The Government and the Exchange Rate

Press, Volume LXXIV, Issue 22414, 30 May 1938, Page 8

The Government and the Exchange Rate

The Hon, H, T. Armstrong’s explanation why the Government has not lowered the exchange rate on London is an'interesting commentary on the methods used by the Labour Party in the last General Election.

Critics say now that we ought to put the rate back where it was before (said Mr Armstrong). We opposed the raising of it because it was wrong, and because it was going to bankrupt hundreds of good people in New Zealand to help another section of the people. If we attempted to put it back again suddenly it would bankrupt another lot of people, and we are not a bankrupting Government,

Though Mr Armstrong could not show that the raising of the exchange rate drove a single person into bankruptcy, he is near enough to the truth when he says that to restore the rate to its former level would produce a crop of bankruptcies; at any rate it would cause much economic distress. But the Minister may be reminded that this was as obvious before the General Election as it is now and that nevertheless the Labour Party promised unequivocally in its election campaign thkt it would reduce the exchange rate. It was not a casual promise; .it was deliberately made one of the main talking points in the campaign. The Prime Minister repeated it from one end, of New Zealand to the other, and solemnly reaffirmed it the day after the election. Whether the Government still pretends that it is going to lower the rate is not clear; nor perhaps does it matter very much. The public generally understands the mechanism of the exchange rate much better than it did a few years ago.

lit realises that the raising of the rate by tine Coalition Government was a measure of currency depreciation such as was forced on every other country in the world by the depression, with the solitary exception of Gsrnaany, which resorted to exchange control It realises also that the Labour Party's promise to reduce the exchange rate was given in the same irresponsible' spirit as its promises to abolish the sales tax and not to increase the total burden of taxation.