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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Assessment of Pre-war Economic Planning

New Zealand's pre-war economic planning was characterised by considerable discussion and many recommendations but very little action. However, in the event no great economic harm resulted from this lack of preparedness.

The greatest barriers to action were shortages of overseas funds on the supply side and the Labour Government's refusal to consider any form of compulsion, or anything which might lead to compulsion, on the manpower side.

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In the event, the supply situation was saved by the fact that the threatened entry of Japan did not immediately eventuate. There was no long break in overseas communications. If there had been, many industries would have come to a standstill for lack of materials, and storage would have been quite inadequate to cope with supplies of perishable foodstuffs which would have piled up in New Zealand. In the short run, fortune had favoured the inactive. In the longer run, most of the preparations which had not been made under peace conditions now had to be made under the more difficult conditions of war.

On the other hand, some pre-war plans went smoothly into action on the outbreak of war. Petrol rationing and the bulk purchase arrangements for foodstuffs for the United Kingdom were outstanding examples.

It was fortunate that, in the few years preceding the war, public works expenditure had been stepped up. This extra pre-war capital formation no doubt left the country in a better situation to carry on later when the demands of war made it impossible to concentrate on normal public works programmes. The possession of heavy earthmoving equipment, imported for public works projects, also speeded completion of defence works.

Labour's pre-war tendency towards direct economic controls helped to ease the economic change from peace to war. There were in existence at the outbreak of war a number of organisations which were used, or which could easily be used, to keep the economy under control during circumstances which must put a considerable strain upon it. For example, the Price Investigation Tribunal was available to watch and fix prices, import selection was in operation and the Internal and External Marketing Departments were well-established, if much-criticised, organisations.

Import controls, which would be necessary to secure priority of transport for scarce supplies in war, were, for other reasons, already in existence. Moreover, industry had branched into new activities under the protection of import restrictions and, though perhaps no more economically sound overall as a result, was more diversified and better able to readjust to cope with the wide variety of new demands which war was to bring.

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Some Noteworthy pre-war Events

Year	Overseas	Economic and Political Events in New Zealand	New Zealand Preparation for a possible War Effort
1930	Imperial Conference, in October, gives reminder of need for defence planning.	Substantial fall in export earnings.
1931		Depressed economy — general reduction of 10 per cent in wages and salaries.
1932	Ottawa Conference on Commonwealth trade, in July.	National Expenditure Commission appointed, in January.
		National Expenditure Adjustment Act makes reductions in pensions, salaries of State employees, and in rents, interest rates and other fixed charges.
		Most difficult year of depression.
1933	Hitler becomes German Chancellor, in January.	Exchange rate changed to £NZ125 = £100 sterling, in January.	Decision in October to form NZ Committee of Imperial Defence.
		Reserve Bank of NZ Act passed in November.
1934	UK Government puts quotas on certain meat imports.	Best prices for wool since 1929–30. Partial restoration of wage and pension cuts.	Manpower Committee set up as off-shoot of NZ Committee of Imperial Defence.page 52
1935	Hitler repudiates the Treaty of Versailles, in March.	Substantial increase in manufacturing activity.
	Italians invade Abyssinia, in October.	Partial restoration of salaries and wage cuts of public servants.
	Agreement between UK and NZ on meat exports.	Labour Government elected, in November.
1936	German and Italian intervention in Spanish Civil war.	Expansion of public works undertakings.	NZ Committee of Imperial Defence becomes Organisation for National Security. National Supply Committee set up.
	Germany reoccupies the Rhineland, in March.	Restoration of cuts in pensions and State employees' salaries.
		Guaranteed price for dairy produce announced in Budget statement.	In Defence debate in the House, Defence Minister Jones outlines need to prepare for possibility of war.
		Forty-hour week becomes operative.
		Comprehensive Government housing scheme announced.
1937	Imperial Conference in London, in June, points the need to prepare for war.	First State housing units become available.	Discussions with UK Government on bulk purchase in event of war.
		Record year for export earnings.	Organisation for National Security, Council of Defence, and Chiefs of Staff Committee given a common secretary.page 53
1938	German take-over of Austria, in March.	Extensive imports of heavy earth-moving machinery.	UK Government memorandum on bulk purchases in event of war.
	German demands on Czechoslovakia.	Social Security Act passed in September.	Spurt in preparation of War Book in September.
	The Munich Agreement, in September.	UK manufacturers unable to fulfil NZ orders for military equipment.	Use of heavy earthmoving equipment for aerodrome construction.
		Falls in prices of NZ exports.
		Import and exchange controls in December.
		Overseas assets fall to £NZ6.8 million.
1939	British and French ‘guarantee’ to Poland, in March.	Commencement of benefits under the Social Security Act in April.	Savage in March warns of need to ‘prepare for the worst’.
	Germans complete the occupation of Czechoslovakia.	Nash visits London to discuss difficult loan conversions.	Military equipment inadequate for mobilisation.
		Price Investigation Tribunal set up in June.	Aerodrome construction speeded up.
			Pacific Defence Conference held in Wellington, in April. Warning of need for reserve supplies.
			Government decision, in May, to make import licences available for purchase of reserve stocks of strategic commodities.
			Manpower Committee, in June, unsuccessfully asks for a Manpower Register.
			National Service Registration Act drafted, in July.
			Schedule of Reserved Occupations prepared, in August.
	Germans invade Poland, 1 September.		First effective action to increase cool storage capacity initiated, in August.
	Declaration of war, 3 September.