The Press SATURDAY, AUGUST 17, 1968. Currency Restrictions

Press, Volume CVIII, Issue 31760, 17 August 1968, Page 12

The Press SATURDAY, AUGUST 17, 1968. Currency Restrictions

The Customs officer who confiscated the $lOO of New Zealand currency which an American industrialist innocently declared on arriving in this country was acting in accordance with the 1966 amendment to the Exchange Control Regulations. The American had obviously been given bad advice by his travel agent and possibly by his bank. It is to be hoped that if, on his return to America, he tells influential friends of the “ ridiculous ” New Zealand currency regulations he will also tell them of the incompetence of his travel agent and the rapacity or ignorance of his bank.

The incident has served, however, to bring home to New Zealanders the scorn with which our exchange regulations are regarded by foreigners. Most New Zealanders, except those who have returned from abroad in the last two years, were probably unaware of any restriction on bringing New Zealand currency into the country, and may well question the purpose it serves. This restriction was introduced in 1966, when New Zealand’s balance of payments was rapidly deteriorating. In his last Budget, Mr Lake introduced several new measures with the following explanation: While the amount of overseas funds which New Zealanders may obtain through the banking system is limited, it has been possible to obtain additional overseas funds through share transactions and in other ways. The result of these transactions has been a large and rapidly Increasing loss to our overseas reserves. One of the measures he announced then was a reduction to £5 in the amount of New Zealand currency which New Zealanders travelling abroad could take with them. At that time the £NZ was freely traded in Sydney, Suva, Hong Kong, and other ports at substantially discounted prices. This black market discount was rightly regarded by the Reserve Bank as damaging to New Zealand's financial prestige. Hence the reduction in the amount of currency New Zealanders and other travellers were allowed to take out of the country. At the same time, the £5 limit on the amount of New Zealand currency that a traveller might bring back to New Zealand was introduced, in the hope that buyers, as well as sellers, would disappear from the overseas black markets. Yet, two years after these Draconian regulations were introduced, returning travellers report the continued existence of black markets and of the discounted value of the New Zealand dollar.

The regulations may have reduced the number of New Zealand dollar notes being traded abroad. They have manifestly failed to eliminate the discount; and they have certainly succeeded in irritating travellers. If the authorities are not yet prepared to remove all restrictions on travellers’ currency transactions they could surely remove the restriction on the amount of currency which may be brought into the country. This would raise the price of New Zealand dollars on the black markets as bargainhunters among returning New Zealanders bought them up. The next step might then be to increase the travel allowances for New Zealand residents, to remove the incentive to take currency out

At the same time the restrictions on New Zealand residents’ dealings in overseas shares should be eased—preferably in consideration for a similar relaxation by the Australian authorities on their citizens’ dealings in New Zealand shares—to discourage New Zealand investors from hoarding dividends in overseas bank accounts. The annual loss to the New Zealand banking system from this source alone has been calculated at more than $5 million. The prevention of this loss, and the repatriation of some of the nest eggs which New Zealand travellers and investors have built up overseas, are prizes worth striving for. The authorisation of a few hundred thousand dollars of extra spending money for travellers is a justifiable gamble when the prizes are so high.