HIGH EXCHANGE

Press, Volume LXX, Issue 21315, 7 November 1934, Page 12

HIGH EXCHANGE

♦ POLICY CONDEMNED ATTACK BY SIR FRANCIS BELL LONDON LOAN PROSPECTUS QUOTED

LFrom Our Parliamentary Reporter.] WELLINGTON, November 6. A vigorous denunciation of the Government's high exchange policy was made by the Rt. Hon Sir Francis Bell in the Legislative Council this morning, in the debate on the Appropriation Bill. Sir Francis, referring to the net increase of £20,169,000 in the public debt for the last financial year, said he had not been able to find any information in New Zealand about the enormous accumulative burden that had been cast on the country by the present rate of exchange. lie mentioned, however, that in "The Times" of July 13 last he had seen an informative prospectus of a New Zealand Government inscribed stock conversion loan. "This document," said Sir Francis, "was published for the New Zealand Government under its authority. In this for the first time — and I challenge anyone to find similar information in any paper laid before Parliament—we find a statement by- the Government that the gross public debt of the Dominion on March 31, 1934, was £302,792,000. We find also that the gross increase for the year was £25,317,000. The Government also stated that the redemption payment totalled £5,140,000, as normal payment of the redemption of the publie debt; but even then, and taking that into account, the Government stated that the net increase of public debt was £20,169,000 in one year. "It was explained in the prospectus that the increase consists of £ 1,277,000 long-term debt, the balance, £18,892,000, being Treasury bills issued principally under the provision of the Banks Indemnity Exchange) Act." The Hon. J. A. Hanan: What is the amount of the increase in ;n----tercst? Sir Francis Bell: That I can't say. Increase In Public Debt. "How long can this go onV" he continued. "I ask the leader of the Council and also the Government how long is this to continue.' Is the public debt of New Zealand to be increased by nearly £26,000,000 every year in order that the farmer may have the benefit of this exchange, which is costing us an enormous sum to pay our interest in London?" Sir Francis said that no year in the history of the country had ever added such an enormous sum to the public debt. The proposal of a former Prime Minister to borrow £70,000,000 was light in comparison with the great burden that was being added year by year by the exchange rate. If the Government went on in the same way as was reported in its own prospectus, the public debt in three years would be increased by almost £40,000,00(J. The sum of public indebtedness had been increased to £302,000,000 by tremendous expenditure which had been absolutely wasted. More than £12,000,000 of "the £19,000,000 paid to the banks as indemnity was wasted for the private benefit of the farmer. Nobody else had benefited by it. The country was heading to ruin if the process was to be repeated, and yet no indication of the position had been given in any paper laid before the Council. "Surely it is time for the Government to pause and consider the position, which is casting a hateful and hideous burden on the country. One hears whispers of repudiation as a remedy. One hopes that these whispers throughout the country are not the hope of the majority of the people: but it seems to me and to many others that we cannot go on adding £20,000,000 net a year to the public debt. Money is being taken out of the revenues of the country at the expense of the taxpayer and the ratepayer, and very little of it has been spent on public works." Government's Policy Defended The leader of the Council (the Hon. R. Masters) explained that the information Sir Francis Bell could not find had not been laid before the Council for the simple reason that it was included in the permanent charges of the country. The statement made by Sir Francis that the expenditure had been wasted to benefit the farmer and nobody else was far from correct, because what benefited the farmer must indirectly benefit the country as a whole. The advantages given to the farmer by increasing the exchange rate to 25 per cent, were reflected in other business throughout the country.

Hon. members: Hear, hear. Sir Francis Bell laughed. Mr Masters said that if anyone took away 25 per cent, from the 65s the farmers were getting for their butter it would be seen at once that most of the dairy farmers could not carry on. Referring to the banks' indemnity, Mr Masters said Sir Francis Bell must know that the Government had transferred £20,000,000 in Treasury bills to the Reserve Bank against cash in London. Sir Francis Bell: That is so. But the money you transferred to the Reserve Bank is not yours. Speaking later, Sir Francis Bell emphasised that the taxpayers and the ratepayers were being penalised by the high exchange rate. Of the total public debt £ 161,000,000 was domiciled in London, and payment of interest had to be made in London, while of the local Government debt interest on £ 17,000.000 also had to be paid overseas. To these payments 25 per cent, had to be added. How long was that burden to remain? He wanted to know how much was being added to the public debt this year.

