PRICE CONTROL

Wairarapa Times-Age, 27 October 1939, Page 3

PRICE CONTROL

MINISTER AND TRADERS AT ODDS. QUESTION OF REPLACEMENT VALUE. (By Telegraph—Press Association.) AUCKLAND, October 26. The principle that traders should be allowed to sell at “replacement value” on a rising market is definitely rejected by the Minister of Industries and Commerce. Mr Sullivan, in a reply to a request by the Auckland Chamber of Commerce that the Price Stabilisation Emergency Regulations be modified to meet recent increases in the landed cost of imported goods and that “replacement value” be adopted as a basis. The chamber wrote to the Minister on September 19 to this effect, and has received a reply. In this Mr Sullivan says that, in a statement issued on September 28, he let it be known that the Price Investigation Tribunal would consider applications to increase prices where it could be shown that the landed costs had risen.

After enumerating the chief causes of increases in the cost of imported goods, Mr Sullivan continues: “The Government had laid it down as a general policy that such extra costs may be added to September 1 prices if it is considered that the industry or trade is not in a position to absorb some or all of these extra costs. It was realised by the Government that if approval had not been given to some increases in prices, then merchants might have been faced with the necessity of selling goods at lower prices than those they themselves paid. The Government had no intention of forcing people out of business through unreasonably rigid control of prices; on the other hand, it had no intention, of permitting profiteering to take place. “It is noted that it is suggested that the regulations should be modified so as to permit of replacement costs. You will appreciate that the application of this principle would have meant that prices of all stocks in New Zealand of imported goods would have been raised quite considerably, and the consumers would have had to pay considerably higher prices for goods which had not cost one penny more to merchants and retailers. Merchants and retailers would have reaped a handsome profit had this been allowed, and the Government did not consider that application of the replacement cost principle was justified under the abnormal circumstances brought about by war.” The Auckland Chamber of Commerce in a reply states: “When the war is over and prices fall, traders will have to sell at reduced prices commodities they have purchased at the high prices of the war period. This offsets the ‘handsome profit’ referred to in your third paragraph, which alleged handsome profit is, in any case, mostly illusory, as high prices mean reduced quantities sold, so that the fixed overhead costs of business have to be spread over articles handled. “Replacement cost is, therefore, quite equitable as a basis for charging, and on the long view confers no “handsome profit' at all on the dealer.” The reply adds that the Government’s present scheme is inherently too unwieldy and cumbrous. It might be replaced by laying down some simple principle such as that of replacement costs and having complaints by the I public investigated by a competent tribunal in association with people having some practical business experience.