EXCHANGE RATES

Dominion, Volume 24, Issue 292, 5 September 1931, Page 8

EXCHANGE RATES

Effect on Importation INCREASE OPPOSED Chamber of Commerce View Current suggestions that the bank exchange rate between New Zealand and the United" Kingdom should be increased to 25 or 30 per cent, were the subject of considerable discussion at a special meeting of the council of the Wellington Chamber of Commerce yesterday afternoon, over which Mr. J. Pearce Luke presided. As it was understood that the report of the Special Economic Committee ■would be presented to Parliament next week, the question was accorded some urgency by the chamber, and a special meeting of the importers’ committee was held on Thursday. The report of this committee was presented for discussion yesterday, and the following resolution was adopted by unanimous vote:—“That the instituting of a managed exchange rate between New Zealand and abroad would so disturb the Dominion’s trade that it should not be entertained without clear evidence being set out that it would bring relief otherwise unobtainable.” The resolution was an adaptation by Mr. W. 8., Matheson of a more strongly-worded one submitted to the council by the importers’ commit: tee.

In its report the committee said that it had considered the proposal reported in the newspapers ns receiving consideration among various interests: that some benefit would accrue to the Dominion by an increase in bank exchange between New Zealand and the United Kingdom. The present rate, the committee said, was about 10 per cent., and suggestions were current that this might be increased up to 25 or 30 per cent., which was’the present ruling rate between Australia and Great Britain.

A major alteration in the exchange would have a drastic effect, the report continued, and, it was considered, would depress rather than improve trade, at the same time considerably increasing the cost of supplies of materials and all goods imported. The additional cost; assuming a 15 per cent, increased exchange, naturally would not rest wifli that figure, as there would be freight, insurance, and other charges. The committee, after considering many aspects of the question, was of the opinion that any artificial interference by way of a managed exchange would have a disastrous and; disturbing effect upon New Zealand. ■ Supply and Demand.

Mr. J. Myers, chairman of the committee, said that the question was of great importance to the whole of the Dominion. All members of the committee had been of the unanimous opinion that it was a wrong thing to interfere with exchange, -which, he had explained, was just a question of. supply and demand, and not a matter, that rested with a small country like New Zealand to adjust on its own account.

“Exchange is arranged by the nations of the world in England.” Mr. Myers said. “Therefore it seems almost an impossibility in my opinion that this can be altered either by the New Zealand Parliament or the bankers in New Zealand. We arrived yesterday nt the conclusion that while it would probably be a great advantage and profit to the exporters, of this country, the trade of the Dominion would be seriously affected, for the reason ■ that it would be impossible to import goods to any extent under those conditions. You are possibly not aware that in many of the lines imported into Australia there has been such a falling-off that we in New Zealand, with a much smaller population, are importing more ot those lines than they are in the whole of Australia. Although the exporter would benefit to a large extent, we have to consider the cost of remitting money to-Eng-land. This cost would probably be as great as or greater than the advantages derived by the exporters. . “If this exchange is introduced it will mean that the business people of New Zealand will be in such a position that they will not be able to employ, labour, for unless they are importing there is no need to employ hands. The Government stated some time ago that in the event of a 10 per cent, cut taking effect the cost bf living would come down. In my opinion the cost of living has increased very considerably, and I cannot see what advantage we would gain if this new exchange took effect. Furthermore, the credit of New Zealand would suffer in the eyes of those creditors which we have at the present time.” Mr. Myers then moved the adoption of the report and the carrying of a resolution at its foot, copies of which, he suggested, should be sent to the Prime Minister, the Leader of the Opposition, and the Leader of the Labour Party. Mr. D. J. McGowan seconded the motion. Artificial Alteration. At the request of the chairman. Mr. L. A. Edwards, representing the , British (U.K.) Manufacturers’ Association, addressed the council. Mr. Edwards said it had been stated that exchange was the natural result of favourable and unfavourable balances. There was no question that if the rate of exchange between New Zealand and England were increased it would to some extent be to the benefit of the primary producers, provided they sold their goods and had money in London. He was seriously afraid that if a matter of 20 per cent, extra were added to the rate New Zealand would not be able to import; and if she could not import she could not export. Although it was an economic necessity that New Zealand should sell her goods to England, it was not an economic necessity for England to sell her goods to New Zealand. “Our association is unanimously against any such artificial interference with the exchange.” Mr. Edwards said. ... Mr. J. H. Whittaker also lent his support to the committee’s views. Manufacturers had already been handicapped, and this proposed exchange would ,mean an immediate rise in the cost of production. As far as the manufacturers were concerned he thought the council need not fear lack of support. Farmers’ Viewpoint. Mr. W. B. Matheson, representative of the Farmers’ Union, said he thought tlie council would realise he was correct in saying that the two largest organisations of farmers, as he , knew them, had not been officially active in making the suggestion. He thought it had come as a result of the visit of Professor Copland. Nevertheless, when they were in an emergency and the person supplying their bread and butter was in danger of being killed, if they could save his life it was better for them to do it. because it was in the interests of everyone in the general community. Mr. Matheson did not hope to make the council change its opinion, but he did think it should hesitate before it passed a resolution which was too sweeping. Fifty thousand at least of the eighty thousand of the farming community did their daily work for a small wage. It was very important that the farmers should in some way be induced to stay on the land by easing their burdens and helping them in some way. Mr. A. Seed also said that tiie resolution was too sweeping. He thought it was a matter that required very much more consideration than they could give it at a meeting called so summarily. Some discussion followed upon the methods and practicability of the proposal being carried into effect. Mr. Edwards spoke on the proposition that the raising of the importing cost, would raise the internal cost of production.

The resolution in the amended form given above was finally carried.