176 WHEAT PRODUCTION IN NEW ZEALAND 



trial world does not cause isolation or even partial 

 isolation. The connection between prices in the Dominion 

 and prices in the Mother Country has already received 

 passing comment, but as the subject is one which contains 

 many pit-falls for the unwary, and as in fact popular 

 reasoning about it exhibits many fallacies, it will not 

 be irrelevant to give a brief discussion of it here. 



Prom a discussion of the history of prices in New 

 Zealand and England, we are now in a position to see 

 that the price of New Zealand wheat is not determined 

 altogether by local conditions up to the point when we 

 have a surplus for export. Should the supply fall 

 short of the annual consumption then economy must be 

 practised or importation resorted to. The demand for 

 wheat is fairly inelastic, for everybody must use flour. 

 Especially is this the case in a country like New Zealand, 

 where the adoption of a high standard of living among 

 the labouring classes has led to the extensive consumption 

 of the products of the wheat industry. In the case of 

 scarcity in the local supply, what, then, is the limit to 

 the price which producers can charge for their wheat? 

 Obviously, a price no greater than that at which it would 

 pay Australian or other producers, say, to export their 

 wheat or flour to New Zealand. This price would 

 therefore be an amount equal to cost of production in 

 Australia, including rewards for management, together 

 with cost of freight, insurance, commission, and the 

 amount of the duty charged for wheat and flour entering 

 New Zealand. Since Australia exports to Britain as well 

 as to New Zealand on occasion, it is at once apparent that 

 the New Zealand price cannot remain for long periods 

 above the English price, unless, of course, Australian 

 supplies are seriously impaired by adverse weather 

 conditions there. But even in this event wheat from 

 Argentine or Canada would be imported, were New 



