NEW HANDICAP

Wairarapa Times-Age, 7 December 1938, Page 7

NEW HANDICAP

■ ♦ INDUSTRY AND EXCHANGE CONTROL / STATEMENT BY FARMERS’ UNION. DANGERS OF INFLATION. (By Telegraph—Press Association.) WELLINGTON. This Day. The announcement of the Government’s decision to control exchange, while not altogerner unexpected, must be viewed with considerable misgiving by the farming community, says an official statement of the New Zealand Farmers’ Union last night.

“The Government’s action means that the difficulties of the primary producer, particularly the sheepfarmer, will be still further increased,” the statement continues. “If the exchange rate remains at its present level there? will be two price levels for the-farmer —the present highly inflated price level in New Zealand, which can be expected to move still higher, and /the price level for the farmers’ produce, which will be the overseas price converted to New Zealand currency at the official rate of exchange. “It will be quite evident that if there is a restriction of imports, and the present rate of Government expenditure in New Zealand continues, the New Zealand price level must rise very considerably; particularly so when it is remembered that the Government intends to raise an internal loan (presumably the £14,000,000 loan for public works), which will have the effect of liberating still further purchasing power in New Zealand, which will have no outlet such as previously obtained in tne purchase of imports. “Borrowing £ 14,tw0,000 internally will have a very adverse effect on the banking position in New Zealand. It will mean that it will be difficult for the business and farming community to get loans, and this will result in severly restricting the undertaking of new enterprises.

“In restricting imports, the Government should • hlso curtail its own spending. Otherwise a degree of inflation must eventuate. This ultimately will impose hardship on all sections of the community. Further, the Government’s action also means that New Zealand will be placed on the black list of overseas ;exporting countries, and it will be necessary for importers to provide cash for goods before shipment. This will further accentuate the rise in the internal price level. “The sheep industry, which is our main industry, and which, it should be remembered, has provided £47,000,000 worth of produce for New Zealand in one year, will be subjected to the heaviest handicap of all the industries, and this at a time when it is experiencing one of the worst periods it has known.

“This accentuation of the present high cost, low price position of the sheepfarming industry will certainly not encourage that expansion of production which the Government states so earnestly that it desires. At the best, this course can be only a palliative. The problem should have been tackled at its root, and costs and prices brought into proper relationship. This will have to be done sooner or later if we are not to have a complete dislocation of the economic life of the Dominion.”