Problems for the Statistician
Problems for the Statistician
In assessing this price stabilisation achievement, it must be remembered that stabilisation policy tended to be concentrated on holding the prices of the commodities in the Wartime Prices Index, even to the extent, on occasions, of offloading cost increases in the stabilised items in the index on to related items which were not in the index.2 However, it also became part of the stabilisation scheme to try to gear production programmes to ensure a steady supply of the selected standard utility articles at the stabilised prices. Much administrative effort was required to achieve this, and there were considerable difficulties. Needless to say, higher profits could usually be made by producing other lines whose prices were not stabilised, and there was a tendency for production to veer away from the standard lines, resulting, for some items, in recurring shortages of supplies at the stabilised prices.page 313
A statement from an unpublished thesis on the footwear manufacturing industry1 gives a good impression of the underlying problems as they affected a particular industry:
‘A range of essential commodities was tabulated and, as far as possible, standards of manufacture for these lines were adopted. Included in these commodities were Men's, Women's, Boy's and Girl's shoes made from New Zealand leather. Prices for these lines were stabilised at the prices ruling on the 15th December, 1942. Increases in costs of manufacture were to be absorbed by the manufacturers, or failing this, the tendency was to subsidise costs of manufacture.
‘The method used in the industry was:
To allow increased costs to be borne by military contracts.
To allow higher margins of profit on non-essential lines.
Enforcement of quotas for manufacture of essential or so-called “utility” lines.
‘In effect this method meant military and non-essential lines were subsidising the manufacture of essential lines.
‘While military contracts absorbed a large proportion of the productive capacity this arrangement appeared to work. From 1945 on, the disparity in prices between essential and non-essential lines became more acute. Production of non-essential lines was far more remunerative. This made the plan committee's activities increasingly difficult, by making production quotas hard to achieve.’
1 E. A. Harris, ‘A survey of the New Zealand footwear manufacturing industry with special reference to conditions in the industry prior to and during the licensing phase 1939–1949‘, pp. 94, 95. Copy held by Canterbury University Library.
The most serious threat to the representativeness of the Wartime Prices Index was the practice of offloading cost increases in stabilised items on to unstabilised items. This practice, however, was shortlived, and no doubt the Government Statistician's protests were largely responsible for its demise. The following Hansard reference is significant:1
Mr Sheat (Patea):‘… It was reported that the Price Tribunal had been authorising price increases of certain unstabilised commodities in order to offset no increases in the prices of certain stabilised items. If that practice existed, it was evident that price-fixation was simply a process of camouflage. The practice was certainly undesirable.’
The Hon. Mr D. G. Sullivan: ‘There were some instances where that was done, but it has not been the practice recently, for it has been completely abandoned.’
1 NZPD, Vol. 266, p. 531, 26 September 1944.