STABILISED EXCHANGES.

Auckland Star, Volume LXVII, Issue 230, 28 September 1936, Page 4

STABILISED EXCHANGES.

EFFECTS ON NEW ZEALAND. .MR. SAVAGE'S POLICY. The agreement between Britain, France and America to stabili.se their exchanges by the operation of equalisation funds, will have important reactions 011 New Zealand, according to a local economist who discussed it with a "Star" representative yesterday. It puts a new light, he said, 011 Mr. Savage's reiterated intention of restoring the New Zealand pound to parity with the pound sterling. The dollar rate at which tne pound sterling is to be stabilised is 4.86, almost 4 per cent lower than the recently ruling rate of 5.0(j dollars. Normally this would stimulate British export trade, and give home industries a temporary advantage over foreign—temporary because costs would tend to rise. These advantages would be passed on to Nc\% Zealand, for, owing to the fixed relation between our pound and the British pound, the depreciation would be followed automatically, if the present policy were continued, by an equal depreciation of the New Zealand pound. New Zealand products would also have an advantage over foreign countries outside the sterling group, 011 the home market, unless those countries commenced competitive depreciation. f Now Zealand's Attitude. Normally, it was stated, New Zealand would be expected to fall in line with British policy and maintain her currency in a stable relationship with sterling. It would, indeed, be to her advantage to do so, for it would place her export industry, 011 which she is dependent to such a great extent, 011 a sound footing. The question is whether to stabilise the New Zealand pound at its present level in terms of sterling, or to revalue it. Mr. Savage has pledged himself to the latter course, though he has said the time is not yet ripe for the change. If New Zealand is io participate in the stabilisation plan, however, and reap its benefits, hcr policy must be decided now, for the stabilisation of the currencies of the three countries participating is to be made immediately. "If Air. Savage is going to restore the New Zealand pound." it was stated, "whether to parity with the pound sterling or nearer to parity than the ruling rate, now is the time to act. If he passed legislation immediately, he would not have to lower the rate so drastically as before, because sterling has been depreciated. "If he did so, however, New Zealand would bo robbed of the advantage she would otherwise derive from the improve--111 elit in British export trade. If the exchange were restored to parity, and the sterling prices for New Zealand exports 111 London remained unaltered, the return in terms of New Zealand currency would fall 25 per cent. The New Zealand Government would have to stand part of the loss, owing to the guaranteed price scheme, but in the case of products which it does not covet\ such us wool and meat, the farmci would suffer."