London Paper Sees N.Z. "Breaking Surface”

Press, Volume CI, Issue 29871, 11 July 1962, Page 19

London Paper Sees N.Z. "Breaking Surface”

(Special Correspondent N.Z.P.A.)

LONDON, July 9.

New Zealand seemed to be breaking the surface again after a particularly long and trying spell of payments trouble, says the “Financial Times" commentator, Lombard, discussing the sterling area's financial position. In New Zealand’s case, he adds, foreign exchange receipt were showing a tendency at last to move abreast of outgoings, with the result that the authorities were no longer under the same pressure as before to raise loans abroad just to prevent reserves being dangerously eroded.

‘‘The behaviour of the pound sterling in international currency markets is apt to be determined —in the short run at all events—as much by the trend of external payments of the overseas sterling area as by that of the United Kingdom itself.

“It is a matter for relief, therefore, that at the moment the state of the payments scoreboard so far as these countries are concerned is satisfactory even though there are a few weak spots. “One reason why the pound found itself in so much trouble a year or two back was that the adverse impact on the supply and demand relationship of the marked deterioration in the

United Kingdom’s own external affairs was accompanied by an’extensive worsening of the overseas payments circumstances Of the rest of the sterling area family. "At one time almost all the more important members were in substantial deficit and as this generally meant they were drawing much more heavily Uvm usual on the convertible currency pool in London, the United Kingdom’s reserve position suffered accordingly. “The inevitable consequence was a series of rehabilitation programmes. These have now begun to bear fruit on ‘ such a scale that the overall position is at. present very much more favourable than was the case only a comparatively short time ago Little Worry

“For the moment, therefore, the United Kingdom has little need to worry about the implications for sterling of the payments behaviour of the overseas sterling area. “But it has to be remembered that as their circumstances improve they are tending to adopt mote liberal import policies which in the absence of an improvement in export performances could mean a general tendency to press rather more heavily on the central reserves. “So the fact that additional openings for British exports should be created by the reorientation of their payments policies will not be an unmixed blessing."