EXCHANGE RATE.

Auckland Star, Volume LXVII, Issue 292, 10 December 1936, Page 25

EXCHANGE RATE.

NOT A LIVE ISSUE.

RETAILERS SATISFIED.

TRADE DISORGANISATION.

With a change in New Zealand's economic position and prosperity knocking at the door, the agitation of a year ago for abolition of the 25 per cent exchange on London has ceased to be a live issue. The general opinion of retailers in Auckland .is that business "would be disorganised if the exchange were taken off in one operation, as It was imposed. Many hold the view, however, that it should be taken off by the instalment principle—2i or 1J per tent at regular stated intervals.

An interesting commentary of the present position is the fact 'that a few months ago a, census of importers on the subject was taken throughout New Zealand and the majority of the replies indicated that the abolition of the high exchange would disrupt business and mean hardship, if not bankruptcy, to those holding large stocks. "Money can and has been made by the imposition of exchange, -5 eaid one informant this morning, "but it is a different thing when the exchange comes off. Many business houses would be caught in the net of large stocks, which they would have to quit at a loss, as other importers would be able to purchase on a better market and be in competition with those who had bought while the exchange rate existed."

Mr. D. Henry, Dominion president of the Xew Zealand Manufacturers' Federation. said that manufacturers did not desire the exchange to come off at this stage, as it was an added protection to them. Manufacturers did not get the full benefit of the 25 per cent as they had to pay exchange on the raw material they imported, but it worked out as a protection of approximately 11 per cent, and they could not afford to forego this. If protection were given by the Government to meet this, not necessarily by tariffs, then it would not matter. The Bureau of Industries might be able to devise ways and means in the future to that end. The question had to be viewed from two angles:—the protection it gave to the manufacturer and the added price it gave to the farmer. The farmer "did not cret the full benefit, but. like the manufacturer, he received his proportion. Only One Way. Mr. J. Hislop, a member of the executive of the Reciprocal Trade Federation, holds that there is only one way to meet increased costs due to recent legislation, and that is by restoring the buying power of the people and reducing the cost of production by increasing the value of the New Zealand £. The devaluing of the New Zealand £ from 20 shillings sterling to 10 shillings, he said, was not undertaken for the purpose of offsetting the fall in farm prices. It could never do that. It was done in order to enable Australia, whose £ had fallen to 30 per cent below sterling in 1932. to use whatever London funds were available through Xew Zealand branches of Australian banks without paving the 25 per cent exchange to New Zealand. The farmers' difficulties at the time were merely used as propaganda to that end. Referring to the annual report of the Bank of New South Wales, Mr. Hislop said that the chairman of directors, Sir Thomas Buckland, held out little prospect of an improvement in Australia's London position. He said that in 193435 Australia had a deficit of £12.000.000 in London and that London funds at the end of 1930-37 might be slightly higher than in 193-1-33. He also said that Australia's funds in London had not materially improved. Mr. Hislop said that these remarks indicated that the same influence was being used as in the past to prevent New° Zealand restoring the value of her £ to sterling parity and thus prevent the Dominion from coming into line with Canada, South Africa and other British Dominions. The Reserve Bank would never agree to a policy of restoring the value of the New Zealand £ by degrees. Disruption. Mr. J. A. C. Allum said that if the exchange rate were altered disruption would be brought about. Everything had been adjusted to meet the altered currencv. Manufacturers were not getting much from the exchange position. The only people who would benefit by the abolition of the present exchange rate would be those trading in currency and importers of British goods. ■ A clothing manufacturer expressed the view that the exchange should be left on unless the Government instituted some other form of protection. Labour costs in New Zealand were two and a half times greater than in England and the exchange abolition would a complete upsetting of business in the Dominion. A drop in. prices always operated quicker than a rite.