Title: War Economy

Author: Baker, J. V. T.

Publication details: Historical Publications Branch, 1965, Wellington

Part of: The Official History of New Zealand in the Second World War 1939–1945

This text is the subject of: ‘Something of Them Is Here Recorded’: Official History in New Zealand

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Stabilisation Subsidies

Subsidies had been paid for various purposes before December 1942. From the beginning of 1943 they became an integral part of the economic stabilisation scheme.

In 1938–39, £500,000 had been paid out in subsidies on wheat and for transport of fertilisers. Total subsidy payments had increased in the war years to £2·2 million by 1941–42. Payments rose to £3·6 million in the financial year 1942–43, which included just over three months of the comprehensive economic stabilisation plan.

Transport of fertilisers had been subsidised for the benefit of farmers for some years and, with the addition of subsidies on the cost of the fertilisers from the 1940–41 financial year, made up two-thirds of all subsidy payments prior to the advent of economic stabilisation.

Subsidies on the production and distribution of coal had made their appearance in 1940–41,¹ while wheat subsidies had commenced before the war. The nearest approach to a stabilisation subsidy on consumer goods in the first three years of war was the subsidy on sugar, which commenced at £155,000 in 1940–41, rose to £347,000 the following year and was to reach £635,000 in the first year of economic stabilisation.

The following table shows, under broad headings, the stabilisation subsidy payments between 1942–43 and 1945–46:

Stabilisation Subsidies
£(000)

	1942–43	1943–44	1944–45	1945–46
Shipping transport and incidental	27	212	452	570
Coal production and distribution	356	513	727	1,168
Primary production2
Transport	414	453	481	504
Fertilisers	813	1,298	2,009	2,226
Bags, etc		113	171	171
Stock and poultry foods			43	113
Other	88	132	198	224
Essential clothing and foodstuffs
Clothing		6	59	301
Dairy produce		11	185	361
Meat				644
Sugar	635	651	1,013	847
Tea	478	92	100	180
Other	158	236	537	703
Wheat	583	458	622	789
Miscellaneous		46	91	99
	——	——	——	——
Total subsidies, gross2	3,552	4,221	6,688	8,900

page 306

Most of the consumer subsidies are shown in this table under the heading ‘Essential clothing and foodstuffs'. £155,000 had been paid out in 1940–41 and £347,000 in 1941–42, the only item being the subsidy on sugar. In 1943–44 payments for sugar, tea and other items under this heading totalled nearly £1·3 million. In the following years the range of items expanded, and by 1945–46 consumer subsidy payments reached over £3 million. Subsidies were paid on flour, bread, sugar, tea, oatmeal, dairy produce, eggs, clothing, and many other consumer goods.

Subsidies aimed at reducing production costs or off-setting rises in import costs became very substantial also, but considerable portions of the farm subsidies were recovered from the farm produce stabilisation accounts. Amounts recovered for years ending in July, were £1·6 million in 1943–44, and £2·5 million in each of the years 1944–45 and 1945–46. These recoveries brought the net cost of all stabilisation subsidies to approximately £3 million in 1943–44, £4 million in 1944–45 and £6 million in 1945–46.