GUARANTEED PRICES

Press, Volume LXXII, Issue 21746, 31 March 1936, Page 12

GUARANTEED PRICES

No Early Reduction ; Of Exchange FINANCING OF THE SCHEME SPECIAL DAIRY-INDUSTRY | ACCOUNT | (From Our Parliamentary Reporter.] WELLINGTON, March 30. Important details about the scheme for guaranteed prices, including the intention of the Government to provide finance through a special dairy-industry account, were given by the Prime Minister tthe Hon. M. J. Savage) this evening. Discussing the exchange problem and its association with the guaranteed-price scheme, Mr Savage made it clear that no reduction in the exchange rate is contemplated in the immediate future. “The question of exchange is one of the most difficult the Government has to face,” said Mr Savage. “It is so easy to raise the rate of the exchange, and so perplexing to know how and when to cut it down.'* The Prime Minister adhered to his statements, made immediately after :he election, that it was the Government’s intention to lower the exchange as soon as possible, but it was realised that reductions might be dangerous if they were not made at the most suitable moment. A number of factors had to be taken into consideration. For instance, a large amount of forward buying was carried out in wool and butter, and it had to be recognised that sudden and arbitrary reduction in the exchange rate overnight might cut the ? round from under the feet of buyers. Similarly, the effect on importers had to be considered. “Many Difficulties” "From the beginning,” Mr Savage continued, “our policy has been to substitute guaranteed prices for high exchange in such a fashion that neither the farmer nor anybody else will lose anything by the change. That is still our policy, but we realise that many difficulties have to be overcome before it can be put fully into effect.” The point was raised that it might not be possible to reduce the exchange rate until the system of guaranteed prices was extended to all the agricultural and farming industries. The Prime Minister said there was a good deal in that suggestion. At present it was intended to provide the machinery of guaranteed prices only to the dairy industry. The wool growers and meat producers were not so much in need of assistance, but although the prices for meat and wool were reasonably good to-day there was no telling what they were likely to be in a month’s time. The Prime Minister made it clear that under the Guaranteed Price Bill, which is to be introduced in the House this session, the dairy farmer would not receive the benefit Of the exchange. He would receive something more. Payment would be made in New Zealand currency by the Government, which would take over the prodttee, and the payment would represent a substantial increase over what the dairy fanner was getting now in spite of the exchange premium on the London market rates. A Hypothetical Case Mr Savage said one of the principal features of the bill would be the setting up of a special dairyindustry account to finance the guaranteed-price system. He agreed to the following hypothetical case «s illustrative of its working:—The farmer at present receives 84s per cwt sterling for his butter, which represents approximately 105s in New Zealand currency. Under the guaranteed-price scheme he might receive, for the purpose of argument, 112s in New Zealand curtency, which meant that the Government would have to make up the deficit of 7s. However, if the price of butter advanced to 120s on the London market the return in New Zealand would be approximately 150s, and the gain could be used in extinguishing any earlier liabilities under the scheme, and, perhaps, in giving increased benefits. The Prime Minister stated that the figures quoted were used purely for the purpose of argument, and no significance could be attached to them. “I want to make it perfectly clear that the Government is not entering into the dairy export trade for the sake of profit,” Mr Savage continued. “It boils down to this: If prices are obtained which are higher than the guaranteed price in New Zealand currency, the balance will fee paid into the dairy-industry account, and used solely for the benefit of the dairy farmers, who. in the first place, will be responsible for the production. In no circumstances will the account be dissipated for any other purpose.” Forward Buying The Prime Minister also said that forward buying at the guaranteed price on behalf of the Government would not be over a long period. The Government would have to be prepared for sudden fluctuations in the market even during next season, and would have to be ready at any time to make adjustments. Neither the farmers nor anyone else could be harnessed to one set price for all time, Mr Savage was asked whether the Government had considered fixing the guaranteed price on the basis of an f.o.b. rate per cwt instead of a flat rate of so much per lb of tmtterfat. It was pointed out that the former rate might prove more equitable, in view of the varying distance of the dairy farms from ports of export. The Prime Minister said there might be something in the suggestion, but there would be ample time'for that and other points to be considered. The bill >had still to be considered finally at the discussions between the Government and the Dairy Board and the dairy conference. These meetings would probably be held within the padl week or so.