NEW ZEALAND AND THE WAR

Taranaki Daily News, 11 December 1917, Page 7

NEW ZEALAND AND THE WAR

FINANCIAL TRADE OUTLOOK* INTERESTING REVIEW. BY CHAIRMAN OF THE BANK OF NEW ZEALAXIX Wellington, Yesterday. I At the h»lf-year general meeting, held W Friday, 7, 1917, at the head tUce of tIM bank, Wellington, Mr. Harntd Eeauch*mp, chairman of directors, | wefcided. I'he chairman saids | 'We have been in a state of war lor j three years and four months, and still I mtav end is not definitely in sight, Geravt/Jiy, with oraetically the whole eivilisM world arrayed against her, with her and i F 3 r t trade crippled tltrough her shipping being either destroyed, interned or bottled up in her own ports, with the pressure of internal distresses fts a consequence of scarcity of food and clothing resulting from the rigorous blockado of her ports by the Allied fleets, would long ete this have been forced to capitulate, had her organisation and preparations for war been less complete and had she not been able to add enormously to her own resources by drawing supplies rom neighboring neutral countries, from her confederates, and from the territory conquered and now occupied (by her. From Belgium and North Eastern France have been taken invaluable raw material, from Galicia oil and food products, from Turkey cotton, and from Roumania grain and wheat. Notwithstanding her disabilities, she continues still as a mighty lighting'force, taxing tne military powers and financial resources of Great Britain and- her Allies to the uttermost.

The discipline and organisation of her people have indeed stood Germany in good stead in this great conflict. In marked contrast is Russia., from which, with her vast population, so t much wa| expected by the Allies in the early and later stages of the war. Since the revolution that occurred in March last, we have witnessed a scries of (kaleidoscopic social and political changes almost unparalleled in history, without discipline or organisation, and with internecine war raging in some parts of the Empire, her value to-day, as a fighting force, is practically a negligible quantity. It looks as if nothing short of a miracle will sueteed in evolving order out of the chaos now existing in that unhappy country. Had Russia been able to prosecute a vigorous campaign on the Eastern frontier during the past nine months, 1 think is probable that the war might have been brought to a satisfactory conclusion this year.

At a time when the British and French offfflisives were being conducted with great success, our Ally, Itstly, has been brought very near to disaster. A powerful and unexpected blow by the enemy has robbed Italy of the whole fruits of her two years' arduous and gallant pfforts. The set-baek is a serious one. It has imposed a heavy trial on the Italian people, and has been a keen disappointment, to their Allies.

The failure of Russia is, to a larg# ex. lent, responsible for the Italian reverse. Kortunately, Russian impotence will, be more than compensated by the assistance and co-operation of the United States, which i» now actively mobilising all its forces in men, money and munitions.

It lias pleased the German Government to attempt to belittle the significance of tlie United States' accession to tlie Allied side. I doubt the honesty of the effort, and am disposed to credit it to tlie vaporings of a leader who is at heart apprehensive concerning the American action, and seeks to encourage himself and I the Gorman nation by disparaging references to the capabilities of their adversaries. A writer in a leading English financial journal Has expressed the opinion that "the Americans, like the English, will gre:(ly astonish the Germans before they have finished with tliem," and witfl that view of the American influence on'the future of hostilities I am in entile agreement.

