Title: War Economy

Author: Baker, J. V. T.

Publication details: Historical Publications Branch, 1965, Wellington

Part of: The Official History of New Zealand in the Second World War 1939–1945

This text is the subject of: ‘Something of Them Is Here Recorded’: Official History in New Zealand

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Overseas Service

Early in 1941 some thirty thousand New Zealanders were serving overseas. By the middle of the year there were forty thousand, and this number was to be considerably exceeded for the rest of the war. Pearl Harbour, in December 1941, renewed the danger of Japanese invasion and led to a rapid strengthening of the home army; but still the numbers serving overseas continued to increase.

At the peak of recruitment New Zealand had 50,000 men and women serving overseas and well over 100,000 serving in New Zealand. This was in September 1942, but it was not until November 1943 that the highest point was reached for men and women serving outside New Zealand. There were then 70,000 serving overseas and nearly 66,000 in New Zealand.

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Wherever they were serving, men in the armed forces had to be fed, clothed, equipped and sheltered, while their services were withheld from their usual contribution to production. But the financial effects differed. The men serving in New Zealand added the financial impact of their pay to the demands on the New Zealand economy in the same way as if they had been producing. This expenditure, without any accompanying production reaching the market, aggravated the tendency to an excess of money demand for goods and services.

Chart 13 shows relationships between New Zealand's overseas and home forces over the war years.

To the extent that those serving overseas allotted portions of their pay to dependants in New Zealand they, also, added to the potential money demand on the New Zealand market. However, the more significant financial impact of overseas service was the expenditure of overseas funds which had to be found to equip, pay and maintain the forces. Unless this extra expenditure was to be matched by overseas borrowing, funds had to come out of export earnings at a time when shortages of overseas funds had page 73 already led to restrictions on imports. As we have seen,¹ the Labour Government had decided against raising money for war by overseas borrowing. New Zealand would pay for the war as it went along. In so far as the war led to overseas payments, this meant, in the main, that New Zealanders would do without a corresponding quantum of imported goods.