ONCE OPPOSED ADVANCE

Evening Post, Volume CXV, Issue 16, 20 January 1933, Page 8

ONCE OPPOSED ADVANCE

BANK OF NEW ZEALAND

Although the general manager of the Bank of New Zealand (Sir Henry Buckleton) declined to make.any comment on the advance in the rate of exchange, it may toe interesting to recall that the chairman of the bank (Mr. Oliver Nicholson), addressing the annual meeting pf proprietors of the bank on 17th June last, said:

"In January last, in order to ensure that the Government and local bodies should be,in a position to obtain exchange to meet their obligations in London, the Government instituted a system of licensing of exports, under which it was provided that the proceeds of exports should be handled by the banks. The action of the Government has been strongly condemned by exporters, who coi' and that exchange should be left free" to find its own level. •

"Doubtless they expected that in. a' free market, and^with the knowledge of the unusually heavy obligations of theGovernment and local bodies in London —estimated at fourteen million for the year—rthe rate, by skilful manipulation, could be 'forced up from 10 psr cent, to 25 per cent., pr even 30 per cent., or 40 per cent. Such rates would, of course, have necessitated an equivalent increase in spiling rates,, thereby casting a most onerous burden on public finance, which would Tequire to be met by increased taxation. "The banks made no alteration in rates because, with the .exception of one bank, it was felt 'that, having regard to their balances in London, and th '• prospective surplus of exports over imports for the season, no change could be justified. "It is certainly not the/business of the banks to adjust exchange rates to meet variations in the price of produce. Nor can they be influenced by the'rates prevailing in other countries which are our principal competitors in the London market. "Neither the Government nor the banks could view with equanimity the heavy depreciation of New Zealand currency which would result from any considerable increase in buying rates on London, and the wisdom of this is born« out by the very satisfactory terms which the Government obtained for its five million loan raised in London in April. Further, control of the exchange enabled the banks to prevent the flight of capital from the Dominion, also to prevent New Zeanad's funds in London being used for the benefit of Australia, "It may "be added that it would pay this" bank well to see the rate on London increased to 25 per cent., but the interests of the country must be regarded as paramount."