"If an enormous sum is going to be added this year and again next year," he said, "the result is going to mean ruin to this country, ruin to its credit, and discredit to the legislature that brought it about." Question of Alternative The Hon C. J. Carrington: What is the alternative? Sir Francis Bell: That is not my business. I am speakine against the fictitious rate of exchange devised for the purpose of giving larger revenue to the farmer at cost to the taxpayer, and which is

adding an incredible sum to the public debt. The Hon. Sir James Allen said he had always been opposed to the increase in the exchange rate. The alternative in his opinion was to have given the farmer direct assistance.

Mr Hanan deprecated any form oi exaggerated criticism which might give the people the wrong impression, either of the improved condition of finance or of the effect of high exchange. He did not think that the country was through all its troubles, and because of that it seemed necessary to go forward with caution in public expenditure. Mr Carrington, the Hon. D. Buddo, the Hon. T. Bloodworth, and the Hon. F. Waite defended the Government's exchange policy, and M" Masters, replying to the debate, claimed that the Govex - nment had acted in the best interests of the farmer and the community generally. The Government had been forced to raise the exchange rate in order to meet overseas competition. It was impossible for him to say when the rate would be reduced to par. Mr Masters said that the arguments advanced by Sir Francis Bell were identical with '' " """" by importing interests. Sir Francis said he had no association whatever with that class. Hio association was with the farmer and with those who were engaged in financing the farmer. REPLY ISSUED BY MINISTER AMAZEMENT EXPRESSED EXCHANGE POLICY AND THE PUP,LIC DEBT LFrom Our Parliamentary Reporter.] WELLINGTON, November 6. A reply , to the remarks made by the Rt. Hon. Sir Francis Bell in the Legislative Council to-day on the high exchange rate was made by the Minister for Finance (the Rt. Hon. J. G. Coates) to-night. "In 1931." said Mr Coates, "the exchange rate was raised by the banks to 110. and in January, 1933, it was further raised by the Government to 125. Every aspect of the question has been thrashed out and 1 am now surprised to find that there has been a revival of the extravagant language which used to be employed by those opposed to the high exchange rale. Sir Francis Bell's remarks in the Legislative Council to-day arc amazing, not only for their appeal to prejudice, but also for their absolute incorrect statement of the facts. He even staled that our national debt had increased by £25,000,000, mainly because of the high exchange rate, and that if this were continued for three years it would be well past the £70,000,000 mark. The simple truth is that the addition to the long-term debt last year was £1,277,394. This sum was mentioned by Sir Francis Bell in the same breath as his question whether our debt was to be increased by nearly £26,000,000 annually.

"It seems that we cannot too often emphasise that the high exchange rate is now costing the Government nothing beyond the increased charges on our external commitments, which charges are more than balanced by the increased revenue accruing from the higher national income. Our shortterm debt has been wiped off by the sale of sterling to the Reserve Bank, which gave the Government £25,000,000 in New Zealand currency in exchange for £20,000,000 sterling. The greatest loss that could be incurred on this sum—to use the extremely unlikely supposition of a return to the old parity—would be £5,000,000.

"Attention should. however, be drawn to the fact that sterling is now being used up by importers. It should be noted that Australia is contemplating raising loans for funding part of her huge short-term debt into longterm debt.

"Sir Francis Bell has not kept up with the situation. I hope it is the last time that I must repeat that high exchange internally cost us last year only the interest on Treasury bills; that these Treasury bills are now entirely paid off; that this year no debt, short-term or long-term, will be incurred in respect of the high exchange rate; and that while that rate remains no debt or loss can be incurred by the GovciTiment. Statements to the contrary ar6 merely absurd figments of the imagination. A glance at the Reserve Bank balance-sheet will show that there are no Treasury bills outstanding. On the contrary, the Government is in credit to more than £5,000.000. Sir Francis asked how much was being added to the publicdebt this year on account of high exchange. The answer is, nothing at all.