HIGH EXCHANGE RATE OPPOSED

Dominion, Volume 26, Issue 50, 22 November 1932, Page 6

HIGH EXCHANGE RATE OPPOSED

City Interests Make Emphatic Protest EXPORT BONUS CONSIDERED PREFERABLE Deputation to State Case to Prime Minister To-day Arguments against-the. proposed increase in the exchange rate were marshalled yesterday when, under the auspices of the New’ Zealand Importers’ Federation, one of the most representative meetings of city interests ever held in Wellington took place in the Chamber of Commerce hall. Speaking with a united voice, the meeting passed a resolution emphasising that violent repercus-. sions and disastrous consequences would follow if the exchange rate were, pegged’ at an artificially high level. It was argued that , the best,method to.assist;the primary producers was to'grant an export-hbnus where necessary. . _ . The resolution will-be presented to the Prim'e Minister this morning, when the deputation .will also request- that any discussion on the question in parliament should be. deferred until the return of-the Minister of Finance, the Hon. _W.D. Stewart.. It, was' generally agreed that if the deputation got no satisfaction from Mr. Forbes public meetings in all the main centres should be organised. .

Mr. E. . Salmond, president' of ’the New Zealand Importers’ •> -Federation, presided, and the bodies, were represented: Wellington Chamber of Commerce, Associated Chambers of Commerce, -New Zealand Harbour Boards’. Association, Wellington Harbour Board, ’ United Kingdom Manufacturers’ and New Zealand re-, presenlatires Association, New Zealand Manufacturers’ Federation, -Canadian Manufacturers’ Association, ' Master Drapers’ • Association,. -’Ngw Zealand Federatibn of Master Drapers, Commercial Travellers’ and ‘ Warehousemen’s Association, New Zealand Electrical Federation, and Motor Trade Association! Before proceedings Commenced . a ruling by the chair as entitled to be present was sought by Sir William Hunt. Mr. Salmond -replied that it was a meeting of those who were definitely opposed to..any inflation in the exchange .rite;-it y was not desired: that it should develop into a debate. • - ’ ’ Sir William Hunt thereupon withdrew. ’..' . " . , “Will Not Remove Trade Barriers.” Mr. Salmond said,he-was. delighted to see so many present. It was proof that the business men of the city realised the tremendous importance of the question. Mr. Coates, speaking to members of the United Kingdom Manufacturers’ New Zealand Representatives’ Association, had emphasised that the main task of the Qttawa Conference had been-the removal of barriers to trade, and he had expressed the opinion that the agreements’made would lead , eventually to freedom of trade, not. only in the Empire but in the whole world. • “I do not know what Mr. Coates’s opinions are,” continued >Mr. Salmond, “but I rather suspect, and if he is one of those/who are in favour of Inflating exchange, his attitude is, to say the least, most inconsistent. 1 High exchange will accentuate and £ not remove, trade barriers.” < Other results which must follow upon ! Mgher Exchange were decreased volume

r of Import and increased cost of Imports, decreased Customs revenue, and the effect pt a higher exchange : uponoverseas markets had also to be taken Into very serious consideration, ’ said Mr. Salmond. An increase, of 15 per cent, in the exchange rate would not .mean an increase of 15 per cent, in the cost of living, but of a very much larger figure, for; profits in ordinary, business practi.ee/were based upon costs,, and by the time the 15 per cent, reach-: ed the public'on a great many items the Increased cost would be. from 25 to 30 per cent. . Mr, Salmond said that the Government had cut down the salaries of Public Servants and many business firms had also reduced the salaries of their employees. Labour had agreed to accept reduced wages, but if the proposed inflation went through they would be faced right away With a great increase in the cost of living. It was unfair to say’ the' least. 1 ,

He believed that the vast majority

of -people, were -against inflated- -exchange, and ho believed also that a ■ , great many farmers were also against the inflating of exchange, for they were wise enough to know that . in the long run they would suffer ! from it. -

