POLICY ATTACKED

Wairarapa Times-Age, 8 December 1938, Page 7

POLICY ATTACKED

REAL ISSUES NOT FACED VIEWS OF FARMERS’ UNION PRESIDENT. FEARS OF AN INFLATION ' CRISIS. (By Telegraph—Press Association.) DUNEDIN, December 7. "The action of the Government in allowing imports only under licence and taking possession of returns from all exports shows that it has not had the courage to face the real issues,” said Mr W. W. Mulholland, Dominion president of the New Zealand Farmers’ Union. "Instead of facing those issues it is trying to avoid them by dealing with some of the symptoms of the economic ills from which this country is suffering."

The amount of sterling funds held in London was not the major problem. Mr Mulholland said. Too much emphasis had been placed recently on the amount of those funds, but the really important fact was the movement that was taking place and the causes which were bringing it about. Those causes might be summed up as being inflation of internal prices by continual raising of wages and of Government expenditure while maintaining the external value of the New Zealand pound at normal. That had resulted in two price levels in the Dominion, a price level for internally-purchased goods and services and another for those goods sold overseas.

"This in turn has the effect of encouraging excessive imports,” Mr Mulholland added, "because it is cheaper to buy imported goods than those produced in our own factories. This caused our factory production to decline. The high internal prices were not equalled by the higher prices for goods produced for export, and as a result the farmers have been affected to such an extent that on much land production could not be maintained because returns were not sufficient to meet working costs and the proper amount of maintenance. MAKING TROUBLE WORSE. "By means of cast-iron regulation, the Government proposes to suppress the evidences of strain which are showing. particularly in the falling amount of our overseas funds,” Mr Mulholland said. “The effect of the restriction of imports, so long as the real trouble is not remedied, can only be to accentuate it still further. "The provision suspending the statu-

tory obligation on the Reserve Bank to give sterling for New Zealand funds is interesting from this point of view. The Government will be in a position to issue any amount it cares to do in Reserve Bank credit internally, but it is not obliged to make that money available outside New Zealand. Consequently, a position will arise where the people will have money in their hands for which they can get nothing of value as there will not be enough goods to meet the artificial purchasing power. “This is certain to have a very serious effect on the value of our New Zealand pound as represented by the amount of goods it will purchase locally,” Mr Mulholland added. “It does not seem from the evidence available here that, as New Zealand had come through the slack period of the export season and is now entering on an active exporting period with a still substantial amount of funds in London, there was any crisis in New Zealand’s ability to meet its current overseas payments, and one is justified in asking what was the real reason for the action that has been taken. Is the Government proposing to hold back from the producers of New Zealand sufficient of the proceeds from their exports to enable it to pay off the £17,000,000, or some considerable part of it, falling due in London this coming year. If this is so it will mean that we will have in New Zealand another £17,000,000 for which we can get no goods. The prospect in this case is one of such , inflation as will bring about a very grave crisis.” i. COMMENT IN LONDON. HIGH COMMISSIONER ISSUES statement: By Telegraph—Press Association—Copyright. LONDON, December 7. The city editor of “The Times” (Conservative) states that, in effect, the measures now taken in New Zealand, are indistinguishable from exchange control, which hitherto has been firmly rejected and disowned by Government spokesmen. The “Daily Telegraph” (Conservative) says that the New Zealand Government acted not a moment too soon in order to increase its London balances. The steps taken, if wisely applied and if they achieve their purpose, should reassure bondholders. However much exporting countries regretted the curtailment of exports, it was for New Zealand to adopt the measures best calculated to improve her trade balance and maintain the high credit which she has enjoyed for years. The “News Chronicle” (Liberal) says that the question- arises whether the measures will remedy the fundamental factors causing a severe deterioration of reserves. The social and other legislation might yet necessitate a further depreciation of the New Zealand pound. The New Zealand High Commissioner in London, Mr Jordan, issued a statement defending the action on the ground of necessity, stating that it was equally in the interest of exporters that New Zealand’s position should be properly controlled.