THE EXCHANGE CONTROVERSY.

Auckland Star, Volume LXIV, Issue 145, 21 June 1934, Page 6

THE EXCHANGE CONTROVERSY.

That the Government is being bombarded by criticism from opponents of the high exchange policy is the jesult not only of that policy, but of the Government's reticence about its effects. The Importers' Federation has made an estimate of the cost of high exchange, and Mr. Coates describes it as '/fantastic." It is possible that the Federation has miscalculated the cost, but Mr. Coates' answer would be more effective if he gave the country some idea of what the figure will or may be. ' All along he has been economical of information on this point, and the inference is that he is counting upon a revival of trade that will reduce the heavy bill which now Stands against the Government in this respect, and threatens to be larger. The Federation says it is understood that the Central Bank will purchase excess sterling held by the Government in London by crediting the Government, in New Zealand, with an equivalent amount in New Zealand _ currency, and the Government will retire Treasury bills held by the trading banks. To the Federation such a transaction suggests inflation, as the local banks will hold additional funds amounting to many millions. Mr. Coates' reply is to ask the Federation what it means by inflation, but he does not ! deny that this will be the procedure adopted. This is not an answer to the Federation's criticism. Even if it is admitted that the Federation's estimate of the amount" of extra money the banks will hold is exaggerated, the actual figure may prove to be alarming enough, and Mr. Coates does not furnish an estimate of his own. Moreover, the "Evening Post" draws attention to "a lack of candour" on the Government's part in regard to the length, of the period of high exchange and the arrangement with the banks. There seems to be a conflict between the statement that the agreement with the banks has been renewed for six months, in regard to which both Mr. Forbes and Mr. Coates made evasive comment, and the announcement that when the Central Bank begins to function in August, that bank and the Government will arrange the exchange rate. The "Post's" opinion, that "this dribbling of essential information is not the right method to adopt on so important a subject," but that "thorough frankness" is required, will be generally endorsed.