HIGH EXCHANGE

Dominion, Volume 26, Issue 184, 2 May 1933, Page 10

HIGH EXCHANGE

Importers’ Contentions REPLY TO MR. COATES “Contrary to Ottawa Spirit” The assertion that the exchange rate had failed to fulfil its promise to those who believed in its possibilities and had seriously damaged the interests of the Dominion' was reiterated by tin? New Zealand Importers’ Federation in a statement issued yesterday in reply to the Minister of Finance, Rt. Hon. J. G. Coates. ‘‘We propose to refer only to facts in replying to some of the amazing contentions of the Minister,” says the statement, winch was made by Mr. Edwin Salmond, president of the federation. “The federation reiterates that the action of raising the exchange rate was in fact contrary to the very spirit of the agreement entered into at Ottawa. Mr. Coates asserts that such a charge is baseless, but on page 13 of the booklet published by II.M. Stationery Oilice, London, describing proceedings at Ottawa, the following appears: '“The conclusions of the conference may be summarised its follows: —

••Resolutions and Statements Regarding Monetary and Financial Questions. — The conference recognises the great importance to traders of stability of exchange rates over as wide an area as possible. The complete solution of this problem must await the restoration of conditions for the satisfactory working of an international standard as referred to below. In the meanwhile, and pending such a solution, this conference has considered the possibility of achieving valuable results in two directions —first by creating an area of stability among countries regulating their currencies in relation to sterling; and secondly, by avoiding wide day-to-day fluctuations between sterling and gold. “As regards the latter, the conference has noted with satisfaction that the United Kingdom has already established machinery aimed at preventing wide fluctuations in the gold value of sterling caused bv speculative movements. As to the former, the conference recognises the value of the countries within the Commonwealth whose currencies are linked to sterling maintaining stability between their exchange rates and looks to a rise in the general level of wholesale prices as the most desirable means for facilitating this result. “Damage to Goodwill.” “In the face of such evidence, how is it possible for Mr. Coates to defend his attitude? The Minister avoids all reference to the patent fact that this country’s finance juggling has been a factor in the depression now experienced in the overseas dairy market where our Governmental action has done enormous damage to our goodwill. There is evidence in plenty that our goodwill in England has received a severe blow. /The published statement made last week by Mr. 11. Neal, sales manager and director of Messrs. Lewis Berger and Sons (N.Z.), Ltd., who has just returned from a trip to the Old Country, Is very much to the r °‘Tle says:—‘lt is difficult for a New Zealander to realise how severe a blow to our goodwill was the result of the New Zealand Government’s experiment m inflation. While th? exchange was more or less the result of supply and demand the sympathy of all British trading classes was for New Zealand in her difficulties, but the attitude of the Government in arbitrarily increasing the exchange by 20 per cent, has alienated whole sections of the British Commercial World and must influence Britain’s future actions toward us. The pegging of the exchange occurred at a most inopportune moment. Ihe Danish trade agreement was being negotiated and other agreements —Argentine, Russian, etc.—were being reviewed and we shall only know in the course of years how expensive that Government action has been for New Zealand.’ Increase in Unemployment. “Turning to the unemployment issue, Mr. Coates accuses the federation of deliberate mis-statement, but the April figures have just been published and • show a gross total of 68,255 on the hoard’s register. This is a new high level. Unemployment emphatically has increased; A cable sent to New Zealand and published here during April stated that, the report of the International Labour Office at Geneva dealing with unemployment in the first Qh ar " ter of 1933 disclosed an increase of 13 per cent, in New Zealand as compared with a reduction in Australia and Canada. What has Mr. Coates to say to this? “The Minister’s attempt to inter that this federation described the prospective loss of the Government on the exchange rate as, a sum of about eight million pounds per annum is just another attempt to distort our clearly expressed statement into something to which the Minister can more easily reply. In quoting the estimate of eight million pounds as a likely approximate cost to the Dominion, the federation took into account the following factors —Loss by acquiring excess funds under the Banks Indemnity Act; loss of Customs duties through restricted imports floss to local bodies on debt service abroad; loss to individual firms; loss to the community through unnecessary increase in the cost of so many commodities affected by the exchange rate. “In replying to the federation, Mr. Coates brightly declares that the funds taken over by the Government had so far not exceeded the amount required to pmet the banks’ ordinary interest requirements in London. In the. same issue of one newspaper in Wellington which published this comforting assurance, we read on another page that Mr. Coates reported in connection with the Budget for the financial year just dosed that unforeseen expenditure had included £-170.000 for the purchase of exchange in excess of requirements for tlie year ended March 31. It is obvious that Mr. Coates flatly contradicts himself. Which statement is correct? Attitude to Primary Producers. “More in the strain of a’political election address rather than, a reasoned discussion of a matter of vital importance to the people of this country. Mr. Coates concludes his statement by suggesting that the importers are oblivious to the interests of the farmers and in favour of a drastic deflationary policy which would entail further sacrifices “The importers are definitely not hostile to primary producers or any other section of the community, realising well enough that only the general prosperity of the entire community can make for appreciable improvement and stability in anybody’s business.

"When the possibility of increasing the exchange rate was being canvassed in public prior to the Government action along those lines, the New Zealand Importers' Federation look a leadng part in propounding an alternative scheme to aiil primary producers which ,vas given wide publicity and sent to :he Government. This _ scheme was ’mineutly sound, but it. was tinned town without adequate' consideration.

The high exchange advocates were determined that they would not be diverted from their plan. ‘ “The most hopeful factor for economic reconstruction on the horizon today is the calling of the World Conference in Juno. There will be laid the foundation of future stability and prosperity if that foundation is to be laid at all. Recovery has only been delayed by the action of some countries in putting the brake on international trade by such utterly unsound methods as that followed in New Zealand by the raising of the exchange rate. Mr. Coates may seek comfort himself that all is well, but the people of this country know that the exchange rate has failed Io fulfil its promise to those who believed in its possibilities and has seriously damaged the interests of the Dominion as a whole.”