The Mixture As Before

New Zealand Listener, Volume 32, Issue 812, 18 February 1955, Page 26

The Mixture As Before

Extracts from a recent commentary on the international news, broadcast from the main National Stations of the NZBS

HAT sort of a year is 1955 going to be? There seems no doubt of the general answer: more of the mixture as before. The inflation we more or less take for granted is likely to go on, at least in the broadcast aspect of world economic affairs. This is illustrated by the fact that world commodity prices, as measured by a statistical indicator computed by the weekly Economist, rose by 70 per cent during 1954, putting prices back to their general level for 1952. .. This upward trend of commodity prices seems likely to continue into 1955. World economic activity is running at very high levels indeed, stocks in many lines are modest, and capital expansion continues apace. But the inflation of the mid-1950s is not quite the same as the desperate scramble for goods which marked the austere days of the middle and late ’40s. It is a more prosperous inflation as physical supplies come into line with demands, and not all commodities need expect automatic price rises. . . If the U.S. news in good, that from Britain is even better. As the statistical picture of 1954 fills up, it looks better and better. First of all, let’s look at industry. 1954 can reasonably be called a boom year, with outputs in general higher than ever before recorded. The increase over 1953, itself an unprecedentedly good year, was of the order of six per cent. Only about a third of this came from more intensive employment. The rest has apparently come from more output per man hour, aided, doubtless, by a smoother flow of more readily available raw materials. This boom was sustained in Britain by stronger consumers’ demand, .. The general present picture of British industry is one of great promise based upon heartening achievement over the past couple of years. For 1955 most industries will find the main limit to production only in their own abilities, and the availability of labour and materials. It is, perhaps, doubtful whether another six per cent lift will be registered. This increase put about £600,000,000 of new spending power into the _ British economy last year. If it happens again this year, 1955 will produce an economic hat-trick such as the nation has never before seen. And it now appears that perhaps Mr, Butler was right after all . . . when he prophesied a doubling of Britain’s standard of living in the next quarter of a century... But encouraging as Britain’s domestic output is, it’s only part of the story. As everybody knows, Britain’s production has to flow into markets abroad to pay for much of the food and raw materials needed in these crowded isles. What is the export situation? Once again, 1954 scored well in this field. . . British exports kept pace with generally expanding world trade, doing rather better than Commonwealth trade as a whole, where primary producing countries lagged a bit behind the general expansion. And prospects today .look better than they did a year ago. .. This budget of good news is nicely rounded

out by the very promising attitude which seems to be developing in Washington regarding trade liberalisation. . . It is interesting to speculate whether the expected buoyancy of the coming year will carry the Western world through to that Mecca of post-war recovery, convertibility of the pound sterling and European currencies generally with the dollar. . . I should think that, strictly from an economic point of view, most Western countries could achieve convertibility with the dollar fairly soon, but at a price in terms of economic freedom of action. This question is too technical for full discussion here: I shall merely say that it is now becoming clearer and clearer that convertibility is not a single goal at all. It is a series of steps in trade and financial policy, which are best taken as month by month circumstances justify them. . . And now for a final, rather perverse word of caution. I have sketched, in rather glowing terms, a picture of a world economy riding the waves of prosperity on the bright achievements and prospects of the great industrial nations. But how about the smaller, primary producing nations like New Zealand? Are their prospects as good? Frankly, I don’t think so. Australia, for example, faces real difficulties with wool prices down a little and her secondary industry plagued by very high costs. Her vulnerability is expressed by the terrific fuss raised over there by the GATT

discussions late last . year-the threat of overseas competition is serious for Australian industry. We are better placed in New Zealand. Our crossbred wool has held up in price better than Merino, and latest market reports don’t suggest serious falls to come, But we

have plenty of worries about butter and cheese which are not helped either by the recent announcement of a lower price for margafine in Britain or by doubts about U.S. sales of surpluses. We can expect good sales for our meat, apart from some weakness for pig meats. And we, too, have a secondary industry which, at least in certain sections, is very vulnerable to competition from abroad. We should not be too despondent. We have passed through a prosperous decade, and the clouds are still small and distant. But we should take note that the days of automatic price rises, touched off by better prices for our exports in Britain, may be over. Stability of prices within New Zealand seems a sound answer to the present situation, together with sustained efforts to match the achievements of Britain and the U.S. in raising their real outputs by increased economic efficiency.

A. J.

DANKS

January 29, 1955.