CURRENCY PROBLEM

Dominion, Volume 24, Issue 143, 13 March 1931, Page 8

CURRENCY PROBLEM

Bank of N.S.W. Dividend •TACTS OVERLOOKED* • M- — Ths New Zealand pound and the Australian pound are no longer equal in value any more than either is equal in value to the French franc or the American dollar. Failure to recognise this simple fact, says Mr. A. C. Davidson, general manager of the Bank of New South Wales, has given rise to much of the controversy over the bank’s decision to pay dividends in Australian currency. Last month resolutions of protest against the decision were passed at meetings of shareholders convened by the Stock Exchanges in Wellington, Auckland, Christchurch, and Dunedin. In a considered statement, which is printed in full in our finance and commercial page, Mr. Davidson deals at length with the question. The argument that it is not equal treatment as between Australian and New Zealand shareholders that the former should receive £9 while the latter receive only £B/12/3, after exchange is deducted, he says, ignores the fact that the £9 is Australian currency and the £B/12/3 New Zealand currency. The fact is that £lO4/10/- Australian has only the same value as £lOO New Zealand. To-day, with Australia and New Zealand no longer ou the gold standard, the Australian pound is not only something different from English and New Zealand pounds, but the three units of account are not even approximately equal in value. It is a rule of law. as well as of common sense, says Mr. Davidson, that Australian companies are not only entitled to pay dividends in ■ Australian currency, but they are not entitled to pay in any other way. If they did pay dividends free of exchange, the difference caused by the rate of exchange would have to be paid out ofthe bank’s funds, and would benefit one class of shareholders at the expense of the others.