25 JUNE] THE NEW ZEALAND GAZETTE 1071

The Security Treaty between Australia, New Zealand, and the United States of America came into force on 29 April. My Government regards this Treaty as an essential complement to the Treaty of Peace with Japan, which imposes no precise controls upon Japan's right to rearm. The Security Treaty assures New Zealand, on a reciprocal basis, of the active support both of Australia and of the United States of America in the event of a threat to New Zealand from any quarter in the Pacific.

The conclusion for the first time of a direct mutual defence agreement between New Zealand and the world's most powerful democracy seems to my Government an event of historic significance, calculated greatly to increase the security, though it adds to the liabilities, of New Zealand. Moreover, in the view of my Advisers, this Treaty, far from hindering, will reinforce New Zealand's capacity to pursue the other main objects of her external policy—namely, the well-being of the British Commonwealth and the effectiveness of the United Nations as the world's greatest hope for peace.

My Government has decided to send a fighter squadron of the R.N.Z.A.F. to assist in peacetime garrison duties in the Middle East. It supports the United Kingdom Government in their endeavours to place the defence of the Middle Eastern area on a sound foundation, through agreement between the countries situated in the area and those other countries which, like New Zealand, are prepared to contribute to its defence. If these efforts lead to the establishment of a Middle Eastern Command, New Zealand is prepared to participate therein.

The scheme of compulsory military training is now well launched and highly successful. As a result of amending legislation introduced last year to the Military Training Act, an additional age group of men is now being trained. Should the need arise, these men will be available and of a suitable age for overseas service.

The discussions of Commonwealth Finance Ministers in London, which my Prime Minister attended, disclosed that prompt and drastic action was required to bring the sterling area as a whole into balance with the rest of the world. Suitable measures have already been taken by my Government in accordance with the decisions reached at this meeting as New Zealand's contribution to the sterling area's grave problems. Already, some improvement is evident. It is too early yet, however, for the action taken to show its full effect. In the meantime, continuous efforts must be made to protect the gold and dollar reserves of the sterling area and to strengthen the economic position generally.

New Zealand's obligations to the sterling area to live within its overseas income, and to conserve its accumulated reserves in the meantime, have necessitated, in the public interest, a measure of control to regulate the expenditure of the funds available for both Government and private expenditure.

Under the obligations imposed by law the Reserve Bank, with the co-operation of the trading banks, is maintaining control over the volume of expenditure on the importation of goods into New Zealand. These controls will be relaxed as fully and as soon as future circumstances permit.

There has been a large increase in the importation of commodities into New Zealand. This resulted from the temporary but substantial increase in wool prices and other export incomes, and from the heavy demand for imports following years of shortages, together with the greater availability of goods from overseas. Our overseas resources have thus been severely taxed. Furthermore, an additional strain was placed on the banking system, which, in addition to financing this extraordinary flow of goods, had also to meet unexpected demands due to the delays to trade caused by the waterfront strike last year. In these circumstances it is essential that expenditure on imports, whether on Government or private account, must be very carefully controlled by the banking system.