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War Economy

The Wartime Prices Index

The Wartime Prices Index

It has been observed that the Wartime Prices Index was the key to the new comprehensive stabilisation scheme. It fixed the level at which the economy was to be stabilised, and facilitated widespread agreement to the whole scheme, by providing a yardstick to determine the equity of the sacrifices to be made by various sections of the community. Without an acceptable index of consumer prices, with which the whole scheme could be interlocked, the plan could not have been operated successfully, even as an emergency measure in time of war.

In a Parliamentary paper dealing with the Wartime Prices Index,3 the following statement appears:

‘On 15th December, 1942, the Government announced its intention to stabilise the domestic economy of New Zealand by means of a comprehensive plan involving the stabilisation of the prices of a wide range of essential commodities and services, of all rates of remuneration, and of rents and transport charges at the levels then ruling. Fundamental to the plan was the decision that wages and other forms of remuneration should be linked to the prices of essential commodities and services (including rents) page 290 entering into the cost of living of the average New Zealand family. This was to be achieved by the preparation of a special wartime price index which would function as a reliable indicator of any variations in the retail prices of such commodities and services taken as a group. Increases or decreases in the general level of prices as measured by the index, when reaching certain stated percentages, would automatically lead to corresponding adjustments in the rates of remuneration.’

As was to be expected, much of the administrative work in operating the new stabilisation scheme would be concentrated on the Wartime Prices Index. The objective would be to use price control, subsidies, and resistance to cost increases to keep price rises, as measured by the Wartime Prices Index, below the 2 ½ per cent increase which would trigger off increases in wages and farm payouts. All cost changes would tend to be assessed in terms of their effects on the Wartime Prices Index.

For this reason, a fuller study of the content of the index is deferred to Chapter 12, which deals with the administration of the comprehensive economic stabilisation scheme.

3 H–43, The New Zealand Wartime Prices Index, 1944, p. 1.