WAR EXPENDITURE AND FINAKUK. Outlay in connection with the war continues to mount up steadily. That of the British alone is now at the rate of approximately £7,000,000 a day. The total war' expenditure of the British Treasury from August 1, 1914, to September 22, 1917, amounted to £5,534,527,000, of which £4,210,384,000 was provided by loan and £ 1,3247143,0(30 by revenue. This expenditure includes loans to the Allies and the Dominions amounting, at July 21,1017, to £1,171,000,000. Before the entry of the United States of America into the war,, she had raised loans for the Allies aggregating over £470,000,000 (of Which £226,300,001) was to Britain), and shortly after her declaration of war on April 6, 1017, a War Finance Bill was passed authorising the raising of loans for $7,000,000,000 ( £l,400,000), provision being made that $3,000,000,000 (£600,000,000) of this money should be available for loans to tlie Allies. Subsequently a further authorisation for a large amount was made, including additional lou'ns to tlie Allies. Huge votes for the building up aeroplanes and ships of war and merchantmen have been passed by Congress, and the programme of war expenditure so far outlined, including loans to the Allies, provides for an aggregate of close on $22 000,000,000 (£4,400,000,000). The first Liberty Loan for $2,000,000,000 ( £400,000,000) at 3 J per cent, was Issued "in June, and was largely oversubscribed. The second Liberty Loan, proposed originally for $3,000,000,000 ( £000,000,000) at 4 per cent, was offered in October last. Limitation of the amount was then removed, the United Statoi Treasurv expressing the hope that the $5,000,000,000 mark (£1,000,000,000) would be-reached. According to press telegrams, this lias been nearly achieved. Whatever may have been thought or 'said concerning America's tardiness in taking up arms, there can be no question that, since her declaration of war, she has thrown herself into the struggle in such a whole-hearted, systematic and well organised way that it augura well for the future of the Allied cause, inasmuch fts it implies a grim determination on America's part to see the war, at all costs, to a victorious conclusion without unnecessary loss of time. In tl'.e early stages of the conflict the cost of it all amazed and bewildered us. N T ow wo have grown accustomed to the outlay. We have learnt, financially speaking, to think in millions, and we somehow view the hugely Swelling figures of the National defts with feelinsrs akin (o indifference. We have to win the war whatever the cost. It is the price of freedom from German domination, and 1 the worth of such freedom is incalculable. , S'EW ZKALAXD WAR EXPENDITURE. In Xew Zealand we ai'e pursuing a ■self-reliant financial We have

largely provided for - all otlr way and other expenditure, since hostilities com- ! inenced, out of locally raised loans or revenue. The total loan authorisations ill',ling the period have amounted to £(>3,183.000, viz: l''or War Purposes £57,000,0110 i'ur other purposes .. 11,185,000 £GB,ISo,OOO These authorisations are estimated to provide for all requirements up to July , 191-8. 1 A total of ovefr £51,000,000 in all has been raised, of which about £24,000,000 has been provided by public subscription in the» Honunion. and iprobabjy £10,000,000 by loans from the Post Office Savings Bank. The net public l indebtedness at March 31, 1914, after allowing for sinking funds, was £91,G59,835. at March 31, 1917, it was £125,57-2,515, an increase of £33,882,(ISO, to which must lie added loans raised since the latter date. Revenue and expenditure for the same periods compare as follo'.vs:— Year ended March 31, 1914: Revenue, £12,229,001; expenditure, £11,825,804; surplus, £4,308,777. ;Year ended March 31, 1917: Revenue, £18.,307,547: expenditure, £11.058,770; 3urpius, £4,308777. . '

I The increased cost of living has necessitated an"adjustment of the scale of old age Maori War, and widows' pensions. The amount paid away under this head for the year ended March 31 last vva9 £ 563,5)18. Provision for increases estimated to absorb over £120,000" has since been made, which will bring up the total of these pensions to probably over £700.000 per annum. The liability for military pensions in connection with the present war, it is estimated, will be over £1,000,000 per annum in twelve months' time, and allowances to soldiers' dependents (exclusive of pay) are expected to amount to a further £2,000,000. War expenses" and pensions, added to the increased cost of education and other Items coming under the head of civil expenditure are creating a heavy' permanent charge on the Dominion's finances, and the incubus of taxation has already grown to somewhat unwieldy and staggering proportions. HIGH PBICES FOR OUR PRODUCE. So far, thanks to the high prices paid for our produce, we have been able to bear these financial burdens, and will probably continue able to bear them, firovided that reasonably good prices are maintained and that shipping facilities are afforded to exporters and to the Government, which has commandeered such & large proportion of our products. At present, owing to the absence of shipping facilities, it is estimated that fully £G,000,000 worth of last season's produce Is still held up. Of this, frozen meat and wool comprise the major portion. The shipping difficulty, both inwards and outwards, affects the trade figures of the Dominion to such a degree that the imports and exports have lost, to a great extent, their significance as an Judication of the Dominion's trade position. I propose, therefore!, on this occasion, to omit giving the usual comparisons of these, items. Practically the whole of the Dominion's products is now either directly commandeered or subject to Government control in the matter of realisation. THE MONEY MARKET. Advances against unshipped produce ire reflected in the bank returns for the quarter euded September 30, I<Jl7. The total advances, as therein shown, were at that date, £ - 2S.4la;JoO —at September 30, 1910, they were £24,877,9tW. The 1917 figures constitute a record for the Dominion, In »J)ite of the high rates ruling for ftioney in other parts of the world, the banks in this country have not, since the delegation of_ war, increased the rates of interest charged for overdrafts or discounting of bills. On the other hand, since the passing of the last Finance Act, which provided for such heavy additions to land and income tax, other lending institutions and private individuals have been compelled to substantially increase their rates for lending on mortgage. The heavy borrowings by the Government within the Dominion "have naturally absorbed a substantial proportion of the savings of the people. As a consequence, the reserves of lipating capital are being depleted and a period of dearer money must be expected.

