Wairarapa Times-Age WEDNESDAY, NOVEMBER 8, 1939. READJUSTING OUR ECONOMY.

Wairarapa Times-Age, 8 November 1939, Page 4

Wairarapa Times-Age WEDNESDAY, NOVEMBER 8, 1939. READJUSTING OUR ECONOMY.

ACCORDING to a cablegram from London yesterday, important readjustments of New Zealand’s national economy are brought into prospect by the discussions in which our Ministerial delegate now in London (Mr I’. Fraser) is engaged with members of the British Cabinet. It may be agreed that some highly important readjustments are very necessary indeed. The cablegram mentioned stated that the transler ol men and machinerv from certain public works in this country to primary production, in order io expand the Dominion s war effort, will be considered should Britain indicate that hei Requirements warrant such a move. It was added that having already participated in general discussions 01. New Zealand w.n finance with the Chancellor of the Exchequer (Sir John Simon) i\lr Fraser intends to make a more detailed examination, with the British Treasury, of New Zealand’s position. This will include the method'of financing New Zealand’s Expeditionary Force, probably by loan, as in the last war. • It must be hoped that the examination and readjustment thus promised will be searching and thorough. .Arrangements which may reasonably be sought in London would assist and facilitate considerably a solution of the problem raised, but the main part of the solution must depend upon adjustments made within the Dominion. For example, it is very much more important from the, standpoint of New Zealand, itself than from that of Britain that our expenditure on public works—an originally estimated amount for the current year 01. £23,000,000. 'including £19,000.000 of borrowed money—should be cut to a minimum. Faced as the Dominion is by the likelihood ol having Io make a considerable expenditure, internal and external, upon an Expeditionary Force, new external borrowing on a mote oi less substantial scale no doubt, is inevitable. In these circumstances it is reasonable that New Zealand should look to Britain to assist it in effecting adjustments of its total external debt, not in the way of remission, but in the establishment ol practicable conditions of renewal and redemption. Taking account of the terms on which a loan of £17,000,000 was lately "renewed, the present position is that the ETominion is called upon to make external payments (debt ami other charges) amounting to some £15.000,000 annually during the next five years, and in addition to provide within the next six years for the redemption or renewal of £37,000,000 of external debt, apart from meeting whatever further external outlay the war may entail. In the absence of some reasonable spread of obligations, the burden thus imposed would be crushing. The best arrangement that can be made no doubt is that the Dominion should be allowed from an approved date Io make agreed annual payments towards the redemption ol its total maturing external debt plus the additional external debt, now to be incurred for war purposes. IE an arrangement on these lines cannot be made with the co-operation of the British Government, the fact should be disclosed forthwith, so that consideration may be given without delay to any practicable alternative methods of dealing with the position.

IS INFLATION TO BE CHECKED?

g() far tis our external debts are concerned this country can look to Britain only for the consideration that a creditor may justly be asked to extend to a debtor able to pay il given time. Much remains to be done, however, in so marshalling our resources that a purposeful effort may be made to deal with the debt position and also to rehabilitate and strengthen the internal economy of the Dominion. ft is a matter of common sense to recognise that our internal economy is in a state which would call lor drastic remedies even if the somewhat staggering burden of external debt with which we are also called upon to cope did not exist. \\ ith costs and prices rising and the purchasing power ol money railing, the effects of inflation are now making themselves lelt in every household in the hind. The latest available statistics show that the present year is the first since the Labour (lovernmenl came into power in 1935 in which rising prices have caused a decline in the effective wage rate —a narrowing, that is to say, of the margin by which wages have increased in excess of prices. Owing to the fact that wage rates have increased much more in some occupations than in others, many .wage-earners no doubt are much worse off than Un' average figures would indicate. Another extremely serious feature, 01. the position, and one which increasingly demands practical attention ami consideration, is the extent to which costs have outpaced returns in farming industry. The total remedy called for is that which was indicated the other day by the Minister of Public Works (Mr Semple) when he asked and answered in the following terms a queslion of commanding importance:— How can you create the additional value which will allow your money to expand, so that it will meet the needs of the buying and selling public? You can do it only by expanding the annual volume of production. Money has been expanded in this country by an enormous expenditure on public works which arc either not immediately productive or not productive al all. by an expansion ol the bank note issue by 9(1 per cent in four years and by heavy Stale borrowing from the Reserve Hank —-borrowing which now stands at £17,425,000 where purpose's other than those ol the Marketing Department are concerned., In regard to advances to the Marketing Department it. has to be remembered that the account shows at present a deficit of some £2,000,000 against, which no product ion or assets of any kind are placed and that further deficits are in prospect. The total effect, of this huge monetary expansion unbacked by production is, of course, present and continuing inflation on a menacing scale. Some of the principal remedies needed are a heavy reduction of public works expenditure, the greatest possible expansion of production in both primary and secondary industries (this implying, not. least where important branches of primary industry are concerned, a reconciliation of costs and returns which meantime is being neglected) and a substantial. continuing reduction of imports. The financial arrangements Mr Fraser is endeavouring to make in London no doubt are in themselves important. It is very much more important,, however. that internal action should be taken in lhe Dominion f<> check inflation and Io make an all-round expansion ol production possible. The apparent alternative is to invile deplorable eouclitious of eeonomie disorganisation and hardship.