LIFTED EXCHANGE

Dominion, Volume 25, Issue 99, 21 January 1932, Page 10

LIFTED EXCHANGE

Objections to Plan RANKER’S OPINION ; J Means of Inflation BURDENED COMMERCE Dominion Special Service. Auckland, January 20.. “There is a iundamental and insuperable objection to the proposal,” ,'said Sir George Elliot, Chairman of Directors of the Bank of New Zealand, in commenting upon the proposal that the exchange rates should be increased. “The question of exchanges is essentially very simple,” said Sir George. "Shorn of all complicated arguments upon theoretical aspects, the proposition that has been put before the Government is that New Zealand exchange rates should be placed upon the same level as Australian rates —25 instead of 10 per cent. The effect would be, according to advocates of this measure, that the returns to exporters would be increased by £4,soo,ooo—assuming the sterling value of our exports is £30,000,000. This is not extra money. The sum of £4,500,000 would have to be collected from the whole community, a considerable amount of it by the Government through extra taxation, the greater part from importers. To suggest that the taxpayers generally and the commercial community especially, can bear the additional burden of £4,500,000 is ridiculous. Community Pays. “I am perfectly aware of the difficulties of the farmers, and have the utmost sympathy with them, but it would only aggravate their difficulties if the country embarked upon an experiment of which the results would be so serious. How is the general community going to pay £4,500,000 ? Can our merchants and shopkeepers pay ■ the extra exchange costs themselves or add them to their prices? Business is possible under present conditions only when prices are cut to the lowest possible level. The Inevitable increase in the cost of all imports would consequently curtail business still further, and the commercial community would be involved in such difficulties that they would also have the right to appeal for assistance by a similar scheme of taxing the whole community to subsidise a section of it. , “Any interference with the exchange rates is a dangerous experiment. The present proposal is merely an indirect means of inflating the currency. Its adoption would inevitably be injurious to the Dominion and its ultimate effect would be to hamper the process of reducing the costs of production that is so important to the permanent relief of primary production. Exchange rates cannot be manipulated for the benefit of some people without doing a great deal of harm to the whole community, including the intended beneficiaries of the experiment. The present rates have been determined to a large extent by the operation of supply and demand. The same forces will continue to regulate them, and there is neither need nor justification for any arbitrary interference with them. Increased Credit Supplies. / “The Government’s requirements create new demand, but the adjustment of our overseas trade has already increased the supply of funds to New Zealand’s credit overseas. During the long period in which our trade balance has fluctuated widely, the banks of the Dominion have so managed its exchange transactions that disturbing effects have been avoided, and the public may confidently rely upon them, with their knowledge and experience, to deal with the new situation In a manner that will safeguard the Interests of the whole Dominion.