Exchange Rate Increase

Dominion, Volume 26, Issue 102, 24 January 1933, Page 11

Exchange Rate Increase

Sir, —Once more the Government is interfering with the economic life of the community in its efforts to palliate the present situation. Experience has shown that it is impossible to escape the action of economic law; any attempt in this direction has resulted in repercussions which have proved disastrous, and there is no reason to suppose that the present attempt will not have the same result. However, the future holds the answer. It would appear that the Government has no knowledge of the factors which are placing industry in. its present parlous position. First is inflated land values. Industrial prosperity is impossible until land values are drastically written down. Secondly, there is the burden of taxation which has become so heavy as to crush industry out of existence. Another factor is the tariff which has raised artificially the internal price level and thereby has increased the cost of production. It is evident that the increase, in the exchange rate will in do way relieve industry from these burdens. Indeed, the opposite will be the case. Had. the Goverument refrained from interfering force of circumstances would have brought, relief to the producer, for it is obvious that at the present price level it was impossible to maintain either the present inflated land values or the present system of taxation. As it is the increased exchange rate will prolong the agony. The whole of the increase will be absorbed by rent and taxation and it is doubtful it the increase will be sufficient to do this, inasmuch as an increase in taxation is inevitable. The increased national debt charges and the increased burden upon the Unemployment Fund will completely nullify the alleged benefits. Another aspect deserves consideration, that is the effect upon the cost of living. Now that the cost of living is to be raised by arbitrary Government action, are wages to be raised also? Or is it part of the plan that wages shall remain at the present level? Both the Government and the exchange inflationists are silent on this point, perhaps advisedly. As an alternative to the present scheme allow me to suggest that the best method of assisting industry would be to abolish our present system of taxation and substitute a system that would, appropriate to the State the entire ground rent or New Zealand which is sufficient to more than balance the Budget. This proposal is of course, radical, but the day is fast approaching when we will be forced te adopt radical measures.—-I am, Rotorua, January 20.