CAB129-78 — Page 129

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Welfare tate spree which will last for ever. The saving factors in the situation are that the balance of payment difficulties could easily be overcome if a little more work was done and a little less pressure put on the available labour and materials by public works activities of the " State. I fear they may have to learn the hard way but the country is so naturally rich and the New Zealanders are fundamentally such steady prudent people that I feel they would not shirk the measures necessary to meet the situation, if they were given a lead.

29. Everyone is strongly pro-British. They want British immigrants and I was constantly assured that they only accepted American imports because of difficulty over delivery dates from British firms. The only point at which enthusiasm stops short at all levels is at adequate payment towards defence. Social welfare always wins.

AUSTRALIA

30. The outlook in Australia is far more dynamic. Everyone thinks and talks in terms of expansion and development while the need to populate Australia with Europeans, preferably British, so as to be able to resist expansion from Asia is everywhere accepted as the only possible policy to pursue. Although the pressures on the economy from such a full-blooded programme are clear I did not meet a single Australian who questioned its necessity.

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31. The economy of the country rests, as the people say, on the sheep's back" and the healthiness of balance of payments depends on wool maintaining its price in world markets.

32. Within a comparatively short time it would be possible to double the output from existing farms so effective is the scientific treatment of pastures which have until now been largely left to nature. There is quite a lot of improvement taking place but there is some hesitancy apparent, as unless new markets can be exploited a greatly increased wool crop would lower the price. There is some opening up of land but the pace of it is limited by the cost of land, the lack of communication and the need for irrigation. If present progress is slow the plans for future increase in land under cultivation are ambitious.

33. Sugar, thanks to the Commonwealth Sugar Agreement, is profitable but wheat and fruit (fresh and canned) are running into difficulties because of surplus elsewhere and the cost of labour in cultivation and harvesting. Plentiful and readily accessible supplies of coal and iron-ore of a high grade easily mined support a steel industry which can produce well below world prices. All the output (except for a small export to New Zealand) is interually consumed and is well below what is needed. A rapidly expanding engineering industry is being created.

34. The most spectacular expansion is in secondary industries which are springing up everywhere like mushrooms. This is part of the deliberate policy to which I referred of making Australia secure and increasingly self-supporting. The process is this: to reinforce a high birth rate with an immigration programme of 125,000 Europeans a year, keeping the annual increase of population at 3 per cent. or more and then to attract_new_industries to supply the new demands. The policy is meeting with phenomenal success. A great variety of firms are establishing themselves and factories are being erected everywhere. Even with the high rate of increase in population there is an acute shortage of labour and the products seem to reach a reasonable standard of efficiency. Everything would seem to be set fair in the long run: they are probably right to invest in men and machines and there are many projects which look very attractive for the foreign investor. But in the short run there are certain adverse factors to which one cannot turn a blind eye:—

(i) The average earnings throughout manufacturing industry and the public services are about £20 a week. There is a 40-hour week which is not worked fully and the unions are irresponsible. So long as these conditions persist it will be impossible for Australia to compete at all in export markets with manufactured goods except where they have great material advantages in accessible raw materials. They should, for example, be able to build up a good export trade in steel but no Pageattento made to do so.