HIGH EXCHANGE.

Auckland Star, Volume LXIV, Issue 202, 28 August 1933, Page 8

HIGH EXCHANGE.

MORE UNCERTAINTY. IS A REDUCTION IMMINENT? WEIXINGTON OPINIONS. The imposition of the 25 per cent exchange rate was made with the express object of compensating the farmer for low prices for exported produce, at the expense of the community. Prices have since slightly improved, but whether they have reached a point at which the crutch of high exchange can be safely removed from the primary producer ie a question upon which there appears to ne some diversity of local business opinion (reports the "Evening Post"). But thevf is no blinking, the fact that IB Wellington there is a' fairly large body of mercantile opinion inclining to the view that a change in the exchange rate is near, and that it will be, and must be, in the downward direction. There is no gainsaying the prevalent uncertainty among primary producers , and business men throughout the Dominion as to the future of the rate. The overseas trade returns for the seven months in New Zealand currency, and excluding specie, showed a credit balance to the Dominion of £12,000,000. ; They also showed the persistent fall in importing. In normal times an excess of exports of £10,000,000 was sufficient to provide for the payment of New Zealand Government and local authorities' requirements in London, and to fully satisfy the demands of merchants when imports were flowing to the Dominion in very much greater volame than they are to-day. These returns have accelerated the thinking of many Wellington business men in the direction of a scaling down of the rate as not only imminent, but inevitable. What is it Costing? Besides, the question is also being asked, not without some anxiety, "what is this exchange business going, to cost the country ?" The Government gave an undertaking to the banka to indemnify them for any losses they may sustain in "niying funds in London, by paying in New Zealand £125 tor every £100 in London. Thie arrangement had much to commend it if—. But the trouble begins at the "if." Provided New Zealand importers were able to obtain from the buying publi-; that extra 15 per cent in the price of their goods imposed by the raising of the rate of exchange from 10 per cent to 25 pnr cent, all would have been well. But the spending power of the- people has been enormously reduced, necessitating in any case a drastic reduction in importing. Retailers know this lack of buying power to their cost. In any case, even if the exchange rate had remained at 10 per cent, imports would have been well down. But the raising of the rate to 25 per cent almost gave a knock-out blow to the import trade. Incidentally, it has been answerable in part for. a large humoer of vessels coming out in ballast to load NewZealand exports, or coming out with about enough cargo to serve as ballast. This fact alone is reflected in reduced earnings by waterside workers and lower receipts by harbour boards from discharge of cargoes. Business men may have been gratified that the high exchange rate has represented ljd per lb more for butterfat, has raised the return on meat and wool to the producer, by 25 per cent above overseas prices, or thereabouts. But they are now asking: At what further cost? Income tax cannot yield any more unless it is still further increased, the sales tax has already eaten into retail turnovers, because so" nany people are buying lees, demanding cheapness, or "going without." If, then, some millions will have to be found Dy the Government 'to indemnify the banks for London credits for which they- have but very little 'demand, where is "the money t.o come from?