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Salient. An Organ of Student Opinion at Victoria College, Wellington, N.Z. Vol. 13, No. 10. June 1st, 1950



But suppose that he makes all the Government enterprises pay, and does bring about a stable balance of prices and costs at the new higher figure. And suppose that he succeeds also in getting enough money from loans to allow for a curtailed works expenditure without having to have recourse to Reserve Bank credit. Will the resultant economy of New Zealand be based on a firmer foundation that before? We think not.

These economies will in the future be able to be paralleled with Mr. Churchill's action in 1924 when he brought Britain back to the gold standard at too high a parity. If the Prime Minister does stabilise the economy (which we doubt) he will do so at too high a level of costs and hence of prices. It is not possible for us to build an economy unrelated to overseas conditions—especially in Great Britain. It is unlikely that there will be an increase in the return from our staple exports—. in fact decreased prices are likely within the next year or two. This means a smaller return to the farmers who are now faced with increased costs—in two years it will possibly cost the farmer more to produce his goods than he will get for them. There are certain limited funds belonging to farmers held in pool accounts but the use of these at high prices will prove somewhat embarrassing to the P.M.: he will meet the opposition of farmers in using funds at such a time, and he will possibly have to raise further loan monies to compensate for the sale of farmers' investments; and of course he will be able to subsidise the farmers, thus proving the fallacy of his anti-subsidy crusade and risking his political neck.

At the same time costs of New Zealand manufactured goods will be too high to allow them to compete with imported goods. The result then will be either large scale unemployment and overseas loans, or more rigid Import and exchange control—not a happy thought for a National Government. To make New Zealand economy stable, costs and profits must be lowered. Mr. Holland will achieve the reverse. Wages, especially those of the basic group, will be further than ever behind the cost of living and the workers' share of the national income (most of all when taxation is taken into account) will be much less. There can be little doubt that as a result of these economies, a slump is brought appreciably nearer.

John Blunt