SERIOUS LONDON VIEW

Evening Post, Volume CXIII, Issue 142, 17 June 1932, Page 8

SERIOUS LONDON VIEW

PROPOSED SUBSIDY TO

EXPORTERS

Commenting on the New Zealand exchange rate controversy, tho "Financial Times" of yesterday's date, 16th June, states: "There is no reason for bringing about an artificial unwarranted rise in the exchange rate. Tho majority of,-the. New Zoaland banks are opposed to depreciating the; pound, but the onus is. on the Government to stop an in? crease in the rate. A rise might assist tho primary producers, but it is a two-edged-sword and any benefits are outweighed by the heavier wage costs, supplies, freight, and external debt service.

Deliberate depreciation would seriously affect imports and reduce revenue. Increased taxation would follow and would in turn react against the primary producers. "*

It is admitted that farmers- need assistance, but the banks prefer to give it direct rather than by exchange manipulations; and it is understood that the banks are prepared-to give a subsidy in the form of an export bonus if the case for the increase falls to tho ground."

Tho journal quotes Professor Gregory that its argument that tho present rate seriously overvalues the New Zealand pound loses its force in the light of the past month's trade figures. Depreciation in. exchange would adversely affect Government finance and credit.

Once the movement is initiated it will be difficult to check it, and in the long run the New Zealand community will pay-

"It has to be remembered that 80 per cent, of New Zealand's trade is with Great Britain, and that she takes nearly 50 per cent: of her imports from the Mother Country. But with all other countries New Zealand has an adverso balance, and it is essential 'that 'she should do nothing to offend her best customer."

The "Financial' News," in addition to carrying a strong letter pointing out the danger, of an increase, states in its own comment that "if tho rate is raised it might compel other banks to follow, but normal forces would compel a reaction,"

It is understood that representations are being made to Mr. Forbes regarding some action being taken to prevent any increase in the rate before the- Ottawa, Confereriec. *

These quotations wore received by cablo from I/ondon this afternoon. '