COSTS & PRICES

Wairarapa Times-Age, 5 September 1940, Page 5

COSTS & PRICES

CONFERENCE OPENED IN WELLINGTON

ADDRESSES BY MINISTERS. PROBLEMS OF WAR ECONOMY. (By Telegraph—Press Association.) WELLINGTON, This Day. The economic conference called by the Government to consider the question of stabilising wages, costs and prices in New Zealand met in Wellington yesterday. The Prime Minister, Mr Fraser, presided. "You have been invited to survey the general economic position of the country under war conditions.” Mr Fraser told the delegates, "in order to consider the possibility of stabilising costs, prices and wages, and to discuss expanding production, so that the strain of war expenditure may be successfully borne and the standard of living maintained as far as possible.” Having emphasised the need for united effort, Mr Fraser continued: “The conference will have to consider all the elements that are involved in the standard of living. This is a question not only of the level of consumption in the community but of the kinds of goods that are consumed.

“It appears from some figures—-and these and any other information will be made available to delegates—that the value of goods which are available for consumption in New Zealand has fallen from about £133,000,000 last year to about £114,000,000. On the face of it this means a decrease in the general standard of living, but the conference must examine how this decrease is accounted for and what types of goods have been cut down. Have they been luxury items or goods for everyday use; goods for consumers or goods for capital purposes?

CONFERENCE OPENED IN WELLINGTON

MONEY AND GOODS. “While the question of the living standard is, in total, entirely dependent on the amount of goods available, the standard for the individual is a question of what he can get out of the general pool of goods and services. This is a question of distribution and is dependent on incomes and prices. “Though the total of goods and services for civil use has decreased by some 14 per cent, the amount of money that is available for spending by individuals, after taking into account increased taxes, is still about the same this year as it was last. A situa-. tion like this no doubt means that prices must tend to increase with the increased pressure of purchasing power on goods to be bought. That, I believe, is the situation with which we are faced today.

“The price increases bring forth a demand for higher incomes which, if obtained, again force prices up and put stability as far away as ever, and so it goes on. The situation would undoubtedly bo relieved if there were more production of the right kind, or if spending power could be diverted to savings, but to the extent that these fail to bridge the gap the question arises as to how the remaining sacrifice should be spread equitably over the community. PRODUCTIVE CAPACITY. “On the production side the limiting factors in our war effort are our capacity to supply all our armed forces and to supply Great Britain with all that she requires of us. When these conditions are satisfied, do we still have productive capacity to spare? This is something which the conference will wish to find out. But it is not simply a question of production along the lines for which our industry is at present organised and for which it is most.ready. Many of the goods at present produced in New Zealand are those of which an increase would not greatly benefit our standard of living. "The conference will, no doubt, find what particular ranges of goods necessary to maintain our standard of living are likely to be in short supply, and it will disvover whether our productive capacity can be used to meet these needs. All this will involve an examination of such things as resources available, capital requirements, imports of raw materials, hours of labour, and the efficient use of every available source of labour. “Then there is the question of the stability of wages and the costs in primary and secondary industries which first need to be settled so that producers can go ahead with their work of producing necessary commodities without having to contend constantly with such ever-recurring and variable factors.

“The problem could, I think, be restated like this: If, after New Zealand production has done all it can, the reduction in imported goods and the drain to military purposes still results in a net decrease in goods for consumption, how shall this reduction in consumption be spread over the community. The obvious beginning is to persuade people who have more purchasing power than they really need to withhold some of their buying of consumable goods. In other words, saving will alleviate the problem. All sorts of savings schemes have been suggested as ways out of the wages-prices spiral, and the conference will do well to examine them thoroughly. In the course of an address intended as he said to give the conference a backgrounds of facts, the Minister of Finance (Mr Nash) said that a comparison of the import figures for 1939 with those for previous years showed how import selection/ had operated. Total imports in 1939 were less than 1938 to the extent of £6,000,000. Of the main classes of merchandise, the greatest decreases were shown by consumers’ goods which decreased by 26 per cent, and by a sum amounting to £3,830,000, transport equipment 15.4 per cent and £1,289,000, and producers’ equipment 14.6 per cent, £1,145,000. The drop in the importation of consumers' goods was extremely significant, in that it was these goods which went into consumption and on which people spent their money. If these goods could not be supplied from our own domestic production, then the demand for them would be greater than the supply, with the inevitable results.

