The Dominion SATURDAY, NOVEMBER 19, 1932. THE EXCHANGE RATE QUESTION

Dominion, Volume 26, Issue 48, 19 November 1932, Page 10

The Dominion SATURDAY, NOVEMBER 19, 1932. THE EXCHANGE RATE QUESTION

Although an early rise in the and against, it may still.be worth whi e if not be the natural result The first thing to note is that the chang w broug ht about ofi our overseas trading position b J p osit i on o f artificially by P oll !’ ca protested strongly against the farmer who, it should be rem P artificially low level, She rate being held at what he level, but on whose behalf it may now P• Jge arguments ,of Such a course ca «! will benefit by an increase expediency. The contention is extent of the increase in in New Zealand prices of 15 per S.. * Lually extend to all classes, the rate) and that benefit exte exp W -Jr another l|d on " „. n(SV -chiallv so into circulation, and The decision is one of choice, not necessity. reaction That fact will not be missed, overseas, is to be he r +v>a British farmer when he observes his New Zealand rival seeking W not so New Zealand. May we not jeopardise newly-won British b rhv these tactics ? On the other hand British manufacturers raising of a new barrier of 15 per cent, against their P ?oods Does this action harmonise with the spirit or intention of te bttawl agreement ? We are more than cancelling out concessions freshly S In the end may we not do more harm than good to Not ’should 6 the position ,of importers be overlooked. Tlie y ge already suffering a lean period and are faced with further conti action and dislocation business. That may mean mbre unemployment. At the same time costs of all imported goods will rise.and no douh the price of many local products. Thus a check will be given to the reduction of costs which might finally have brought receipts into equilibrium with expenditure. Hence the farmers and local manufacturers will have to pay part of the high exchange premiumin increased costs. Others of the community will have to find the rest. Another important factor is the heavy increase.inevitable in the effective weight of overseas debt charges. The State and local body budgets will be seriously affected. That may.mean higher rates and taxes or a postponement of relief from existing burdens. The stringency so created in public finance is bound to affect the Public Service and local body staffs. An uncertain factor is the infl uence the changed exchange rate may have on any arrangements Mr. Downie Stewart may have made in London, for loan conversions or redemptions of maturing loans. Its adoption should certainly b postponed pending his return to the Dominion next week. The man who has to balance the Budget should be consulted. From this review it would seem that the disadvantages of an artificially high rate are more numerous than the advantages, although they may not outweigh them. Those who are pressing for a high exchange may be right in claiming that the stimulus transmitted through the primary and secondary producers will reach the whole community and compensate for the obvious drawbacks. Nevertheless the contrary arguments should not be dismissed lightly. The whole, case should be again examined. And it should be remembered that high exchange is not a remedy but a palliative whose effects will be no more than temporary. New Zealand may merely be • postponing the reckoning. Finally, is it too late to revive the idea of export bounties for farmers? That should, achieve the same result as far as they are concerned, would avoid the dislocation of public and private budgets, the disturbance to trade and unemployment, the penalising of British imports, and the pressure on particular classes. Moreover it would be more honest since it would enable us to discover exactly what we were doing without concealed and delayed consequences.