exported in increasing quantities, and together with the increasing
output of industries already established in this field will make a valuable
contribution to our export income as well as broadening the base of
the national economy.

Encouraging results have already been obtained in my Government's
search for new overseas markets, not only for our main lines of
primary produce, but also for the products of our steadily expanding
and highly efficient manufacturing industries. My Government is
anxious to see an increase in New Zealand's trade with Australia
and the arrangements recently negotiated by my Prime Minister
should, in the coming year, result in a marked increase in trade
between our two countries.

Although minor crises, which are the economic aftermath of the
Second World War, develop from time to time and require a
temporary resort to directly corrective measures, substantial progress
has been made in moving from import licensing to import duties as
a means of stabilising sound local industries.

The review of the Customs tariff, which is to be undertaken this
year, should lead to the removal of anomalies where they exist and the
formulation of an up-to-date tariff in keeping with modern conditions.
A Bill will be placed before you which will provide for the consolidation
of existing legislation affecting the Department of Industries and
Commerce and for the redefinition of that Department's functions
and objectives.

The problems associated with substantial over-employment and
high levels of business activity to which I referred when I last
addressed you are still with us. Notwithstanding a further rise in
export income last year, a record level of expenditure on imports was
responsible for a net reduction in our overseas reserves. It has been
necessary to take further steps to meet the situation during the past
year, and, in particular, the banking system has been placed under
some pressure to reduce the level of bank credit. My Ministers
believe it will be necessary to continue with the present policies, which
are designed to strengthen the country's economic position externally
while maintaining stability within New Zealand.

The Commission appointed under the chairmanship of the Honour-
able Mr Justice Tyndall to investigate the functioning of the nation's
financial and banking system and to examine and report on proposals
for changes in banking methods and financial policy has completed
its report, which will shortly be placed before you for your consideration.

During the present financial year, securities issued by my Govern-
ment and totalling in all £50 million in some four loans fall due for
repayment. Since it is the aim of present policies to absorb the excess
demand in the community and to lessen the pressure for imports, a
successful conversion operation became a matter of major importance.
My Ministers therefore decided to make to all the holders of
the maturing loans one offer of conversion. The rate of interest was
increased in line with current market rates and while the final figures
are not yet available it appears that approximately forty million
pounds, or eighty per cent, of the loans will be converted. In all the
circumstances my Advisers regard this as a satisfactory outcome for
what is the largest financial transaction of its kind in New Zealand.
Suitable adjustments in the borrowing rate for local government
authorities have been effected.

The impact of Government income and expenditure on the
economy generally is a major factor and my Ministers will continue
to subject Government expenditure particularly to the most careful
scrutiny to ensure that Government plays its full part in the control
of imports and of inflationary pressures.