EXCHANGE QUESTION

Evening Post, Volume CXIV, Issue 50, 27 August 1932, Page 16

EXCHANGE QUESTION

DAIRY BOARD REVIEW

PRIMARY, PRODUCERS'

CASE

'•Evening Post," 27th August,

-As was to be expected, the New Zealand Dairy Board, in,, its'draft annual report, makes reference ;;to tho exchange question, New .Zealand"-onl London. Outlining iho history of the,;, steps taken by the Government to establish control o£-e.i-fchango by the licensing of exports, ihs report^ states that the six banks operating in New Zealand assumed complete control over all credits and effectively prevented any free marketing of exchange. •*'lii other words, the banks secured a monopoly over all overseas funds, which gave them power to dispose of these at such prices and under such conditions as they might determine." The letter of the Prime Minister, dated 2i.nd December, giving reasons for the imposition of the export regulations, is described as "a bombshell." The report continues:— "It became abundantly evident that the Government had allowed itself to get into a position where it had to find in a few days' time £4,000,000 to meet Treasury bills falling due in London. The Zealand banks were the only source ot supply, and they dictated their own terms, viz., complete control of .exchange. The Prime "Minister and other members at Cabinet have again and again from public platforms disclaimed any responsibility for fixing the exchange rate. Nevertheless their action gave the banks this power, which they exercised most eiiectively. "WIDESPREAD PROTEST." '"The control scheme evoked widespread protest from all primary producers, as they were the principal sufferers. The Oovernment's requirements in London ■would undoubtedly have forced up the exchange rate had there been a free market for exchange, and as almost tlie ™"? /* the overseas credits are provided from the sale of export primary products, the producers lost heavily imdertho arrangement. The board joined with the Meat Board, Fruit Board, Farmers Union, and Sheepowners', Fede-1 ration m deputation after deputation to the Government in an effort to secure relief. Practically all the daily' Press of the Dominion were ranged against the; producers in these efforts, and in a great many instances clouded the issue, intentionally or otherwise, as to the aims of the Farmers' Exchange Committee, which represented .Jne: above-mentioned organisations. ... This -committee made but one request, viz. ? ;for a : v£ree exchange market.' "&0& OF INFLATION." "A larg£;'6e%tioa of.-'the Press, in what certainly appeared be an effort to drag a redpifertihg> across the trail, frequently re^teastjis^the ■■committee "was seeking t*|iia«s ? a^:aiglr: fixed exchange late. iJan^ers^lßaja^hei- commercial interests po*gtga"7 ; obfc: -the evils of an inflated eurredcMwfuch .would be brought about by -syiiugo,^exchange rate, entirely overlookingiiijie. ; .:'fact ..that the rate of exchange is not'.iespensible for the inflation, but is simply a symptom indicating that it has taken.place. It was not until late in April, 1932, that in response to a deputation of the Dairy and Meat .Boards the Prime Minister stated that •the regulations would be lifted at 30th June. "It should be mentioned that during the period of Government regulation the .Treasury floated a New Zealand loan of £a,000,000 in London, thus effectively reducing the value of New Zealand funds /nTrii M thne of writing this report (31st July), no alteration in the rate of exchange has taken place, this still stand•\ns, a..£8 lOs Per cent- premium for sight drafts." a FROM A BANKING ANGLE. Sir Austin Harris, chairman of the -Sational Bank of New Zealand, dealt "With the exchange question from a banking angle. In the verbatim report of the proceedings at the recent annual meeting of the bank, held in London, Sir Austin Eaid: "This attempt to force up exchange appears to disregard the interests of the rest of the community. Indeed, the considered opinion o£ all the [save one] banks was that the temporary advantage to the producer from a further depreciation of exchange -would be outAveighed by the ultimate disadvantages accruing, not only to the producers themselves, but to the whole community, in the form of increased cost of Government iinance, increased cost of imports, rise in anternal prices, increased wages, loss of Customs revenue, and the lowering of the Dominion's credit. Moreover, New Zealand has a large external debt and has many indispensable imports." The chairman referred to the cteps taken by the Government to maintain the credit of the Dominion and the arrangement of Government requirements in London to 31st March, 1933. He referred to "Strade balance then estimated at £ U,000,000, the assured provision for payment of present level of imports, and then added that there was now less reason than ever for raising the rate of exchange, New Zealand on London. BANKS AND GOVERNMENT. _ '"The banks (he eaid) have been accused in some quarters of exploiting the public or the Government or both for their own ends, but in the long run and in times ot financial stress it is on the strength and guidance of these institutions that the country must rely. In the critical year under review, the banks have had not only to consider the requirements of their customers and the safety of their depositors, but to meet great demands on their resources made by the New' Zealand Government. That they have been able I believe, adequately to deal with these problems may be accepted as a proof of their wise and sound policy. "I cannot too strongly emphasise that toe banks are only concerned with the financial stability and trading affairs of the Dominion. Political pressure in any direction is outside their province, and they can do no more than give the Government then? considered opinion and ad*»ce from time to time as to ways and means of finance." DOLLAR EXCHANGE RATES. Current dollar exchanges, to be quoted by the New Zealand banks as from Monday, 29th August, with previous quotations, are as under:— U.S. Dollars to £1 N.Z. Ist 6th 15th 25th 29th „ . A «S- Aug. Aug. Aug. Aug. Buying .. 3.60 3.58 3,57 3.56 3.56 fcelhng .. 3.40 3.30 3.37 3.36 3.36 Canadian Dollars to £1 N.Z. Buying .. 4.12 4.07 4.08 4.00 4.02 Selling .. 3.92 3.87 3.88 3.80 3.82 The United States dollar rates on 25th 3Asdok Vfere'' ?Us""lS' 3- GS dols -> seliin S The above rates are given for conversion of dollars into English currency or inghsh currency into dollars. Exchange 13 charged or allowed on drafts or bills drawn m dollars in the same way as if drawn in English currency. MOTUROA OIL FIELDS. Moturoa -Oil Fields, Ltd., is calling for subscriptions to .an, issue, of 40,000 cumulative preference shares, paying 6 p.c. per annum and issued at os. The proceeds o£ the issue will be devoted to the equipment and drilling of No. 3 well and further development of existing wells as circumstances require and funds permit. The No. 2 well of the company since the beginning of August last has produced to date 6300 barrels, the daily production heing twenty-one barrels. The oil is sold at profit, and the demand exceeds supply. It is estimated that wells Nos. 1, 2, and 3 should produce fifty barrels daily, and this production would give £10,000 per annum at the present price ex well. Production rasts are stated as not exceeding £3000 jer- annum.