H.—35

Agricultural Requisites and Export Prices. Comparison of Index Number of Wholesale Prices of Producer's Goods and all Exports.

In the third column, the index number of agricultural producer's goods is compared with the index number of export prices by dividing the former into the latter. When the resultant figure rises above 100 the movement relative to prices in 1914 is favourable to the farmer ; when it falls below 100 the movement is prejudicial to the farmer. Although the figure must not be taken as an exact index of the disparity, it reveals clearly enough that, as compared with pre-war years, far from having suffered from the disparity, the farmer has in the main benefited —except in the years 1920-23. It is quite possible that the movement in the price of such goods bought at retail has shown a lag behind the movement of export prices ; but if this is the case, the blame must be laid at the door of high retail distributive charges rather than high manufacturing costs due to the influence of the Arbitration Court. In an accompanying memorandum the subject is pursued further, and the special problem of agriculture is considered in greater detail. » 7. The Cost oj Living. It is further asserted that the Arbitration Court is responsible for the high cost of living. What is meant by this statement ? In general, it would appear to mean that the high cost of production in " sheltered " industries by virtue of the Court raises retail prices of goods and services entering into the household budget relative to the income of those not engaged in the " sheltered " industries ; for the statement is usually accompanied by an assertion that workers in such industries are protected by virtue of the fact that wages are fixed in accordance with the cost of living, and therefore rise with it, while employers pass on increased charges in the shape of higher prices and so protect their profits. Thus there is created a vicious spiral of rising wages which are translated through rising costs into rising prices. This again comes back in the main to the problem of the price disparity referred to above, for conditions in the large farming market for retail goods are influenced by the export price of primary products, and it is argued that these have fallen more than retail prices. In the accompanying table, retail prices are compared with consumer's wholesale and with export prices :

Wholesale and Retail Prices. Comparison of Index Numbers of (1) All Retail Prices, (2) Retail Prices excluding Fuel and Rent, (3) Consumer's Wholesale Prices, and (4) Export Prices.

Certain, conclusions appear to follow from an examination of the Table : (1) There is no doubt that a marked disparity exists between the level of all retail prices and wholesale export prices in 1927 as compared with 1914. It would appear that retail prices would have to be reduced by, say, 15 per cent, last year to bring them to the 1914 parity with export prices. (2) If rent, fuel, and light are excluded from the retail index, the disparity still persists ; but is reduced. This figure would have to be reduced by some 10 per cent, to bring it to the same parity with export prices as in 1914. It appears, therefore, that special factors affecting rents, fuel, and light are important elements increasing the disparity. These should be investigated. (3) The disparity between the wholesale price of consumer's goods and export prices is very small, and would disappear if the former were reduced by 3 per cent. The reduction required in 1926 would be of similar magnitude, while in 1925 there was a greater disparity in the opposite direction.

54

(Base 1914 = 100.) llatio Export Ratio Export Agricultural Tr„„„ r t 1 Prices Agri- i Agricultural u v „nrt Prices AgriYear. Producer's a j cultural Pro- Year. Producer's ! cultural ProHoods- 1 rices. ducer's ! Goods. Prices. ducer's Goods. j Goods. 1914 .. .. 100 100 100 | 1921 .. .. 166 152 92 1915 .. .. 118 119 101 1922 .. .. 155 114 89 1916 .. .. 130 138 115 ' 1923 .. .. 132 140 106 1917 .. .. 136 157 115 I 1924 .. .. 150 159 106 1918 .. .. 159 162 102 1925 .. .. 140 ' 170 121 1919 .. .. 165 167 101 1926 .. .. 133 138 104 1920 .. .. 204 164 80 j 1927 .. .. 117 137 117

(Base 1914 = 100.) Retail other than nomnmer's Year. All Retail. | Rent, Fuel, and Wholesale Export Prices. I 1914 .. .. .. .. .. 100 100 100 100 1915 .. .. .. .. .. 107 110 116 119 1916 .. .. .. .. .. 116 122 119 138 1917 .. .. .. .. .. 129 137 131 157 1918 .. .. .. .. .. 143 151 154 162 1919 .. .. .. .. .. 157 174 165 167 1920 .. .. .. .. .. 178 149 186 164 1921 .. .. .. .. .. 171 193 176 152 1922 .. .. .. .. .. 160 166 154 114 1923 .. .. .. .. .. 158 160 152 140 1924 . . .. .. .. .. 160 159 153 159 1925 .. .. .. .. .. 162 159 152 170 1926 .. .. .. .. .. 163 156 143 138 1927 .. .. .. .. .. j 162 152 141 137