The Governfnent was getting its income taxation mainly from the trading community and from the professional community, continued Mr. Salmond. They were not getting it from the farming community. An increase , of 15 per cent. 'would surely not turn the farmer, who was frankly bankrupt, into a taxpaying Individual. Therefore, the increased taxation which must, be found must come out .of ? the pockets of traders and . professional men. Necessarily, the additional taxation would be very heavy indeed, and at the same time business operations would be hampered. Mr, Salmond said it was difficult enough to carry on business profitably and with taxation increased profits In many businesses would be turned into losses, and where.' then, was the Government to get the required additional taxation? The strongest possible

protest should be made against the action of a section of members of Parliament, who, whether they were endeavouring to serve their own ends, or were acting perfectly honestly, were, he was certain, mistaken. Text of Resolution. Mr. Salmond then formally moved the following resolution:— “That this meeting most strongly protest's against the attempt which ig now being mado by certain sections of Parliament to force the banks to increase the existing rate of exchange, and considers that any increase in exchange is entirely unwarranted and unjustified. “Furthermore, this meeting insists that If an Increase eventuates it will be a flagrant breach on New Zealand s part or the Spirit ft pot of the letter, ot the Ottawa agreements/and must adversely Zealand’s credit and the sale of her primary products in Great Britain. “The existing financial difficulties ot trio Government must also-be very materially accentuated since the proposed increase of 15 per cent, in exchange will add 15 per cent, to the annual interest bill on the public debt, will greatly reduce the Government’B revenue from Customs duties, will Increase unemployment, and consequently add to the expenditure ou unemployment relief, and will ultimately lead to lower receipts from Income taxation. “This meeting strongly urges on the Government that the evils of unwarranted exchange inflation far outweigh the illusory benefits accruing therefrom, and suggests that the most beneficial and equitable method of ensuring assistance to the primary -producer is by means of au export bonus where necessary, as previously suggested to the Government by the Associated Banks.” ■ ' The Mayor’s Views. > The Mayor, Air, T. C, A. Hislop, who seconded the resolution, said that when any. questions of general public controversy arose he felt that as Mayor of tbe city his-duty was, so far as was possible, to maintain an attitude of impartiality; but, on this occasion, he felt that the interests of the Corporation in particular and the interests of tbe main' body of the people carrying on business in Wellington in general were so great and the effect upon them of an artificial inflation of exchange might be so disastrous, that he felt justified in being present. • “I feel personally that if it were clear that such a policy as that now advocated was really in the true interests of the Dominion, then we would have just to bear the burden put upon, us for the general well-being, but I don’t ; think that is the result of the proposed policy,” said the Mayor. “I think 1 so far as one is able to learn from the arguments and can gather from experience elsewhere that the reverse of what, has been'said will be the case.

I don’t think for a moment that in the long run individual farmers can ■ gain anything from the proposal. ' “The most it seems, to me that can be'gained by anybody might be a gain on the part of certain financial institutions, in that they would have an opportunity of getting back certain monies which were really on a true basis, irretrievably lost. Tbe matter has arisen again suddenly, although not unexpectedly, and I, like Mr. Salmon have not had the opportunity of preparing various matters which otherwise I might have been able to do, but' one is glad to know that that important and possibly crucial meeting which originally was to take place to-day In the Bank of New Zealand has been put off until Friday. ■■■ “It was a most noticeable thing, a remarkable tiling, that the matter, should again be brought forward and an effort apparently made to get something done immediately during the absence of the Minister of Finance, and also one of the members of the board of that bank. There is, of course, the old saying, ‘Divide and rule,’ and

that seems to be part of the taetlcs at present followed. We know perfectly well that the Associated Banks, as such have all along opposed the proposal. We know that one of those most helpful in preventing inflation of the exchange, some little time ago was Sir Henry Buckleton.

“And we know also,” continued the Mayor, “that the chairman of the board at the recent meeting stated definitely that while inflation might help the banks, it was definitely against the true interests of the country. That being so, it, is easy to follow tbe line of attitude that is being adopted. We know now that a large number of members of Parliament, and certain other people, went, as a result of suggestions made to them, not to discuss the matter with tbe- Associated Banks, but to discuss it with one of the most important members of that association, namely, the Bank of New Zealand, obviously in an effort to see if that bank could not be made to detach itself from the policy that has been laid down by the , banks Jis an united organisation. It is clear that if one bank, a bank of that size, broke away, then the others would almost certainly have to follow.

"Now we know what has happened and‘ we know that an endeavour is being made to got the board of the Bank of New Zealand to alter the view., which it expressed only so recently as the last meeting of shareholders, when they definitely stated themselves as being opposed to inflation. It seems to me clear that if that effort is successful, and it is .almost inconceivable in a way that it should be, it will only be as the result of political pressure exerted behind tbe scenes upon the board of the Bank of New Zealand. The Australian Position.

