COSTS & PRICES

Wairarapa Times-Age, 24 April 1939, Page 5

COSTS & PRICES

FARMERS DEMAND RELIEF * THREAT OF ANOTHER DEPRESSION FREEING OF EXCHANGE RATE ADVOCATED. JOINT COMMITTEE'S REPORT. (By Telegraph—Press Association.) WELLINGTON. This Day. Aii opinion that with farm production and prices falling’ and costs rising, another depression is imminent, is expressed by a special eornmillee of the New Zealand Farmers’ Union and the New Zealand Sheepowners’ Federation. The committee believes that the only way of averting a general depression is to restore prosperity to the farming industry. The surest, easiest and most practicable step toward that objective. it contends, would be to free the exchange rate and allow it to rise. “A rale free to rise or fall under the control of the Reserve Bank, as conditions demanded, would do much to restore the general economic balance, from the loss of which the farmers and the genera] community are suffering," the committee states. “A rise in the rate would not only benefit farmers; it would remove the necessity for import licensing and it might attract back some exported capital and so replenish sterling funds. It would also enable a price to be paid to the dairy industry sufficient to meet its cost of production, as determined by the committees which have investigated it.” In a report to the New Zealand Primary and Ancillary Industries Producers’ Council, the committee summarises its views as follows: —

The present position and prospects of farming are worse than for many years past. Production is already declining and is tending to decline further. Unless the position is improved, production will fall further and the effects on the Dominion may be disastrous.

The chief cause of farmers’ difficulties is the disparity betv/een costs and prices,. General costs are determined largely by wages .throughout industry as a whole, and by taxation. Both have risen out of all proportion to the rise in the export prices out of which farm costs must be paid. These difficulties can be solved only by lower costs or higher prices, or both, hence the possibilities of both must be examined.

Cost reduction on the scale required cannot at present be regarded as practicable, and even temporary palliatives in the shape of minor cost reductions vVuld be difficult to secure and ineffectual if secured.

Direct subsidies on wages, rates and taxes.'or prices.- from the Government or from consumers, by guaranteed prices or otherwise appear equally unpracticable. Money would be hard to get, control schemes might be imposed, and higher costs would largelj’ be passed on to farmers.

Since the community as ti whole depends so largely on the farming industrq, and since it has always been a general rule that when the farmers are prosperous prosperity is general, and when the farmers are depressed depression becomes general, it is essential, in the interests of the Dominion, that prosperity should be restored to farming.

The surest, easiest, and most practicable step towards this is to free the exchange rate from the point where it is now arbitrarily ' pegged. Then the rate would rise till it registered the level most appropriate to present conditions. STATISTICAL COMPARISON. The committee submits the following tables as giving some indication of the costs which producers of all kinds have to meet, and of the prices of exported produce frorh which their costs must be met: —

“These figures show." the committee states, “that comparing December, 1938, with 1914. weekly wages in New Zealand have risen by 76 per cent, retail prices by 51 per cent, and the farm expenditure index, to 1937 only, by 45 per cent. “Comparing the same periods, dairy produce prices (market prices, not guaranteed prices), have increased by 11 per cent, meat prices by 48 per cent, wool prices by one per cent, while other pastoral produce, mainly hides, skins and tallow, are 17 per cent lower than in 1914, and all pastoral and dairy products are 21 per cent higher than in the base year. EFFECT OF SHORTER HOURS. “But. these figures do not tell the whole story. Wages constitute about 60 per cent, or three-fifths of all costs that have to be met in New Zealand. The index number given refers to weekly wages, and takes no account of the fact that, since 1914. average weekly hours have been reduced by 141 per cent. If allowance is made for this reduction, the average hourly wages of adult 1 males show an index number of 206, that is. they are about 106 per cent higher than in the base year. “Wage costs enter into all costs in New Zealand, including the cost of all the farmer buys and all the cost of processing and marketing his product. It appears that, out of their receipts from a product which sells on average at prices 21 per cent above the 1914 level, farmers are now called upon Io pay general costs which have increased by more than 100 per cent in the case of hourly wages and by round about 50 per cent in many other items. “This comparison should be sufficient to indicate that the farmers, who ex-] port and sell in the world's markets,

who have, therefore, to meet competitive world prices, and whose piospeiity is essential to the prosperity of New Zealand, are in a precarious position. -Since the farmer, like anyone else, is interested first in meeting his costs and. second, in the net income left from his receipts after all costs are paid, relief can only come by reduced costs of production or in increased receipts for produce sold. It is probably unnecessary to say that costs might be reduced by greater efficiency in organisation or that receipts may be increased sometimes by increased total production or by producing more of the more profitable products and less of the less profitable ones.

“Probably most farmers have achieved already as high a state or efficiency as they can manage under present conditions, and most farmers are pretty well aware what lines represent their most profitable products. What they need and what they seek is a reduction of the costs that must be met if these products are to be produced.

Price Indexes. Whole- Farm Weekly Retail sale ExpenYear. wages, prices, prices, diture. 1914 100 100 100 100 1935 138 133 126 115 1937 166 147 142 145 1938 173 151 144 9 Dec. 1938 176 151 147 ? Export Price Indexes. All pasDairy Other toral pasand Year. duce. Meat. Wool, toral. dairy. 1914 .. 100 100 100 100 100 • 1935 .. 96 132 75 88 98 1937 .. 106 137 161 139 130 1938 .. 115 146 101 86 123 Dec. 1938 .. Ill 148 101 83 121