THE LOCAL LOAN OF £12,000,000. The Minister of Finance is to be cordially congraulatcd upon the success of the last internal loan. In the early stages of last session, he obtained statutory authority to raise £24,000,000 for war purposes at 41 per cent, free of income tax. Of this loan, £12,000,000 was offered in September, and the whole amount has been subscribed by the pub-" lie. There is no doubt that Minister of Finance, in this financial operation, was materially assisted by the banks, which offered their customers attractive facilities to enable them to subscribe to the loan, which facilities were largely availed of. It is, I think, a great financial feat for a small conntry such as this is, to bave provided from its own resources £34,000,000 for war purposes and public works during the currency of the war, and it speaks well for the financial stability of the Dominion and for the patriotism of its people. It is to be hoped that when the next instalment of the loan is placed on the market in, say, March next, the Minister of Finance will be equally successful and that lie will be able to then raise from the public, by voluntary subscription, the whole amount that lie requires, and not be compelled to adopt the alternative of enforcing the provisions of section 40 of the "Finance Act, 1917," relating to compulsory subscription to the War Purposes Loan. TAXATION. To meet the increased war expenditure and the. heavy additional interest payable in respect to loans raised for war purposes, it was imperative, during tlie late session of Parliament, to provide for extra revenue, and this was done by substantially increasing the land and income tax, by disallowing deductions for mortgages on land over and above the sum of £6OOO, and by slightly recasting tlie customs tariff. Under the new scale, companies and individuals, with incomes of £O4OO and upwards, will pay 7s (id in the £, or 37.V per cent. As this ■rate, will fall heavily upon joint stock companies, strong efforts were made to induce the Minister to alter the present method of collecting the company tax and, in lieu of taxing the companies, make the tax payable by the individual shareholders, who \vo:ild be subject to the graduated scale. The Minister could not sec his way to accede to this request, but lie made provision for a refund .to shareholders (whose dividend does not exceed (i per cent, upon the paid-up jnmount of their shares) of a relative [proportion of the tax paid liv a company, provided that the shareholder's income, from all sources, does not exceed £4OO Der annum,

To give you an idea of wliat {lie increase in Xew Zealand income tax means to u?, I may mention that, 011 its assessed income of last year, this bank will contribute about £210,500 to tlie exchequer, or an advance of £121,830 on tlie amount we paid last year. The former sum is equivalent to 12.37 per cent, of the total paid-up capital of the bank; in other words, if the present rate of taxation were to bo continued, an amount equal to the whole of your capital would, in eight years' time, be paid to the Government in the shape of New Zealand income tax. Then, in ad-f dition, our land tax will amount to about I £17.000, and our contribution to tvI revenue in tlie shape of note tax wiT' probably be considerably in excess of £75,000 for the year. Wo fully recognise the necessity for all classes oT tTie community to pay in proportion to tlieir means. At the same time, to use a platitude, there ought to be true "equality of sacrifice." At present this does not obtain, as tlie banks are taxed upon a higher scale than any other trading corporations or individuals in the country, because they art taxed upon an income larger than that they actually earn. It lias been suggested that, if further imposts are placed on land and income, the result may be disastrous to the trade and industry of this Dominion. Judging by two of his late public utterances on the question of taxation, r,ur Minister of Finance is apparently fully alive to that possibility. Eecognising its inequitableness, Parliament, on the recommendation of the Minister of Finance, promptly repealed last session the tax on excess profits, which had been in existence for only twelve months. STAFF. Tho drain on our working staff for military service goes steadily on. At present, we have 370 officers absent on duty connected with the war. Twentynine have returned and resumed duty, but as against this, 21 are under orders .to join the "colors, arid 182 more are liable for service as members of the second division. TJie number of our killed has, I regret to say, increased to 39 and our wounded to 101. With the bereaved families and with the injured men, we have to express our heartfelt sympathy. Wc have now 297 women clerks in the bank's employ,'and it appears probable that our circumstances will necessitate a further increase. Our whole staff, male and female, are doing good work and acquitting themselves creditably.