IMPROVING EXCHANGE.

Auckland Star, Volume L, Issue 199, 22 August 1919, Page 9

IMPROVING EXCHANGE.

LOCAL BANKERS DOUBTrXJL. ' DEEP-SEATED CAUSES. RAISING LOCAL LOANS. '' sir Joseph Ward's proposal that means should be taken to improve and regulate, as far as possible, rates of exchange to oversea countries were the subject of some inquiries made to-day amongst local bank managers. These gentlemen, while acknowledging that i come rates of exchange. c_recially that i between Xew Zealand and the United > States, wore very unfavourable, ex- - pressed grave doubts whether interven- '■ tion by the Government through a State - bank would be of any practical effect, i "It is very hard to sec what a State ; bank could "do to improve exchange." " said one manager. -Exchange rates 1 depend on many conditions, and some of .' thet-e ate on the other side and beyond our control. At the present time our 1 exports considerably exceed our im- " ports, and so money has to be brought - into the country, either by gold or by 1 ! other means, and cither way the cmst is ' appreciable. A country the sdze of Xew '-'. Zealand cant well expect to alter the f i laws by which the ebb am! flow of ' ■ exchanges is governed. 1 should very M much like to know what Sir Joseph's " j proposals are. but. judging from our 'j experience of tin- Common wealth Rank, ! , there is not mueli to bo expected in this 1 respect from the establishment "f a r ] ""fate bnnk here. Sn far as 1 can reenlI lect. tbe Commonwealth Pink has never ' had nnv influence on rate* 'if pvhnni»e. 2 nnd cevtnnilv it h-is not. made any tpfference to the rnriyi between Australil and Xew Zealand." QUESTION OF PROFITS. The manager went on to say that Sir Joseph Ward, whose remarks on the subject were in rather general terms. appeared to connect exchange rates with the profits made by existing banks. It was obvious that a State bank could ! save expense to its customers by carry- ! ■ ing out exchanges at cost. but. leaving " i this out of account, it was not easy to " i see. as he had said before, how a State >l bank could help matters. It was dilli- . j cult to express an opinion on Sir . : Joseph's plans until they were made I known in detail. j Professor J. P. Grosimann, of the .'Auckland University College, in the " course of an interview on the proposed . ■ State bank, observed that Sir Joseph r ' Ward appeared to believe that such a . i bank would have a valuable influence in j | preventing the fall of the rate of exp change against us. "At present." he f said. " the reason why the rate of exchange is favourable to America, for in--3 stance, and unfavourable to Britain . and the Dominions, is chiefly the fact r that enormous issues of temporary in- . convertible paper money, through the . flotation of local loans and otherwise. t! has caused an inflation in our currency - and has thereby reduced its purchasing I power beiow that of American currency. t This is an effect entirely apart from '. any adverse balance of trade." Like the

bankers, Professor C.rossmann considered that the causes of fluctuations in exchange were to deep-scalted to be influenced by the establishment of a State bank or by any general appeal to the financial institutions of the country. TIIE 5i PER CEXT PROPOSITION. Asked about the prospect of raising sufficient money in Xew Zealand for the Government's needs during the next few years, the bankers interviewed were agreed on the point that there was a great deal of money in the country, and little scope for investment. "The country has been accumulating profits," said one hank manager, but not much is being spent on-' improvements, because labour and materials are scarce, and prices at present are high. When the moratorium is lifted there will probably be a better demand for money, but at present the bank returns are a record, and the Post Office Savings Bunk figures show very heavy deposits. The 5J per cent which Sir Joseph mentions seems a reasonable one, and I think that the Government ought to be able to get plenty of money so long as present conditions prevail, and the prices of our produce remain high." "1 think that the war loan figures show what the country can do,'' said another banker. "As for the -terms which Sir Joseph Ward offers, one cannot say whether ' 5J per cent, subject to ordinary taxation,' is a good thing until one knows what -'ordinary taxation' is going to be."