Higher Exchange Rate

Dominion, Volume 26, Issue 103, 25 January 1933, Page 11

Higher Exchange Rate

Sir, —As a man who has had. his time equally divided between town and countrypursuits during the past.2s years, I cannot but admire your.fair.and impartial summing up of the points for and against iu the exchange controversy in your leading article of January 21. While regretting that I cannot agree with your contention that repercussions, internal anu external, will balance out unfavourably for the country, I think you have struck the right note in appealing for judgment of the problem on a national as against a sectional basis. The almost hysterical note struck in some newspapers is unwarranted and undignified, and the space devoted to adverse comment on the recent rise in the exchange engenders the suspicion that under the smoke screen raised there will develop a sharp rise in prices of goods already imported. Government action should at once be taken to. forestall any move to exploit the situation in this respect As a soldier settler I feel that some viewpoints from our angle should be published. Assuming agreement that, the farmer is in dire need of a drastic adjustment between the disparity in costs and returns, and that 75 per cent, of this country’s troubles are internal, then the first logical step toward stabilising . the prices of exports on a payable basis is to raise the exchange rate and thereby alter the incidence of taxation from country to city properties. This will apply the acid test to city valuations. They cannot be sustained at the present figure and allow the retailer to pass on any accrued charge resulting from increased exchange. The diminished purchasing power of the people will not allow of this, so the ultimate effect is to reduce the profits from ground rents. Fixed charges for the handling of farm produce are to a great extent governed by city valuations and must be re-

duced more rapidly. Liquidation of the farmer 3 debts will ■ enable more men to be employed,, thus directly relieving the town. The high exchange rate will increase the. money incomes of producers and maintain the yield of taxation at a higher figure than would be possible under the former rate. It will also increase the returns upon that part of the public debt advanced to producers. Exchange charges will not be a net addition to the Budget, as is often stated. The experience of Australia and England under a high exchange.has been the reverse of what was prophesied. Internal costs have not risen, and the progressive deflation of commodity prices in gold standard countries to some extent accounts for the apparent paradox of an inflatory measure failing to cause inflation. Regarding costs within the control of the farmer, no further reduction is possible for the woolgrower, and the dairyfarmer is in much the same position; so much so that even if the land were rent free, production for profit could not -be carried on at present-day prices. There is also the external. problem, which consists mainly of maintaining our credit abroad by sustaining our volume of production in the real New Zealand pounds, viz., pounds of wool, meat, butter, etc., our per capital production of which is still the highest in the world, despite the burden farmers are working under. This is the real currency on which our national credit is based, and any measure which militates against it is bad. Should a serious contraction of imports . take place, which is a debatable point, it wdl not be in contravention of the spirit of the Ottawa agreement. Since this agreement was made, Britain has already varied the quota of produce agreed upon. The prices, paid for. our produce in Britain have dropped considerably, and hare placed the manufacturers in a better position to sell their goods at a lower rate. The time is overdue for us to set about the task of converting our overseas debt to a lower scale of interest. With the Government, through its accredited agents, the Bank of New Zealand, assuming control of all London credits, we will be able to use any cash balances accruing through the drop in price or contraction of imports for buying in New Zealand securities and converting to the lower rate of interest. The whole of our external debt could ultimately be dealt with on this basis. —I am, etc.. SOLDIER SETTLER. Hastings, January 22.