The Press THURSDAY, OCTOBER 9, 1969. German Revaluation: Effects On N.Z.

Press, Volume CIX, Issue 32114, 9 October 1969, Page 16

The Press THURSDAY, OCTOBER 9, 1969. German Revaluation: Effects On N.Z.

By the metaphorical stroke of the pen, New Zealand’s net overseas indebtedness is likely to be increased by S 3 million or $4 million in the next few weeks, when the higher exchange value of the Deutschmark is confirmed by the new Government of West Germany. An article on another page today lists New Zealand’s debts and assets held in Germany, and shows the effects of a revaluation of 6 per cent or 8 per cent It may seem unfair that the actions of governments and financiers on the other side of the world can increase New Zealand’s national debt overnight Happily, this is not the sole consequence for New Zealand, which stands to benefit as well as lose by a revaluation of the mark.

A 7 per cent revaluation would add $282,000 to the cost in New Zealand currency of New Zealand’s annual interest bill on its German debt, allowing for the increased interest paid on New Zealand’s German deposits; but it would also add $410,000 >to New Zealand’s trading surplus with Germany. In the 12 months ended last June New Zealand received $27.9 million for its exports to Germany, and paid $22.0 million for imports from Germany. If the mark is revalued 7 per cent, New Zealand exporters will receive 7 per cent more in terms of New Zealand dollars for their exports to Germany, and importers will have to pay 7 per cent more for the marks they must buy to pay for their goods. New Zealand’s trade surplus with Germany would rise from last year’s $5.93 million to $6.34 million. These calculations are based on the assumption that New Zealand would continue to sell the same volume of goods for the same (German) prices as before devaluation, and continue to buy the same goods from Germany. This is an unreal assumption. New Zealand’s main export to Germany is wool, which accounted for more than $l5 million of the $2B millinn of New Zealand exports to that market last year. As German buyers will get more New Zealand dollars in exchange for their Deutschmarks this year, they should buy more wool, or pay higher prices for the same quantity of New Zealand wool, than at last year’s sales. New Zealand importers, on the other hand, will be discouraged from buying German goods because of the higher price they will have to pay for their Deutschmarks. A wide range of goods, mostly industrial, entered New Zealand from Germany last year, machinery and appliances ($3 million) being the biggest item. New Zealand importers now have a 7 per cent incentive to buy from other sources.

If New Zealand exporters are trying to sell more to Germany and importers are trying to buy less from Germany, New Zealand’s trade surplus with Germany might well rise above $6.34 million. Only a minor shift in the direction of New Zealand’s trade would earn or save more than enough Deutschmarks to provide for the extra cost of servicing and repaying the country’s German loans.