MR. STEWART.

Auckland Star, Volume LXIII, Issue 276, 21 November 1932, Page 5

MR. STEWART.

ALONE IN CABINET ?

OPPONENT OF HIGH RATE.

TREASURY EMBARRASSMENT.

(By Telegraph.—Parliamentary Reporter.)

WELLINGTON, this day,

The extent to which the Minister of Finance, the Hon. W. Downie Stewart, may find himself at variance with the views of his Cabinet colleagues on the exchange issue will invest his return this week with more than ordinary interest. Mr. Stewart will return to Wellington on Wednesday from his financial mission to London. His return has been eagerly awaited by the other members of the Ministry, since he is expected to place before them information of considerable importance to New Zealand's future overseas borrowing policy, payment of external debt, and the indebtedness of local bodies. Another point upon which his advice is sought is the policy to be followed with respect to the establishment in Now Zealand of a Central Reserve Bank. However necessary his presence in New Zealand would be under any circumstances, the movement which is afoot to raise the exchange artificially and to "peg" it at a high level makes it imperative, in the opinion of those who are viewing the situation from an unbiased, national standpoint, that the Minister's advice should be available to the Government before any radical action is precipitated.

Lone Hand in Cabinet. It is well known that during the previous exchange controversy Mr. Stewart fought almost lone-handed in Cabinet against pressure from agrarian interests in the House and in the country to bring about in the exchange rate an alteration which the trading position of the country did not in his opinion warrant. On that occasion the Minister carried the day, with the result that in a statement made to the House on March 11 he bluntly laid it down that the Government did not propose to interfere with the rate of exchange.'

Unless the Minister has completely reversed his views since that time—and there is no reason to believe that he has —it would appear that in view of his determined aim to balance the Budget by the end of thj next financial year he will be in the same ombarrassing position as the Treasury if the exchange rate is forced up to and pegged at 25 per cent above parity.

The Treasury View. Mr. Stewart is still, no doubt, in hearty agreement with the opinion of the Secretary of the Treasury, Mr. A. D. Park, that an increase in the exchange rate would immediately, and considerably, accentuate Budget difficulties. The estimate of Mr. Park, made in February last, "was that the total adverse effect of a rise to 25 per cent would be £3,500,000, made up of £1,500,000 for exchange expenditure, a similar sum in reduced Customs revenue, and £500,000 in a decline of income tax and other items of revenue. Mr. Park asserted also that when stabilisation at the new level was eventually reached, the aggregate margin of real income available for taxation could be no greater than would accrue from stabilisation at the present rate of exchange, or at parity with sterling.

It may be.pointed out also that the justification claimed by the Government for the series of severe economy measures which it has enforced since the depression made itself felt was that the outstanding necessity was a balanced Budget. Mr. Stewart was among those who stressed this.

Possible Complications. Questions are being asked as to what the position of Mr. Stewart in the Cabinet will be if, on his arrival on Wednesday, he finds that new buying and selling rates on London in the direction pressed for have been announced. Members freely admit that the possibility of political complications cannot be overlooked, and some have gone as far as to say that Mr. Stewart may have to "consider his position." This, of course, is speculation, and must remain so until Mr. Stewart resumes his portfolio. A suggestion is current, however, that the city members of the Coalition should lose no time in approaching Mr. Stewart and assuring him of their support in any action he may take in opposition to what they consider to be a move dictated by panic circumstances.