EXPLANATION

Auckland Star, Volume LXX, Issue 20, 25 January 1939, Page 12

EXPLANATION

IMPORT CUT.

EXCHANGE CONTROL MR. NASH SPEAKS. WELLINGTON CONFERENCE. SAVING STERLING FUNDS. (By Telearitph -Press Association.) WELLINGTON, this day. The i>riain of the Go\ ernment's exchange control policy and factor? Influencing the derision to >>rinjr it into operation were set out by the Minister of Customs, the Hon. W. Xa*h, when addressing the »pecial importers' conference in tho Wellington Town Hal l thU morning. The president of the Associated Chambers of Commerce, Mr. M. S, Myers, of Dunedin. presided over an attendance of about 1150, which was fully representative of the business interests of the Dominion.

Mr. Naah emphasised that since the Introduction of exchange control and from the study ho had. given to the question previously ha was satisfied it was a common sense, rational and reasonable procedure to follow, even with all the difficulties it would bring into Mtng. Mr. Nash aaid he regarded it as a privilege to allow importers to know exactly what was in the Government's mind regarding the regulations. For the "even months from April 30 to November 30 last year there had been a decline in the Dominion's sterling funds in London of slightly mora than £20,000,000 and the Government had to And out the reason for auch a marked decline in such a short period. A procedure had to be found to augment the starling funds and to prevent their complete disappearance. Past Governments had usually borrowed to supplement the funds, and during 1023 to 1932 tha national debt overseas increased by nearly £80,000,000. Since then tha Dominion had not borrowed any naw money overseas. Tha previous Government had started to try to work out a way of preventing the continual increase in tha national debt, and during IMS and 1038 tha debt was reduced by £14,000,000, including local body debt. That automatically had tnme effect on sterling funds. Money Taken Oat of Maw Zealand.

In 1W58«, funds, the Minister continned, were £4«,000,000. The decline to the present level of £7,000,000 was not entirely due to over-importation. Large sums had been taken out of New Zealand that had been left here in anticipation of the exchange going down. Another reason was that persons who had made money in New Zealand had tent large sums overseas with the object of getting higher interest rates. That was probably the major influence on the funds. .

During the last twelve months exports exceeded Imports by roughly £3,800,000, when at least a £12,000,01)0 excess of exports over imports was required for normal Working. The ejL procedure before the Reserve Bank ctfMMnto being was that when the tradln* banks found their London funds tending to decline they automatically started reducing overdrafts and increasing interest rates on overdrafts. Then their clients were advised to curtail expenditure, which automatically brought unemployment, reduced -wages and .spending, power, bringing about a decline in imports and so balancing exports and Imports.

The Labour Government decided not to adopt that method. Taking Into account the type of country New Zealand wat, it decided not to reduce living standard* or borrow In London to meet current commitments. It eould nave adopted several other course* than that adopted, namely, Increased tariffs or let the exchange find a normal level, but it decided It did not want that to happen. Had either of those two courses been followed there would still have been a. restriction of imports. There was no way he eould see in which the necessary funds in London could b« built up to the desired point except by a restriction of imports. The present procedure, he continued. was nothing new so far as the world generally was concerned. Thirty or forty countries had adopted exchange control. £17,171,000 Due Next Year. During the present year local body loans maturing in the United Kingdom were £840,000, and on January 1 next £17,172,000 was due by the Dominion in London. That implied that New Zealand had to find something more than £21,000,000 In New Zealand currency In London by the end of the present year. That could be done in three ways. New Zealand could induce some of the people to whom the money was due to renew their loans; more money could be borrowed' for repayment purposes; or more of New Zealand's own money could be found to meet the charges. If New Zealand was to get fairly reasonable terms for renewal and repayment purposes some steps had to be taken to conserve the funds built up from the sale of exports. The decline in export values last year was £7,500,000, but the decline in import values waa slightly less than £2,000,000. If New Zealand had only enough last year and

ivhk £•">.■"iW.fMiO worse off again this year, oh\ iously some curtailment wal neces- j Mr. Nash said that during the year New Zealand had to rind interest on | debts amounting to IH.IMMMMM). and | everybody would agree that had to be i paid tii-t to maintain the country's | I integrity. Another prior charge of j about CI.O(MUMM) ww mi private invest- | merit- held by people domiciled over- | sea-. Then there wan about another ( Cl.niiii.dim required for salaries and | i coinmi--ioiis, insurance payments and ' >o mi o\ erseas. Defence Needs. Another special circumstance was the ' prc-ent world situation and \ew Zealand had to play its part in Kmpirc and Commonwealth defence. The present I Government had lieen spending at an , accelerated rate on defence during; the j past few years out of sheer necessity, j and he believed that expenditure would i I have to be still further accelerated during the present year, entailing; a fairly heavy char-re on sterling; fund*. Materials for defence would have to come in before other import*. All those factors meant a fairly drastic cut in imports. It was commonsense to select the imports it was desirable to bring; in. so that the new procedure would have the least harmful impact.. It wan impossible in New Zealand or elsewhere to have a standard of living; other than that based on commodities and serviced produced. If New Zealand was to reduce her imports and'i -till enjoy her present standard of liv- j ing obviously she must make arrangements to manufacture in the Dominion and produce more than in the past and produce more than in the past, both primary and secondary, for the purpose of building; up fund*. Manufacturers had a case in that there were men, women and youths not I fully employed. Manufacturers would lm\e the maximum facilities provided j lor, the import of commodities necessity for the production of goods. First of all. the selection would apply to facilities for primary production, and then capital equipment and raw material* for manufacturing goods to replace imports. There would be a curtailment of less essential and nonessential import*. United Kingdom Praised. In his opinion the United Kingdom) l-rul done more for the Dominions than ■ i-y could reasonably expect any countrv normally to do. (Applause). It lind given special preference* regarding marketing facilities and made major contributions to the Dominions' defence, and Xew Zealand was willing to do its part in making the impact of the new procedure the least harmful against the United Kingdom. The Government would do all possible to reduce difficulties to United Kingdom manufacturers and others arising from the control plan. Maximum preference would be given to the United Kingdom, but there were other countries with which in -recent years Xew Zealand had made agreements and which he thought possibly would take more from Xew Zealand than previously. Since the introduction of control the Government was beginning to see for the first time what happened to the proceeds of the Bale of exports which had not been fully known in the past. Only during ' the past month or six weeks had the Government begun to see the ramifications of credit and currency, and the effect on sterling funds. Mr. Nash asked the conference to accept the fact that the Government had been elected to take charge of the country and the new procedure was part of its policy. He would do everything humanly possible to remove any hardship, injustice or anomalies that might arise. Ho Discrimination.

As regards procedure, Mr. Nash said he had given instructions to all Collectors of Customs to act exactly the same at every port. There wm to be no discrimination. He took particular f>ride in .the eta ft* of the. Customs )epartment. It comprised some of the finest officers that had ever been associated with any Government. He had profound faith in their integrity. The basis of the allocation for the first six months of the present year wa« the quantity imported in the first six months of 1938. That occasioned tremendous difficulties. He knew there were, anomalies, and to overcome some of them, although he did not want to issue licenses for a second period just yet, instructions went out a fortnight ago to collectors that where special circumstances existed a license could be issued for half of the total imports during the year. Provision had also been made for new lines and new imports. Hundreds of appeals had been answered and an effort made to work out general principles on special points. Cases of particular hardship would tie dealt with Immediately. As the gathering was breaking up, a member of the audience rose to propose a vote of thanks to Mr. Nash, but already many'of those present had left their seats and no formal motion was ' put.