HIGH RATE DENOUNCED.

Auckland Star, Volume LXIII, Issue 58, 9 March 1932, Page 3

HIGH RATE DENOUNCED.

«POLICY OF INFI*A.TION.»

"PHILANTHROPISTS" SUSPECT.

(By Telegraph.—Parliamentary Reporter.)

WELLINGTON, Tuesday

Ministerial and other advocates of an artificially high rate of exchange listened in the House to-night to a trenchant denunciation, by a colleague, Mr. R, A. Wright (Coalition Reform, Wellington Suburbs), who warned members representing rural constituencies against being misled, and producers generally against being led into a trap.

Criticising the speeches of some of the farmer members of the House in favour of freeing the exchange, Mr. Wright said it appeared, that the

farmer wanted protection when it helped him and free trade also when it suited him. If exchange were freed it would fall, and not rise, as the farmers wanted it to do. That was generally acknowledged. He could not see

what the farmers had to gain. They had been misled.

Mr. J. Bitchener (Coalition Reform, Waitaki): Why prevent the farmers from getting a free exchange if they want it? Mr. Wright: To save them from themselves. Mr. W. J.' Poison (Coalition, Stratford) : Do you suggest the exchange should be freed?

City People to Find Money? "I am in favour of its being free as long as it is not artificially raised by the banks or by Parliament," replied Mr. Wright. What was being aimed at was an artificial exchange rate, pegged up to 30 per cent, 80 that it could not recede. He described as "utter nonsense" the statement in the report of the Economic Committee that the Budget would benefit by taking £4,000,000 from the pockets of the city people and giving it to the farmers. The high exchange argument must be condemned as a policy of inflattion. Statistics showed that at least 50 ! per cent of the farmers were paying their way. One dairy farmer had told him that last year his profit was £1000. If the rate of exchange were raised the proceeds would be divided pro rata among all farmers, and the people in the cities would be finding that money for 50 per cent of the producers, who were not doing badly—notwithstanding that 00 per cent of business men were losing money and living on their resources, while scores of them were going out of business altogether.

There was no guarantee that the farmer who was in grave difficulty would receive his share of the increased exchange. That producer was heavily indebted to a bank, which would naturally expect him to reduce hie overdraft, and the money would go. into the bank for that purpose.

Position of a Bank. "If the rate of exchange is increased it will play right into the hands of the Bank of New South Wales," Mr. Wright declared. "Whatever the Government or the House may do, if the exchange is allowed to go free' I believe the Bank of New South Wales in New Zealand will break away from the other banks, and lnunp_up ite rates. The other banks will have to follow suit. I don't believe in philanthropic bankers. I view with suspicion a banker who comes here from Australia and wants to teach farmers how to save themselves from disaster. He has got one word- for the farmers and two for the bank. I would give something to know the names of those who are indebted to the Bank of New South Wales. It would be an eye-opener. Possibly ifc would be found that some of the, men who are trying to have the exchange increased are heavily indebted to that bank in New Zealand. I warn farmers against being led into a trap by a very skilful, able and clever man."

Mr. Wright contended that the banks would not foreclose on clients when their overdraft wae heavy, because they could not get their money, but after the clients' overdrafts had been reduced, by the proceeds from high exchange, it would be profitable to take action. Effect on London Market.

Continuing, Mr. Wright said that if the exchange went up normally and naturally it would have a, bad effect on the London money market, but if it were forced up artificially, ae was euggesterl by the Economic Committee, what would the financiers in London think? There wae not the slightest doubt the effect on the credit of New Zealand would be very serious indeed. He recalled a definite statement by the secretary ' of the Treasury that if the exchange were pegged high the total adverse effect on the Budget, including the external debt service, would be £3,500,000. From what source was it proposed to derive that sum? The average business man would not have any taxable incomo this year. Was it suggested that the additional taxation should be imposed on the wage and "salary earners in order to raise the money required? He trusted that the farmer members of the House would weigh the whole matter carefully before voting in favour of an unnatural, artificial increase in the exchange rate. He predicted that if such a step were taken the time would come when no one would regret it more than the farmers, because when the position | was reversed, and. the exchange rate had | come down, what plight would farmers find themselves in? "I would be sorry ( to be a farmers' representative in those circumstances," said Mr. Wright. i