“We have heard a-good deal about what has happened in Australia," said the Mayor. * “We have been told that .the benefits of high exchange have been proved; among other things, by the recent loan floated by- the Commonwealth at 3i per cent., but I venture to say that that result was not on account of the exchange but despite it. It must bo remembered that the Commonwealth was lucky enough to have ;a loan due for renewal'just about the ■ time the great conversion at Home had been successfully put through, and consequently the Commonwealth was able to take advantage of. the position., as it arose at Home and get its now loan at the reduced rate of interest. Is it certain that if we bad a loan due now, and were able to go on the i market at Home under conditions similar in time to those that helped Australia, we would not get an equally good rate? .1 suggest that - we would. Talk regarding Ausi tralia’S loan is entirely illogical and beside the point. ■ .

: “We have also heard about a cable-Mr. ; Endean received from Australia,” said the Mayor.' “Mr. Endean was acting on behalf'of his group of Parliamentarians when he cabled and asked what was the effect of the high exchange..’; He received a reply-that everything was,in its favour, although be got a latei; cablegram not quite so favourable. I have been fortunate’enough to get a cablegram from a man in Australia controlling several of jthe biggest enterprises there, and whose .interests are principally those of primary producers. This is what he says: I am of opinion that the rate of exchange here (Australia) has materially assisted the primary producers at the expense of the consuming public and taxpayers, and T am strongly of opinion that the rate of exchange, whether high or low, should be determined by the law of supply and demand.” Outlining the effect of exchange infla-

tion on the Wellington City Corporation, the Mayor said: “The fuct is that inflation will force up our annual interest bill by considerably more than £33,000 a year. How are we going to find that money? We.can’t find it by an increase in rates. You can’t increase ‘axation, if you can possibly avoid it, at the present time. I think we have reached the taxable capacity. The only other alternative must be an immediate curtailment of work with a consequential dismissal of dozens and dozens of men. Practically £30,000 worth of labour would have to be dismissed from our staffs. Furthermore, we would at once, such is the narrow margin between our expenditure and revenue—we would at once have to stop all the relief work going on in tbe city to-day, and throw the entire burden, if they could take it, upon the Government. A Voice: Tbe farmers.

of London funds to-day. In a speech at a dinner given in his honour our Minister of Finance, who unfortunately is not with us to-day, made a statement that in his estimate a sum not less than £14,000,000 would be in our favour in London by the end of December. A few months ago the banks in this country opposed the inflation of exchange. If they opposed it then there is some other rea* son why they should be inclined to change their opinion when London funds are so plentiful.”

Inflated Land Values. The Government had taken up the attitude that the question was one for the banks. In 1894, said Mr. Hislop, Mr. Seddop placed four directors on tbe board of the Bank of New Zealand to safeguard the honour and credit of New Zealand in monetary affairs. Therefore, as the Government had nominated and still maintained four directors out of six on the board of the country’s largest banking organisation, it could not under any circumstances shelve the responsibility for whatever action the bank took on the question of exchange. Mr. Hislop said he was not unmindful of the great difficulties facing tbe primary producers. It was significant, however, that the sales last year, as far as the dairy industry was concerned, showed that those farmers who were carrying on their business unencumbered by an exceptionally high inflated value of land could make ends meet. It was true that many of those engaged in the butter industry were suffering to-day, but they, were suffering from a cause which no inflation of exchange would ever relieve—a highly inflated land value. One was sorry that position existed, but there it was. On- the other hand, one must not be unmindful of the position of the wool-growers. They were in a very different position altogether. < lie would much rather prefer to see a bonus granted to the wool- J growers than see an inflation of exchange. Tills course did not undermine the honour and credit of New Zealand. The other did.

The Mayor: And ultimately upon the farmers. There would. I believe, be a considerable increase in the cost of living and in the numbers of unemployed. It has been very carefully estimated that the total cost to the country of this suggested increase would be £5,000,000 a year.

If you take the increase in the Government loans bill, the local bodies loans bill, the loss of Customs, tbe loss of increased taxation due to the effect of these proposals on employers, and the increase in unemployment, you will fiud that the figure of £5,000,000 a year is not an inflated one.

