RATES OF EXCHANGE.

Auckland Star, Volume LXII, Issue 143, 19 June 1931, Page 9

RATES OF EXCHANGE.

M REDUCTION SOON. BANK CHAIRMAN'S REVIEW. ■ AUSTRALIAN CONDITIONS. Comment was - made on the present rates of exchange between London and New"Zealand, and vice versa, by the chairman of directors of the Bank of New"Zealand, Mr; W. Watson, at the annual meeting to-day. The rates were abnormally high, he. said, and there was no reduction in close sight. The. principal factor in advancing rates had been the necessity for bringing about a reduction in imports to correspond with the reduced value of exports. To a considerable extent that result had been obtained, but London reserves, which had been heavily depleted, would have .to be built up before a reduction in rates could be looked for. It was by no means certain that, for the present year the balance of trade would be in the Dominion's favour to anything like an adequate amount. If ■ the banks had not held extensive funds in London the rise in exchange would have taken place at an earlier date, and it would have been heayi er . "Wo have resolutely refused to permit our New Zealand funds in London to he- .availed of for the benefit of Australia," he said, "but-unfortunately the bank s do not control the exchange position, consequently, through channels outside the banks, Australians have secured possession of an appreciable amount of New Zealand funds in London. •■

. • "Producers Benefiting." "A large section of the public does not appear to recognise that whilst the > margin between buying and selling rates remains, unaltered, the. banks derive no advantage either from.a high buying or a high selling rate. -As. a matter .of fact, 'ifc- is almost certain that during the. period of adjustment' to normality, the banks must lose 'money on their exchange transactions. "The position of Australian exchange is also abnormal, and until conditions in the' Commonwealth substantially prove, there is ■ little '■ or no. ■ hope of alteration. Complaints have - been. made by New Zealand exporters to Australia that the ... exchange "rate is' seriopsly

restricting trade. That no doubt is the case. On *the other hand our bank has funds in Australia far in excess of its requirements —an excess which in present conditions it is impossible to shift. In fact, it would suit us to stop buying any exchange on Australia for a long time to come. "It is well to emphasise that - it is the producing, and also the manufacturing, industries of the Dominion, and not the banks, that are reaping the advantage of the present abnormal exchange rates on London."