STERLING PRICE LEVEL.

Auckland Star, Volume LXIII, Issue 238, 7 October 1932, Page 3

STERLING PRICE LEVEL.

PROBLEM OF ADJUSTMENT. WHAT NEW ZEALAND CAN DO. SIR WILLIAM HUNT'S REVIEW. "I say that more than half the farmers in New Zealand to-day are failing to meet their engagements in full, and a large proportion of the remainder can see the same fate in store for them if the price level does not rise substantially," said Sir William D. Hunt at the annual meeting of the Canterbury Employers' Association. He said .that the sickness of the farmers had made the cities sick, and that the cities could not get well till the farmers got well. New Zealand depended on restoring the farmers' purchasing power, And that in turn depended on raising the price level. Value of £ Sterling. A movement in any one of the following three monetary factors would raise the New Zealand price level:— (1) The gold price level. (2) The relative value of sterling to gold. (3) The relative value of the New Zealand £ to sterling. But No. 1 and No. 2 are beyond our control in New Zealand. No. 3 is not. No. 3 is within the scope of internal adjustment. "The problems of every country are probably more than 75 per cent internal and less than 25 per cent external. The question is, is it worth while trying to deal with our 75 per cent internal troubles by following Sir Josiah Stamp's suggestion of recognising that the purchasing power of money has varied and making the appropriate adjustments. Every country in the world except four has already been compelled to adjust its internal currency to meet the storm. France who only six years ago completed one of the widest internal adjustments of all is to-day undoubtedly in the strongest financial position of any country. Is it not worth while exploring the possibility of Sir Josiah Stamp's appropriate adjustments? If we can make appropriate internal adjustments, we will have deajt with 75 per cent of our troubles, and can afford to wait on world developments to cure the remaining 25 per cent." Sir William Hunt maintained that "the farmers' price limit must be raised," and that New Zealand retained a say "in the' relative value of the New Zealand pound to steiiing. . . . Stability of exchange is undoubtedly very much to be desired, but reasonable stability in the price level is much more to be desired." . What Britain May Do.

As regards monetary factors No. 1 and No. 2, tliese arc beyond New Zealand's control, but Sir William's own view is that Britain herself may elect to lower the price of sterling, and thus (through fall in. sterling) the New Zealand farmers' price level would be raised by that external action. Secrecy properly covered the handling of Britain's exchange stabilisation fund of lio7 million sterling, but it was possible that even this would not prevent a fall in sterling. Circumstances might be too strong for the British Government. "My own view is that a rise in the price level is becoming so very necessary in Britain that unless we have an early world rise in gold prices, which would, of course, oarry sterling with it, an attempt will be made to lower gradually the value of sterling, and thus increase the sterling price level independently of gold. As New Zealand is tied to sterling, any movement in the sterling price level immediately affects us in New Zealand."

Since sterling left gold a very little over a year ago, the dollar rate has fluctuated between 3.95J and 3.25J (par rate 4.86 3-5). "To-day it«is 3.46, which means that to-day sterling is now 29 per cent off gold, or to put it the other way round, sterling would have to increase in value 41 per cent to be equal in value to gold. Even with sterling at this great discount compared with gold, as the index figures I have given you show, the sterling price level in Britain is lower to-day than at any time during the last century, excepting only the 'nineties. There is a very large body of opinion in Britain to-day that sterling should be further reduced in value as compared with gold."