WIDENING GAP

Wairarapa Times-Age, 22 August 1939, Page 6

WIDENING GAP

BETWEEN EXPORT PRICES AND COSTS SIR W. HUNT STRIKES NOTE OF WARNING. DANGERS OF INFLATION. (By Telegraph—Press Association.) WELLINGTON, This Day. The widening of the gap between farm prices and costs in tills country has not only been maintained, but still further accelerated during the 12 months ended June 30. 1939, Sir William Hunt, managing director of Wright, Stephenson and Company. Lid., states at the conclusion of his survey of the accounts of that company. Attached to the balance-sheet and the chairman’s memorandum is an interesting graph compiled from the Government Statistician’s index figures. A year ago the graph showed the steep fall which had taken place in the export value of farm produce between December, 1937. and June. 1938, without any decrease in wages and wholesale and retail prices which represent farmers' costs. This year's graph shows that this widening of the gap between farm prices and costs in this country has not only been maintained, but still further accelerated during the 12 months ended June 30, 1939. While pastoral and dairy produce export prices have fallen by a further 13 points during this period, the wholesale, retail and wage indices have risen by 4, 5. and 4 points respectively. The wage index does not, however, reveal the true increase which has taken place in wage costs since 1936. as no account is taken in the computation of this index of the effect of the 40-hour week. If these reductions in hours, together with increases in paid holidays, were included, it is probable that the wages index would be at least 10 per cent higher. DEPENDENCE ON EXPORTS. “Herr Hitler, in a recent speech, is reported to have said that Germany must export to live,” Sir W. Hunt observes, ‘That statement applies to every country in the world. No country can live entirely within itself; each must export in order to be able to import the goods it cannot produce economically itself and also to provide overseas exchange to carry on its world trade. -Of all countries in the world New Zealand is the one most in need of exports, To meet this necessity she has built up an export trade which, per head of the population, is the largest in the world. “The need of export trade compels every country to keep its internal costs at a level that will enable its export industries to function. When internal costs and export prices get out of step to such an extent that the export industries cannot carry on economically, one of two things happens. The first is that the country in this position must get its internal costs lowered sufficiently to enable its export industry to carry on. If it fails to do so, then its export production falls off which creates a shortage of foreign exchange and the country then drifts further and further into difficulties until economic laws step in and force an adjustment by reducing the value of the local currency. The means inflation with all its well-known consequences. MEETING COMMITMENTS. “In New Zealand our export industry are our farms, which provide approximately 96 per cent of our total exports. It is the export of our farm produce that enables us to meet our overseas debt commitments and pay for our imports. Without the export of farm products we cannot have financial intercommunication with the rest of the world. “The graph shows that the margin between export prices and internal costs in New Zealand is getting wider and wider. An adjustment will have to take place, and if the powers that be do not make the adjustment, then economic laws will step in and do it. “In the meantime, our farmers, who arc our only providers of sterling exchange. are having their sterling funds taken from them at the arbitrary value of £N.Z.125 for £lOO sterling. The real market value of New Zealand currency is much below this, probably nearer £N.Z.140 for £lOO sterling, and this state of affairs cannot continue. It must and will be adjusted, if not by the power that be, then economic powers will step in.”