H.—44

26

upon the extent to which the financing of industry by banks may be carried under Government support. Again,-gold circulating currency may be restoreel or it may not. If it is restored prices will reach a lower level than if it is not restored, because a much larger volume of purchasing-power can be maintained when all the gold is in the reserve, than when part of it is circulating as currency, and, as pointed out previously, the level of prices largely depends on the volume of purchasing-power. But whatever the action of Governments it is probable that a fall in prices, which may be delayed for some years, is bound to be experienced. This being"so, it is evident that the money wages that can only just be paid at first would soon become an impossibly heavy charge unless something occurred to render the amount left for wages, after payment of capital, much greater than it was before the war. If, as pointed out by Professor Chapman in " Labour and Capital after the War," the problem in industrial organization is approached by the employers and employees in an open-minded way, with a desire to minimize as much as possible any real or seeming conflict of interest, and with the object of increasing the yield of the industries of the country, productivity will be raised to a substantial extent. Productivity may not be raised rapidly, however, though whole-hearted effort ■on the part of the employers and employees to improve the efficiency of the industry will certainly yield eventually far more comfortable real incomes for the latter than they had before the war. This matter .of money wages in the exceptional period of reconstruction requires most careful consideration, and eventually industry by industry, because the war bonuses have varied greatly from industry to industry. In our last annual report we attempted tentatively to show the concurrent movement in the volume of the circulating media anel in the volume of trade or business, and we discussed the question as to whether both hael increased at the same rate. F'or this purpose it is neeiessary in some way to measure the growth of trade, and, although this cannot be done with any high degree of accuracy, a rough approximation can probably be made through the study of certain statistics which typify business activity and growth. The statistics used, to measure business should, however, exclude' prices. The; indices of business growth and activity should be expresseei in units other than monetary units. Among the items selected for measuring the movements of business in general, because they are factors that enter into the manufacture, of many goods of first-rate importance, are coal, wheat, mineral oils, the number of passengers and tons of freight carried on the railways, the tonnage; e>f vessels entered and cleared at New Zealand ports, the consumption of sugar and tea,, and the; production of wool, frozen meat, butter, cheese, hides, skins, tallow, and flax. As each of these has its own peculiar bias, an index number has been constructed including them all, and this number represents in a rough way the growth eff business in general. The index numbers are as follow : Growth of Trade in New Zealand, 1909 to 1918. Year. Index Number. Year. Index Number. 1909 .. .. .. 1000 1914 .. , .. ..1278 1910 .. .. .. 1082 1915 .. .. .. 1321 1911 .. .. .. 1034 1916 .. .. .. 1311 1912 .. .. .. 1020 1917 .. .. ..1119 1913 .. .. .. 1134 1918 .. .. .. 1161 This table shows the steady growth in business up to the, end of 1913 as compared with 1909, amounting to 13-4 per cent. During 1914, five months of which we were at war, the increase over 1909 rose to 27-8 per cent. The volume of business reached its maximum in 1915, showing an increase oxer the base year of 32-1 per cent. ; thereafter there was a steady decline to 1917, the volume of business falling in that year to leiwer than what it was in the year immediately preceding the war. The year 1918, however, shows a recovery. In order to institute a comparison with figures relating to prices let us take 1914 as the. base; year, and we find that the volume of business in 1915 increased 3 per cent. ; in 1916 the; increase was only 1-6 per cent. ; in 1917 there was a drop of 13-6 per cent. ; and in 1918 9-2 per cent. ; the respective index numbers beingYear. Per Cent. 1914 .. .. .. .. .. .. 100 1915 .. .. .. .. .. .. 103 1916 .. .. .. .. .. .. 101-6 1917 .. .. .. .. .. .. 86-4 1918 ' .. .. .. .. .. .. 90'9 The Government Statistician's figures show a rise in food-prices during the same period of 42 per cent., a percentage which in all probability is exceeded by other commodities, We therefore find during the war period that there has been a decrease in the volume of trade concurrent with an increase in general prices, anel a comparison of these figure's gives, a, rough indication of the degree; to ich the currency has been inflated in New Zealand. Figures are not available showing the actual volume of money in circulation during the; period. Notes in circulatiem have, however, increased as follows :— Year. Index Number. Year. Index Number. 1910 .. .. .. 1000 1915 .. .. .. 1750 1911 \.. .. ..• 1032 1916 .. .. .. 2490 1912 .. .. .. 1054 1917 .. .. .. 3328 1913 .. .. .. 1030 191.8 .. .. .. 3854 1914 .. .. .. 1229