"You have to consider, in addition, a point which I think seems to be overlooked,” said the Mayor. "What is going to be the cost to the Government of having to take over from the banks the exchange they ean’t get rid of? That is what is being done by the Government in Australia. There is hot much said about it, but the Commonwealth Government is taking over all tbe surpluses and in that way there is gradually being accumulated an additional very large Government debt in Australia. The same would follow here. / "1 do think it is encouraging that we can fill this hall on tbe quick notice that was given, with those, who are determined to do what they can to prevent this purely artificial measure coming into operation—-a measure which if adopted would not in the long run benefit even those whom it is said it will benefit—the individual farmers.”

Evils of Inflation. . Mr. J. Pearce Luke, president of the Wellington Chamber of Commerce, said ho had been criticised for not having called a meeting of the chamber to discuss the exchange question. The position was that the members of the chamber were very definitely mixed in their opinions, and in view of the fact that the Importers’ Federation, which was vitally affected, had been to the forefront in the controversy be had taken, the view that it was fitting and proper that that organisation should-sponsor any initial effort of protest. Mr. Luke said he had little to say; the resolution covered all the ground that was necessary. New Zealand, in common with the rest of the world, was suffering from what was definitely an Inflationary position forced upon it, from 1914 onward. “I want to put this question,” said Mr. Luko. “Are we going to cure our difficulties which we brought ■ about, 'by that inflationary experience - by adopting a further inflationary process?”, Mr, J. Hislop, of Auckland, said he represented, one of tbe two large contracting parties to the Ottawa agreement—the British manufacturer. He appealed. to' the other section mentioned in the agreement, signed by Mr. Baldwin anti Mr. Coates, not to nullify the contract and treat it as a*mere scrap of paper. “As a New Zealander I join with you in a protest ’ against the action of members of Parliament in being so unmindful of our national credit and good-will overseas as to give their support to measures forced upon them by sectional interests. “I say this is a wilful attempt at inflation,” continued Mr. Hislop. “It is wilful as evidenced by tbe accumulation

Mr. Hislop said that the country could, if it liked, grant a bonus to its primary producers, but it should be confined to the wool-growers if any such assistance was to be given. Great Britain was due to make war debt payment to America. She was not being released from the payment. In spite of that, she had released New Zealand of its payment of £850,000. “I think we business men and citizens of New Zealand would be failing in our duty if we did not fight this fight to the last diteh," said Mr. Hislop. “The credit and honour of our country must be maintained.” —.

A member of the United Kingdom Manufacturers’ Association said that his association was entirely opposed to an increase in the exchange, as it believed such a move was not in the interests of the country. New Zealand to-day had the goodwill of its best customer—Ureat Britain. He contended that if the exchange was increased, New Zealand would lose its best customer.

It would mean the start of slow but certain suicide. His association would not bo a party to that.

Mr. Cousins, secretary of the Motor Trades Association of New Zealand, took the view that an increase in tbe exchange rate would involve. New Zealand in a calamity. '

Temporary Benefit Only.

Mr. F. Campbell, representing the manufacturers of New Zealand, said: — “While we have no doubt an increase in the rate would result in a temporary benefit to the local manufacturers, we feel that in the long run it would not be a benefit to New Zealand. Therefore we are opposed to an inflation.” Mr. W. Hustler Smith, president of the Wellington Commercial Travellers’ Association, said that his organisation stood for fair and honest dealing, and for what one might.term straight finance. "I am perfectly satisfied,” he said, "that in this movement you will have the support, the wholehearted support, of practically every member of our association throughout New Zealand.” Mr. C. J. B. Norwood, president of the

New Zealand Harbour Boards’ Association, said that only two of the harbour authorities in the Dominion showed a margin of profit last year. Exchange on London commitments would necessitate the funding of an additional £30,000 a year. That could only be done by a curtailment of costs —and one knew what that meant —or by increasing charges. Either course was serious.

He appealed to the authorities to at least permit of such economic handling and management as would leave the harbours intact for the good of the country. . I View of a Banker's Son. Mr. R. G. Buckleton said he would like to draw attention to the tremendous effect an increased exchange rate would have upon the. workers of New Zealand. In the first place.it would involve a reduction in real wages. The majority of the employers were decent men, who were conscientiously doing the best they could for their employees. Another reduction in real wages would inflict colossal hardship. He wondered whether the advocates of a higher exchange rate realised fully the effect of a policy of inflation. “This meeting,” said Mr. Buckleton, “is probably the most representative gathering of business men ever held in New Zealand. It represents, directly or indirectly, fifty per cent, of the population. That being so, surely the interests of this large body of people should be considered in this national crisis, and in this state of emergency which now exists? ’ •*

. I am speaking without any authority as a son of Sir Henry Buckleton,” he continued. “Sir Henry has been particularly . careful at the present stage not to discuss with me either exchange or central banking. But I have carefully . watched developments. I have made a study of banking and finance, and-I am absolutely certain that any change in the attitude of the banks toward an increase- in the exchange rate is being brought about by some means the Government has now got which it did not have before. “I believe the Government is using the bogey of the Central Bank Bill as a big stick with which to belabour the banks.

