■ "New Zealand, unfortunately, is following to an extent in the footsteps of Australia, where acute depression is being experienced,’* Sir George proceeded. “Australia has been compelled, owing to her financial exigencies, to increase very materially her Customs duties. It is to be hoped New Zealand will not be forced to follow her example, except perhaps on foreign goods of a luxury nature. ‘lt is a lamentable fact that, as in Australia, we in New Zealand are losing all sense of proportion where public expenditure is concerned; and even in private life what was considered extravagance a few years ago is now taken as a matter of course. "Rates and taxes in New Zealand are steadily increasing; beyond a certain level, however, they cannot go without bringing about calamitous results to the taxpayers as well as to the tax-gatherer.” A few years of low export prices for agricultural products, coupled with over-importation, and possible difficulty in raising loans from outside sources, would. Sir George contended, bring about conditions somewhat similar to those obtaining in Australia. No prophet was required to foretell that if substantial reductions were not made in the expenditure, public and private —especially the former—the future financial credit of New Zealand must be prejudicially affected. The immediate adoption of a -policy of retrenchment would no doubt entail a certain amount of hardship in the community, but delay in the adoption of such a policy would inevitable lead to greater hardship for greater numbers. WAR AND PUBLIC DEBT In the last 20 years the public debt of New Zealand has increased from £74,890,645 to £264, 191,893, or from £72 6s lOd a head of th» then population, to £179 12s lOd a head of the present. It must not be forgotten that in the period under review the greatest war in the history of civilisation ran its course, leaving an aftermath of unprecedented public debt in every country of the British Empire. It should also be remembered that a considerable amount of public debt was revenue-producing, if not quite self-supporting. The Railways, Post and Telegraph Departments, Advances to Settlers and Workers, hydroelectricity and other Government undertakings all contribute revenue to meet at least a portion of interest charges on the loans raised for these purposes. Of the total local body loans issued, Including Government loans to local bodies, 69 per cent, was raised locally, the balance abroad. It spoke volumes for the faith New Zealanders had in the future of their land that a relatively small population in a comparatively newly-settled country should invest more than £34,000,000 in these bonds. The allocations of indebtedness were:—Counties, £3,882,000; boroughs, £29,278,000; harbour boards, £10,326,000; electric-power boards, £10,176,000; other, £5,278,000. According to the New Zealand Year Book the total amount of interest payable on local body loans at March 31, 1928, TOS £3,158,359, of which £1,239,840 was payable outside the Dominion, and that amount had since increased. These figures did not include about *7,405,000 borrowed from the Government by various local authorities. ui addition to the public debt, local *x>dy indebtedness was increasing at a greater ratio per capita than popula- !- OI V - According to the Local Authorises Hand Book, of 1929, debts con-

l ra 9~ ed as at March 31, 1928, amounted to 6b.4 millions sterling, or £45 13s 8d a head of the then population of 1,403,517, as compared with £lO Is lOd L 1 * when the population was 771,568.* No doubt the greater proportion of the local body expenditure was justifiable from one aspect or another; some of it, however, might with advantage have been postponed. An increasingly expanding expenditure was getting out of step with the wealth of the country a head of population. TRADE WITH BRITAIN The United Kingdom had bought 76 per cent, of New Zealand’s total exports for the past six years. It was true reciprocity was not given by allowing Customs- advantages, but the fact that the United Kingdom was the Dominion’s chief purchaser was to be remembered. Any great rise in New Zealand’s Customs tariff might have serious consequences to the Dominion. Since the days of Bright and Cobden the ideal of free trade had held the imagination of the British people, but changing times and changing conditions demanded adjustment of ideas. Tradition could not always with advantage be maintained. The cry of “cheap food” had a subtle appeal, so subtle that the benefits that might accrue by the reversal of policy already discarded by every other nation on earth were not being sufficiently recognised. Probably there would be little difficulty in arranging for reductions in colonial Customs tariffs in exchange for a small protective duty on at least some of the raw materials and foodstuffs imported intd* Britain from her own overseas dependencies. The assured market that such protection would provide, woul be of inestimable advantage to the colonies, and would so stimulate production that in a short period of time prices would probably reach levels tending to reduce rather than increase the cost of living in Britain. Concerning Britain, one might hope to see her export trade increased, unemployment lessened, and impetus given to the finl ideal of an Empire united into one homogenous, economic whole. If governments throughout the Empire brought to bear on this vitally important question half the zeal they expend on matters of infinitely less value, substantial results must surely follow. Even if absolute free trade were a remote idea, foundations might be laid on which to build a monument to the solidarity of the British Empire. PEOPLE SHOULq STRIVE New Zealand was better placed than many countries, but an example could be taken with advantage from other countries. In several South American States, where export prices were greatly reduced, public works were stopped and retrenchment adopted; in Australia, retrenchment was the order of the day. It remained for New Zealanders to work individually and collectively, to use their advantages to the full, to lessen overhead expenses. In seconding Sir George’s motion to adopt the report, Mr. Richard W. Gibbs said that, with ample warnings being given in all quarters, there would be no excuse if New Zealand were caught unprepared. Lessening private expenditure in non-essentials, and reducing State and municipal extravagance could allow no occasion for undue pessimism. The bank, in his experience, had passed through worse times.