H.— 35.
Column 6 shows that farmers in general benefited by the delayed rise in wages during the years 1914-20, suffered 1920-23, benefited 1924-25, and suffered 1926-27. The dairy-farmer suffered in 1915, benefited 1916-24 (except in 1922), and suffered in 1926-27. Whilst the failure of wages to fall imposed an additional burden in 1926-27, it must not be overlooked that throughout almost the whole of the previous period the movement of wages relative to all export prices benefited the farmer. In 1926 a reduction in wages of not more than 7 per cent, would have brought things to the same parity with export prices as in 1914. At the outside, this reduction would represent the sum of about £800,000 per year, or less than £10 per farmer or £15 per worker. In short, if other cost-price relationships were the same as in 1914, the present burden of wages would not have been sufficient to account for the depression. Wages may possibly press heavily in regard to the clearing of new land, in which labour is the important item in cost, but any reduction in wages the worker would be prepared to accept would not appreciably affect the situation as a whole. (3) Producers' Material.—The price of farm requisites (seeds, manures, wire, implements, &c.) is compared in similar fashion in Table 4.
Table 4. —Comparison of Export Prices of (1) Dairy-produce, and (2) All Exports, with the Wholesale Prices of Farmers' Producers' Material, 1914-26.
Export prices are from " New Zealand Official Year-book, 1927," p. 823. Materials for farming industry, ibid,., p. 821. The figures for farm requisites are wholesale, and no comparable index is available for corresponding retail prices. In so far as changes in the wholesale index are a reliable guide to changes in retail prices, it will be seen that, except in 1920-22, the farming community generally benefited by the disparity in the movement of export prices and prices of farm requisites. The dairy-farmer suffered during 1918-20, which were admittedly not years of depression, and again in 1925-26. The position in 1927 is about the same as in 1909-13. Normally, retail prices tend to lag behind wholesale prices, so that the advantage accruing to the farmer in respect to the greater fall in the price of requisites than of exports is likely to be less than the figures would indicate ; but as far as farmers in general are concerned it is highly improbable that the lag is so great as to completely eliminate the disparity. It seems likely, however, that the dairy-farmer, especially in remote districts, where transport costs are heavy, has actually suffered in consequence of the retail lag. My own conclusion is that farmers in general are at present benefiting somewhat, as compared with 1914, in consequence of the relative movements of the two series ; but that certain groups (as, for example, dairy-farmers) are worse off by an uncertain, though probably not very considerable, amount.* (4) Capital Charges in respect to Land. —Whilst the increase in taxation and the delayed fall in wages have had some influence on the position, we must look elsewhere for the most important cause of the long-continued depression in farming industries. There is no doubt in my mind that the main burden pressing on those farmers who are materially worse off than in 1914 is the increase in fixed charges in respect of land, due to the movement of land-values, especially in the years preceding 1922, accompanied by an increase in the volume of mortgages outstanding, and in the rate of interest on both mortgages and short-period or intermediate credit. This is all the more important, in that fixed charges against land represent by far the most important item of outgoings. The ratio of fixed capital to circulating capital charges is much higher in agriculture than in most other industries.! The
* Of recent months it has become popular to blame the Arbitration Court for most of the economic evils from which the country is suffering, and, in particular, to affirm that the disparity between " sheltered " and " unsheltered " prices, which presses heavily on agriculture by raising costs relative to returns, is due to the operation of Arbitration Court awards in raising the costs of production of those " sheltered " products which the farmer uses. If this allegation were true, it would reveal itself in the index number of wholesale prices of producers' goods quoted. If it is true that the farmer is suffering from the delayed fall in the retail price of requisites, this cannot be attributed to high manufacturing costs dependent on the evil influence of the Arbitration Court, but to high retail distributive charges. f See " The Profit Cycle in Agriculture," Economic Journal, March, 1926.
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(Base average, 1909-13 — 100.) Export Prices. Producers' Material for Column 1: Column 2 : Year. Farming Column 3. Column 3. Dairy-produce. All Commodities. Industry. (1) (2) , _(3) - (4) (5) ".'J. 1913 • • • ■ 107 1914 .. . . .. 104 111 108 96 103 1915 .. .. .. 120 132 128 94 103 1916 .. .. . . 135 153 130 104 118 1917 .. .. .. 156 174 147 106 112 1918 .. .. . . 157 180 171 92 105 1919 .. .. .. 175 185 178 98 104 1920 . . .. .. 181 182 220 84 83 1921 .. .. 223 169 180 124 94 1922 .. .. . . 150 127 148 101 86 1923 .. . . . . 162 155 143 113 108 1924 . . . .. 165 177 162 102 109 1925 .. . . .. 152 189 156 97 121 1926 . .. .. J 41 153 147 96 104 1927* .. .. .. 130 149 129 101 116 * Average monthly figures, January-June, 1927.
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