CITY WOULD LOSE

Dominion, Volume 25, Issue 230, 24 June 1932, Page 10

CITY WOULD LOSE

Effect of Increase in Exchange Rate MAYOR STATES CONCERN Two months ago the Mayor, Mr. T. C. A. Hislop, made it clear that if the agitation for a heavy increase in the rate of exchange between New Zealand and England were successful, it would be most serious for the Wellington CitiCouncil and every other local body in the country which has raised loans in the Old Country. Now that the matter is being again pressed from a certain quarter, the Mayor is again emphatic as to the ruinous effects of the change. He states that if the rate of exchange were raised from 10 to 25 per cent it would either mean that rates would have to go up 25 per cent, or city services would have to suffer to that extent No Justification. “There is much speculation,”, said Mr. Hislop, “as to what will be the effect upon the exchange rate when the Government’s arrangement in connection with the export pool come to an end this month. There appears to be a feeling that one of the trading banks will make every effort to force up the exchange rate, and that the other banks may have to follow suit. There does not appear to be any justification for any Increase in exchange on the basis of the present trading position of the Dominion. “For the twelve months ended April 39, 1932, the surplus of exports over imports was £13,861,507. The debt service of the Government arid local bodies for the full year was estimated at about fourteen millions, including four million pounds for. the redemption of Treasury bills. The floating of the recent Government loan of tive million pounds in London has reduced the ' debt service requirements to about nine million pounds, and there would therefore appear to be for meeting all Government and local body requirements a favourable balance of £4,861,507. In these circumstances it is difficult to see any justification for any increase in the exchange rate. . “Should, however, any such increase take place of the amount suggested by the inflationists, namely, an additional 15 per cent, on the present 10 per cent., the effect on the city of Wellington, in common with inany other cities, would be great *' ' ■ Additional Money to be Found. “For the balance of this ■ financial year the amount of sinking funds and principal to be sent to London by the Wellington City Council is £160,000, and on this an increase of 15 per cent, would mean anothei; £24,000 out of the pockets of the citizens, 1 ’ said Mr. Hislop. “During next financial year moneys amounting to £213,500 have to be sent to London from sinking funds, and a 15 per cent, .increase in exchange would mean another £32,000. “As regards interest payments on loans domiciled in London, an amount' of £183,300 has to be sent to London during this financial year, and of this amount £150,000 still remains to be sent; this would involve ,a further £22,500 If the exchange rate were itf ereased by an additional 15 per cent. “The total effect of a rise of 15 percent. in exchange for the balance of this financial year will, therefore, mean that another £46,500 will have to be found, and next year ti further £54,000 will have to be found. “Unthinkable Alternative.” “We have had to make most drastic reductions in our expenditure.” continued Mr. Hislop, “and any further charges for exchange will either reduce our available income, which is at present only sufficient for essential city services, by no less than 25 per cent., or in the alternative, will necessitate a 25 per cent, increase in the rate charge. This alternative is unthinkable, but a reduction of 25 per cent, in our expenditure, which has already beeii reduced by 33 1-3 per cent, in the last year, would be disastrous to the essential activities of the city, such as drainage, water supply, sanitation, refuse collection, etc., and would involve an increase in unemployment that one does not like to contemplate. “Every effort has been made by us to get our funds Home before any increase in the exchange takes place,” concluded Mr. Hislop. “This, however, could not be done, because moneys can only be transmitted on the due dates.”