Salient. An Organ of Student Opinion at Victoria College, Wellington, N.Z. Vol. 13, No. 10. June 1st, 1950
[Introduction]
On Friday, May 5, Mr. Holland an Minister of Finance, announced the reduction or abolition of subsidies on butter, milk, eggs, bread, tea, flour, coal and wool, and imminent increases in the cost of railway fares and freights, and telephone charges. This step has been estimated by Mr. Holland to bring about a gross saving in Government expenditure of up to £12m per year.
All these commodities and services are, in economic terms, in inelastic demand. That is, they are basic for living and, with an increase in price as caused by such a move as this, will suffer no decrease in demand. Hence the same amounts will be used as before, but more money will be needed to do so; as a result the £ will buy less and the cost of living will rise. Mr. Holland realises this, and estimates that (disregarding the wool subsidy, the abolition of which will not be effected until next season) the resultant increase in the cost of living will be About 4%.To meet this increase "the Government would immediately draw the attention of the Arbitration Court to the removal of subsidies so that that factor could be taken into account and a cost of living bonus declared to compensate for higher costs." In addition, "Social Security Benefits would be increased and special provision made for those thrifty people whose small incomes are derived from their own resources. Primary producers will get higher payments to compensate for their increased costs in production."