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THE EXCHANGE POLICY.

A correspondent in a recent issue of your paper writing on this subject made very clear the fallacious policy of the Democrat party in relation to the exchange rate, but he did not give any details as to the reason of therate being raised to 25 per cent, booking back over a number of years, we find that, prior to the "pegging" of" the exchange slate at 25 per cent by the Government, it rested at a much lower figure, depending on the interaction of supply and demand, or the volume of trade exports" compared with trade imports. The price of goods we scut to England was placed in a fund from which we had to pay for our imports and also interest on our debts due to England. While the price obtained for our exports was approximately equal to the amount required for our imports, etc., no trouble arose. For example, from 1924 to 1929, when the surplus of exports over imports approximated £25,000,000, which, together with £27.000,000 which New Zealand borrowed, made the total funds available £52,000,000; the demand on these funds totalled £40,000,000. The apparent surplus of £0,000,000 over a period of six years was absorbed -by invisible imports and exports. Thus it can be seen that the exchange problem was easily solved while the demand on funds in London equalled the supply. When the price of exports slumped from £56,000,000 in 1929 to £37,000,000 in 1931, and our commitments had still to be met in London, there was a shortage in the supply of funds available and the rate rose to 10 per cent (approximately). This might be termed the natural rate, and was brought about by supply and demand. Since the Government has "pegged" the rate at 25 per cent there has been raging a fierce controversy as to the necessity of the move. On one hand the importer and manufacturer have condemned the move, while the primary producer has welcomed it ori the count that he receives more for his exports (which he actually does on the face of it). But whatever move the Government took to arrest the decline in the value of our exports, some section of the community had to suffer. .G.J.D.

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https://paperspast.natlib.govt.nz/newspapers/AS19350828.2.28.2

Bibliographic details

Auckland Star, Volume LXVI, Issue 203, 28 August 1935, Page 6

Word Count
374

THE EXCHANGE POLICY. Auckland Star, Volume LXVI, Issue 203, 28 August 1935, Page 6

THE EXCHANGE POLICY. Auckland Star, Volume LXVI, Issue 203, 28 August 1935, Page 6

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