EXCHANGE ON WOOL

Evening Post, Volume CXV, Issue 25, 31 January 1933, Page 10

EXCHANGE ON WOOL

WHO PAYS IT?

The rise in the exchange rate between New Zealand and London has made a big difference in the price of wool to the New Zealand grower, but the buyer of the wool actually pays no more than he would have done, had the exchange rate ,<l! n mft a3 tt -(states the Auqkland btar ). Whether the buyer decides,to pay lor the wool he buys in New -Zealand currency or in English currency, he does not pay any more in actual fact. Suppose he decides to pay in New Zealand currency. He gets from the bank £124 to pay for wool purchased. At the present telegraphic rate, £100 in London will satisfy that £124 in New Zealand. If he decides to pay in English currency he goes to the bank, which takes over his documents promising; payment in London. The bank makes him an allowance .of onehalf of one per cent, more for this form, the amount being allowed for interest for one month at 6 per cent./ during which time the documents-are going to England. During this time the bank is ■ out of the amount of the bill, but, as the buyer has the use of the money, the interest .really cancels out and favours neither side. In a transaction of this sort the payment of £100 in London satisfies the debt.

It makes no difference whether the buyer is doing business on behalf of English or foreign firms, because all payments. are settled in London.

This simple instance emphasises clearly the elementary fact, that the people of New Zealand—and none other—must pay the additional amount which accrues to those who export wool or other produce from the Dominion as a result of the advance in exchange.