HIGH EXCHANGE DEFENDED.

Press, Volume LXIX, Issue 20906, 13 July 1933, Page 10

HIGH EXCHANGE DEFENDED.

♦ BENEFIT TO FARMERS CLAIMED. VIEWS OF MR COATES. MESSAGE I'ROM THE IMUME MINISTER QUOTED. ITHE PKE3S Special Service.) WELLINGTON. July 12. Quoting a cablegram which he had received from the Prime Minister, in which the Rt. Hon. G. W. Forbes stated that the consensus of opinion in London was that, in the circumstances, New Zealand had followed the only course in raising the exchange rate, the Acting-Prime Minister, the Rt. Hon. J. G. Coates, in addressing the Dominion conference of the New Zealand Farmers' Union to-day, expressed the view that the primary producers were now feeling the benefits which the Government had claimed would follow manipulation of the exchange. After referring to the steps taken by the Government to reduce costs, Mr Coates said the Coalition Government had been faced with the necessity of deciding whether an inflationary policy should be introduced. In view of the World Economic Conference, he did not intend to say very much about monetary questions, except that it was desirable that such matters should be approached with a perfectly open mind. "No proposal has been put forward yet which has not been worthy of the most careful consideration; but," said Mr Coates, "we must make certain that there are going to be no mistakes. A mistake might well leave us in an infinitely worse position than we are in at present. We cannot afford to take anything on its face value. We must bring the most minute examination to bear on every proposal that is put forward." Aiding Basic Industry. Mr Coates said there was a difference of opinion so far as the raising of the exchange rate was concerned, and it was fitting that he should try to show what was at the back of the Government's mind. In the first place, it had to decide what was the basic industry of the Dominion. The Government was surely on sound ground when it said that the primary production of New Zealand was the basis of the country's prosperity. New Zealand was essentially a primary-produc-ing country, and would continue to be. That being so, it was necessary to have a look at the farmers' position. How was the farmer getting along? he asked. They would say, "Not too well," and the Government realised that fact. The budget position showed the way the farmer was placed. The Government, he thought, was justified in allowing the public accounts to stand a certain amount of strain, if it meant that the farmer was going to be assisted, for when the position of the farmer improved, the position of the public accounts would improve. Accordingly the Government had considered every phase of the problems of the farmer, especially the marked disparity between costs and prices. In January last there had been a gap of nearly 50 per cent, between costs and prices, as compared with the 1914 level, continued Mr Coates, and the Government naturally had to face up to the position. He thought—and his colleagues thought—that the Government could no longer follow a deflationary policy, and accordingly it had been decided to raise the exchange rate. They had heard a lot of criticism from the United Kingdom and elsewhere about breaking faith and so on; but in his view a lot of the criticism was not worth listening to. Only last Saturday, he had received a cablegram from the Prime Minister, in which Mr Forbes said the consensus of opinion amongst London experts and authorities was that in the circumstances New Zealand could do nothing else, but follow the course she had done. Prices Raised. Mr Coates said he believed that to be the correct interpretation of ! the position. The raising of the exchange rate, he said, had certainly had the effect—artificially, of course —of raising the prices of the primary commodities produced in New Zealand. Prices had been increased by I 15 per cent, as from January last, and there had been benefits in other directions. Much of the criticism which had been levelled at the Government had been deliberate, although he believed it had been perfectly honest. There had certainly been a fall in the prices in overseas markets since January; but in recent months there had been a recovery in meat, wool, and dairy produce. The question the dairy farmer had to ask himself was, "Is it not better that I should receive a monthly cheque of £4O than a monthly cheque of £30?" That was the practical effect of increasing the price. Mr Coates claimed that the Government's opinions as to the benefits that would follow the raising of the exchange were panning out. There were more New Zealand pound notes in the country than there were in January last, and the raising of prices had helped in a great measure to bridge the gap between costs and prices.