As a national policy, New Zealand had always directed its import trade as much as possible to the United Kingdom. During the war this was accentuated in order to assist the United Kingdom both in its export field and in conserving Britain's overseas funds, which would otherwise be drawn on by New Zealand. There were under present-day conditions inevitable difficulties connected with deliveries in England, shipping delays, and so on. These again were factors which not only affected the flow of raw materials, but also New Zealand's whole economy. Added to this there would be the shortages from Europe and the cutting down of purchases from nonsterling countries would be continued. We had not felt the full effects of this yet. In the year - to come the shortages would show themselves.

WHOLESALE PRICES. Mr Nash submitted the following table showing the rise in wholesale prices from June, 1939, to June 1940:—

These increases in wholesale prices would perhaps not immediately be shown in retail prices, he said, and perhaps not to the same extent, but it should be noted that they entered into costs. The basis for the statistics was the five-year period 1926-30—1000. Mr Nash also presented another table dealing with retail prices, wage rates, and export prices. He pointed cut that the table showed that export prices were not synonymous with returns to farmers. Where production had in creased, farm income had increased. Since September. 1936. retail prices and export prices, he said, had

risen almost identically, but the wage rate index number showed a smaller percentage increase. Workers in unions under the jurisdiction of the Arbitration Court represented only about 50 per cent of all wage and salary earners and 70 per cent of workers in industries covered by the wage rate index. This, combined with the fact that where applicable board and lodging additional to wages were not affected, accounted for the tentative wage rate index for August, 1940. not being 5 per cent higher than that for June, 1940. It was worth noting also that retail prices indexes had not risen very much since the outbreak of the war. VALUE OF PRODUCTION. It was not possible to give other than preliminary estimates for the value of production for the production year 1940 (usually a June year). But a table had been prepared by the Government Statistician. It was possibly on the conservative side and was a very rough estimate. However, for the main divisions of our Productive economy apart from the provision of services and transport, the following table was 'indicative of the position:— 1938-39. 1939-40. (Rough pre(Final liminary

One of tha difficulties with the table was that factory production was hard to predict, particularly because of the adjustments that had had to be made in industry in the last year. It was this figure, however which was important, because apart from the basic agricultural commodities that went into the housewife’s basket, the products of factory production also provided a good deal of consumers’ goods on which purchasing power was spent.: Merely because total production had increased did not necessarily mean that total consumer goods had increased, for farm produce might have increased and this had to be exported, and imports bought and brought in at a later date, and imports were rapidly rising in price.

Mr Nash also dealt with the transport system and its relation to production and distribution and concluded by saying that all effort, short of any procedure that might reduce our -possibility of contributing, would be made to win the war. With the war effort taking precedence, every step would be taken to maintain civil activities and living standards at their maximum. Both these objectives must, however, be examined with a view to providing for rehabilitation of national life and of individual members of the Forces at the conclusion of hostilities. WORKING COMMITTEE. After a general debate last night the conference appointed a general working committee. This consists of a chaiman appointed by the Government, seven members appointed by the organisations representing employers, farmers, chambers of commerce and manufacturers, and seven appointed by the Federation of Labour and trade unions. The Minister of Finance, Mr Nash, will be chairman, and the chairman of the Bank of New Zealand, Mr A. T. Donnelly, deputy-chairman.

The other members of the committee are:—

Employers: Messrs W. W. Mulholland W. H. Nicholson, W. Marshall. C. V. Smith. E. W. Maclean. W. S. Mac Gibbon, T. O. Bishop. Workers: Messrs A. McLagan R. Eddy. A. W. Croskery, G. T. Thurston. F. P. Walsh. W. N. Pharazyn, F. G. Young. The working committee will meet today to examine questions raised at the conference and any other matters relevant to its purpose. The committee has power to appoint sub-committees to examine particular questions referred to them.

The working committee is to rejjort its findings to the conference as early as possible. The chairman has power to convene the conference at any lime to receive and deliberate on the findings of the committee.

Consumei ■s’ Goods. Food. Non-food. Combined. June. 1939 .. 1073 984 1035 June. 1940 .. 1143 1118 1132 Producers’ Materials. Builder! Others. Combined. June. 1939 .. 1202 1041 1070 June 1940 .. 1351 1187 1223 Wholesale —Total Groups. Locally All Imported, produced, groups. June. 1939 .. 1GG9 1043 1058 June, 1940 .. 1249 1089 1182

estimate.) estimate.) £ £ Agricultural .. 9',200,000 10.500,000 Pastoral 37,400 000 38,500.000 Dairy, poultry,. and bees .... 38,800,000 36,800,000 Mining 4,900.000 5,400,000 Fisheries 600.000 600,000 Forestry 4,000,000 4,100,000 Factory 30 500,000 30,500,000 Building & miscellaneous .. 14,900,000 14.100,000 Totals .... £135,300,000 £140,500,000