DEFINITE STATEMENT WANTED

Evening Post, Volume CXIII, Issue 33, 9 February 1932, Page 8

DEFINITE STATEMENT WANTED

' The constant agitation and propaganda for a higher exchange rate has led to unsettlement in' overseas trade finance. This should be ended. Exporters and importers should be advised exactly what the position is. Without a firm and definite declaration there is sure to be trouble and difficulty. Exporters, hoping that their propaganda will lead to a rise, will naturally endeavour as far as they can to hold for that rise. Importers also are uncertain of the future. They cannot be sure whether they will be able to rely on credits to cover their purchases, or whether they may have to buy from some operator in an outside exchange market. This indecision will remain until there is a firm pronouncement from the Government. There should be no unsettlement, for the Prime Minister declared last week that this was a matter for the banks, and the chairman of the Associated Banks on Wednesday denied that any alteration was proposed.

The banks doing business in Zealand (he said) had all agreed upon the current rates of exchange, andiiono of them wap likely to propose any alteration without giving notice to the others. All present indications pointed to the current rates as approximately correct; and it was estimatod on all information available at present that the exports of .the, Dominion .for this year ,wouia provide for the service of the Dominion's.oversea debt and also cover the costs of imports., Therefore, on the balance of trade, there was no reason why there should be any alteration m the existing rates of exchange New Zealand on. London.

The banks cannot, of course, be sure how the balance of trade will move within the next twelve months. An upward or downward movement may necessitate alteration of the ex. change rate; but they were able to keep the rate at 10 per cent, for almost the whole of last year, and their judgment should prpve Squally accurate this year. The unsettlement is caused, iiot so much by the known factors of trade or those trade conditions which can be foreseen, but by political factors of which the operation cannot be so exactly determined. There is widespread political agitation which is causing uneasiness. The Minister of Agriculture, Mr. Ransom, yesterday informed a deputation that another conference on exchange was to be held. While there is a conference in prospect the position cannot be regarded as final. We do not in any way deprecate discussion. Rather it is to be welcomed as removing misapprehensions; but there must be some finality.

In the meantime, the':" propaganda is doing harm. Some of those who read it obtain absurd impressions, and make absurd statements. The Woodville deputation to Mr. Ransom gave several illustrations. One speaker declared definitely that the full benefit of the exchange rate would amount to £2 for each cow, and referred to the exchange pool as a 20 per cent, cut imposed on the farmers. He added:

If tho dairy farmer lias no knowledge of the practical effect of being robbea of £2 per cow, who the dickens has?

With all due allowance for the dairy farmers' omniscience, which extends to banking operations as well as his own business, we prefer the statement of an experienced banker that the present rate is approximately correct. The banker's statement is supported by the undeniable fact of a favourable trade balance of £10,000,000 last year. Yet the Australian example of 30 per cent, adverse exchange (due to trade being off balance for years while New Zealand trade was not) has been so oft repeated that some of the farmers are quite convinced that cancellation of< the pool arrangement would immediately cause a rise to 30 per cent. And they use the unwarrantable term "robbery." With outside operation, after all this agitation, one cannot foresee what speculative rise would take place if the pool were abandoned; but we are convinced that the greater part of such movement would be speculative. It is to prevent such disturbing speculative fluctuations and a damaging recoil that we have urged the prudence of Wellguided control. If, however, there is hesitancy and uncertainty behind that control, ihe difficulty of maintaining financial stability; will be, . increased,