PLAIN WORDS OF WARNING.

Wairarapa Times-Age, 22 July 1939, Page 6

PLAIN WORDS OF WARNING.

A LG the more because the Reserve Bank of New Zealand is now a purely Stale institution the note of warning' sounded emphatically in its annual report, tabled by the Prime Nfinister in Parliament yesterday, should command serious attention and respect. In effect the Government is informed, in this plainspoken report, that it has gone as far as it can hope to go in expanding credit through the agency of the Reserve Bank and that,

in existing circumstances any additional credit expansion would inevitably tend to cause, sooner or later, a general rise in prices, with a consequent diminution in the value of all savings, wages, salaries and pensions.

We are thus told once again what we should have known without further telling—that we cannot enrich ourselves by printing paper money or producing and distributing its equivalent. It may be left to those who receive and disburse incomes of various kinds, not least to women managing household budgets, to say whether we have not already entered on conditions in which the value of wage, salary and other payments is being reduced by rising prices.

Pertinent observations are made in the report also on the subject of the deficit in the Primary Products Marketing Account. 11 has been stated, though not by the Reserve Bank, that the deficit in the Dairy Industry Account for the present season may approach an amount of £2,000,000. The Reserve Bank report comments: —-

To the extent that such deficits exist, they represent the creation of credit beyond the equivalent of commodities produced, and the board considers it important that the inflationary tendency of such accommodation should not be overlooked. The importance of the question here raised is very far from being measured by the amount of the present deficits. The stability of our total monetary system is involved and the Government will fail strangely in its duty if if does not institute during the current session a stronger and safer policy than that of balancing the Marketing Account with an unsupported overdraft.