The Press THURSDAY, SEPTEMBER 2, 1971. Convertible and acceptable

Press, Volume CXI, Issue 32701, 2 September 1971, Page 12

The Press THURSDAY, SEPTEMBER 2, 1971. Convertible and acceptable

Less than two years ago Mr Muldoon told a conference of travel agents that the “ non-acceptance “ of New Zealand dollar notes overseas ... is partly “the result of the dollar being non-convertible—-“which is a different thing from weakness in its “parity—and partly the result of the fact that the “ New Zealand dollar is a minor currency ”. An article printed elsewhere in this issue reports that the New Zealand dollar has recently been traded in Hong Kong at 90 cents to SUSI, compared with the then official exchange rate of 89 cents to SUSI. This is convincing evidence that the New Zealand dollar is now not only convertible but acceptable.

The significance of this development should not be overlooked in the present uncertainty which has clouded the international monetary scene since President Nixon’s de facto devaluation of the United States dollar on August 15. The growing strength of the New Zealand dollar in recent weeks is only remotely connected with the decline of the United States dollar: it can be explained entirely in terms of New Zealand’s recent overseas exchange transactions, and changes in its currency regulations over the last two years. The current-account transactions showed a surplus of $96 million in 1969 and a deficit of $26 million in 1970. On capital account a deficit of $lO million in 1969 was succeeded by a surplus of $5l million last year: and overseas reserves recently reached a record $460 million. Some minor relaxations in the currency regulations were made in 1970, paving the way for major concessions to the travelling public in the 1971 Budget. New Zealanders may now take up to $lBOO in overseas currency—or, with Reserve Bank permission, up to $7OO0 —when travelling abroad, and may bring back with them unlimited quantities of New Zealand $1 and $2 notes. The right to repatriate New Zealand currency is, at first sight, an odd “ relaxation ” of the restrictions on taking money out of the country: but restrictions on the repatriation of bank notes were found to be necessary to enforce the ban on taking out of the country large sums in bank notes. That New Zealand currency now fetches its face value abroad shows that little currency is being taken out.

The new and unaccustomed freedom to travel and snend abroad should be prized by New Zealanders, who travel more often than the people of almost any other country. Paradoxically, the recent relaxations may not cost the country anything in overseas funds: but this cannot be established until full details of the country’s overseas exchange transactions for the next 12 months or so are available. Some of the extra spending now permitted may be financed out of the small hoards of overseas funds buijt up by New Zealand residents in the days of severe currency restrictions: and some of these hoards, or the incomes they produce, may be repatriated. But no analysis of such transactions will disclose the full extent of the country’s gain from declaring its currency convertible and persuading other countries that it is acceptable. Confidence is not measurable.