H.—43

The Economic Stabilization Emergency Regulations 1942,* were issued on 15th December, 1942, for the purpose of giving effect to the stabilization plan as announced. Part IV of the regulations sets out the procedure whereby rates of remuneration! are to be linked to movements in the prices of essential commodities, services, and rents, and requires the preparation of a wartime price index for the purpose of recording such movements. The relevant portion of the regulations is quoted below :— General Orders increasing or reducing Mates of Remuneration 40 (1) For the purposes of those regulations the Minister} shall cause to be prepared an index to be known as the wartime price index, for the purpose) of recording as from the 15th day of December, 1942, any increases or reductions in the prices of such commodities and services (including rents) as the Minister directs. (2) For the purposes of this Part of these regulations, the expression " the basic level of prices means the general level of the prices included in the wartime price index as indicated by that index as at the 15th day of December, 1942. 41. The Government Statistician shall as soon as possible after the end of the quarter ending on the J sth day ol March, 1943, and as soon as possible after the end of each succeeding quarter publish in the Gazette and in such other manner as he thinks fit a statement of the wartime price index as at the end of the quarter, showing in particular the amount of any increase or reduction in the general level of prices as indicated by the wartime price index. 42. A general order increasing or reducing rates of remuneration shall be made by the Court of Arbitration whenever there is an increase or reduction of not less than 5 per cent, in the general level of the prices included in the wartime price index, as shown in the last, statement published by the Government Statistician before the date of the application for the general order : Provided that the first general order increasing rates of remuneration to be made atter the commencement ot tneso regulations shall be made when there is an increase of not less than 2| per cent, in the basic level of prices. 43. (1) Subject to the provisions of this regulation, the amount of the increase or reduction provided for by auy such general order shall be as nearly as may be equivalent to the amount of the increase or reduction in the general level of prices as shown in the last statement published by the Government Statistician as aforesaid. (2) in making any such general order the Court shall exclude from the scope of the order such portion of the remuneration in each week of each worker affected by the order as exceeds £6 : Provided that the said amount of £0 may be reduced by such amount as the Court thinks fit in the case oi female workers, junior workers, and apprentices respectively. (3) Whore any such exclusion is made the increase or reduction provided lor by the order shall apply to tne uncxeluded portion of the remuneration of each worker, irrespective of his total earnings. (4) Where on the date on which any such general order takes effect the rate of the actual remuneration ot any worker exceeds the rate of the remuneration to which he is entitled under any award, industrial agreement, or apprenticeship order, the increase or reduction provided for by the order shall apply in accordance with this regulation as if he wore entitled under the award, industrial agreement, or apprenticeship order to his actual remuneration. Except with the consent of the Minister in Charge of Stabilization, no increase in price is permitted in respect of the commodities and services included in the wartime prices index. Traders may, oi course, make application to the Price Tribunal for an adjustment of price. The Tribunal then carries out its customary investigation of all the facts involved, and if satisfied that the application should not be granted, then a decision to that effect is convoyed to the applicant. If the Tribunal is not so satisfied, or if special reasons make it seem advisable to do so, then the application is referred through the Minister in Charge of Stabilization to the Economic Stabilization Commi.ssion§ for consideration. 2. RETAIL-PRICES INDEX NUMBERS AND COST OF LIVING Retail-prices index numbers as computed and published in many countries are commonly required to perform two functions : — (a) To measure variations in the retail price level; and (b) To indicate changes in the cost of living. Normally the retail index performs the first function with considerable accuracy, and also acts as a satisfactory indicator of general changes in the cost of living. In times of violent economic disturbance, and particularly in wartime, both the compilers and users of index numbers are, however, confronted with serious and difficult problems, both from 'the point of view of statistical technique and of interpretation of the results shown by such index numbers. In particular, certain factors emerge which render retail index numbers based on customary peacetime living standards inappropriate instruments for recording changes in the wartime cost of living. (a) MEASUREMENT OF PRICE VARIATIONS Retail-prices index numbers, although popularly referred to as " cost-of-living " index numbers, are in reality price index numbers only. They are a device for measuring changes in the average level of retail prices for a generalized purchaser, who may be taken to represent all sections of the community as in the case of the New Zealand retail index computed by the Government Statistician, or a particular section of the community as in the case of the British Ministry of Labour retail index, which relates specifically to the " working classes." Measurement of pure price-changes implies a fixed regimen and the application of fixed weights. Variable weights lead to an index number compounded partly of pure price-changes and partly of changes due to the altered weights. In addition, as the regimen or list of commodities on which the index is based is designed to measure price-changes only, the primary consideration is to obtain a representative sample of retail commodities and services for which comparable price quotations can be continuously obtained. The common practice is to base the regimen and apportion the base period weights on the results of a sample household budget collection. This ensures that the index measures changes in the prices of those kinds and qualities of goods and services commonly entering iuto the " cost of living " of the average household from which the budget sample is drawn.

* Statutory Regulations 1942, Serial number 1942/335. t " Remuneration," as defined by the regulations, means " salary or wages ; and includes time and piece wages and overtime and bonus and other special payments; and also includes allowances, fees, commission, and every other emolument, whether in one sum or several sums, and whether paid in money or not; and also includes travellingexpenses ; and also includes the remuneration of directors of companies, who for the purposes of this Part of these regulations shall be deemed to be employed by the companies of which they are directors." J The Minister of Industries and Commerce is the Minister in Charge of Stabilization. § Under the provisions of Regulation 5 of the Eoonomic Stabilization Emergency Regulations 1942 the Economic Stabilization Committee was reconstituted as a Commission.

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