B. —4,

In considering the position of New Zealand it has always to be remembered that this country is a debtor country —that is, it is a country which has to meet each year interest payments abroad. At a high price-level a smaller proportion of exportable goods is required to meet the interest burden than is the case where there is a low price-level. A high price-level in England reduces, and a low pricelevel increases, the burden of our overseas debt. An increase in overseas prices of our exports of, say, 10 per cent, causes more than a 10-per-cent. increase in our overseas income—that is, in the fund available after payment of interest for the purchase of imports ; similarly, a drop of 10 per cent, reduces the fund available for imports by more than 10 per cent. Taking a broad view, prices in New Zealand moved steadily upwards from 1900 to 1914 ; they then shot up rapidly, and remained high until 1930. Taking as an illustration the figures in respect of wholesale prices (1909-15 = 1000), the index for 1900 was 899 and for 1914 was 1053. By 1918 it was 1705, and in 1920, 2092. For 1930 the index figure was 1449. Export prices (which, as already stated, profoundly influence prosperity in New Zealand) rose gradually from 1900 to 1914. From then they ascended steeply to 1920, dropped heavily in 1922, and recovered between 1923 and 1929. In 1930 a tremendous drop commenced. The following table, which takes the year 1909-13 (1000) as a base, illustrates this movement: —

The sharp drop in. 1922 immediately revealed the unduly high values then ruling for land. However, the price-level recovered in 1923, and although there were severe fluctuations it remained on a high level until 1929. In addition, the improvement in farm management and the increased use of artificial fertilizers increased productivity to a marked extent. Taking the volume of exports in 1926 as 100, by 1929 the figure was 116 (an increase of 16 per cent.) and for 1930 it was 119. The drop in total export income was not, therefore, as heavy as that of prices. Figures (in New Zealand currency) for years ending June are as follows : — Year £ Year £ 1921 .. .. .. 49,000,000 1927 .. .. .. 45,000,000 1922 .. .. .. 43,000,000 1928 .. .. .. 54,000,000 1923 .. .. .. 46,000,000 1929 .. .. .. 55,000,000 1924 .. .. .. 47,000,000 1930 .. .. .. 46,000,000 1925 .. .. .. 56,000,000 1931 .. .. .. 36,000,000 1926 .. .. .. 45,000,000 It will be seen that for 1928-29 exports reached the high value of £55,000,000, and that for the year 1929-30 they dropped by £9,000,000. There was a further and cumulative drop of £10,000,000 for the year 1930-31 ; and in the year 1931-32, in place of an export income which in 1928-29 was over £55,000,000, there was £34,000,000 only. The drop in prices was spread over all classes of exports, and the following are particulars of the main items : —

This position was reflected in the aggregate national income of the country, which for 1928-29 was estimated at £150,000,000. The estimate for 1931-32 was £97,800,000 and for 1932-33 £90,000,000.

2

Calendar T „ ■ Calendar T ,, Years. ,Iune Years " Years. June Years " 1909-13 .. .. 1000 .. 1925 .. .. 1893 1914 .. .. 1089 .. 1926 .. .. 1540 1920 .. .. 1806 .. 1927 1525 1514 1921 .. .. 1713 .. 1928 .. .. 1683 1922 .. .. 1363 .. 1929 .. .. 1623 1668 1923 .. .. 1610 .. 1930 .. .. 1283 1397 1924 .. .. 1788 .. 1931 .. .. 984 1052

Greasy Wool, Mutton, per Lamb, per Butter, per Cheese, per per Pound. Hundredweight. Hundredweight. Hundredweight. Hundredweight. 1929. d. s. d. s. d. s. d. s. d. January . . ■ ■ 17 44 0 76 0 162 0 86 0 1930. January .. .. Hi 42 0 69 0 145 0 75 0 July .. .. •• 8f 38 6 64 6 120 0 73 0 1931. January .. .. H 32 0 60 0 104 0 56 0 July .. .. 6f 25 0 52 0 100 0 43 0