“Mr. Forbes has declared that the responsibility for any exchange alteration must be taken by the banks, and the banks are entirely responsible for the finances of the country. If that is the case,” said Mr. Buckleton;' “why has Mr. Forbes not accepted the advice of the Associated Banks which has been conveyed to him time and time again? The attitude of tbe Associated Banks is definitely No.” An Election? Mr. Buckleton said that Parliament appeared to be in a panic. A previous speaker had hit the nail on- the head when he declared that the trouble was high land values. The Government was afraid to tackle that problem, but it would have to be faced sooner or later. “I am probably the youngest man present this morning,” added Mr. Buckleton. “I have a long life ahead of me. but I do realise the tremendous responsibilities we are taking upon ourselves. “It is possible that opposition to the endeavour to increase the rate of exchange might lead to an election. If that did eventuate, it is up to those who are opposing higher exchange to throw their whole weight into any campaign which followed.”

The Mayor said that an “export bonus” involved no extra charges upon Government or. municipal debt services, no increase in unemployment, or loss of income tax or Customs duty.’ It .certainly did, of course, put upon the community an additional loan of, say, 4 or 5 millions with necessary annual charges required for the purposes of the loan, but those charges would be infinitely less a burden on the community than the proposed ' exchange inflation. A representative of the New Zealand Booksellers’ Federation said that his organisation was definitely opposed to an increase. If the course proposed were , adopted, many booksellers would have to ’

go out of business. It was inflation that threw the Lang Government out of of-'’ fice.

The Mayor: If the price of books goes up we will not be able to buy any more books ou exchange. (Laughter.)

The resolution waa carried unanimously. An architect for a canister manufacturing firm about to start business ■ in Wellington said that an increase in the exchange rate would materially affect the contract and might even result in its cancellation.

The Mayor: If the rate goes up another building might not be gone on with. Mr. A. Fletcher (smilingly): Fod God’s sake don’t mention it. (Laughter.) .. Mr. Campbell suggested that a deputation should wait upon Mr. Forbes as soon as possible, asking him to defer any-dis-eussion in the House until the return of the Minister of Finance. Mr.-’Forbes had stated several times that he did not know what financial arrangements -Mr. Stewart had made abroad. It would be wrong for any political party to embarrass the. country by taking action when the details of what had been done in London would be known within .a few days. • "Attempt to Stampede.” Mr. Luke said he agreed with Mr. Campbell’s suggestion. The Prime Minister had stated, not once but many times, that neither he nor Cabinet knew what had actually taken place in the discussions between Mr. Stewart and the Home Government. Mr. Stewart might have very strong views which would vitally affect the whole financial structure of the country. -Not only would it be discourteous to him to take action in his absence, but it would be against all the principles of straight dealing to go behind the back of the very man who had been sent to Lon-

A certain interested section was trying to stampede the people into an action which was entirely unwarranted, and it was a matter for the Government to seriously consider and to give opportunity for duo consideration in the House.

Mr. Luke said that if the deputation got no satisfaction from Mr. Forbes, the wisest thing to do would be to r organise public meetings in all the main centres. The question, after all, was a national one, and. there was no doubt they would get support from the other centres. Mr. Norwoodsaid the Prime Minister had insisted, that the question of exchange was not one of politics, but was a matter for the banks, but there was a veiled threat of a Bill in someone’s pocket. The public was vitally interested and had a right to express its views.

Motor Traders Concerned. Mr. G. H. Scott, representing the British Motor Manufacturers and Trader®, said that a large number of motor principals operating from England had pegged the exchange rate much below the 10 per cent., which was looked upon as the standard rate to-day. One could easily forecast what would happen if there was inflation. The men at Home would no longer be able to meet the position. Any change in the direction proposed would seriously affect them, and the definite ad vantages accruing to the users of their vehicles would be cancelled.