INFLATED EXCHANGE

Evening Post, Volume CXVI, Issue 83, 5 October 1933, Page 11

INFLATED EXCHANGE

POLICY DEFENDED

"BENEFIT TO INDUSTRY"

Arguments in support, of the high exchange rate were advanced in tho House of Representatives last evening 'by the Government member for Invercargill (Mr. J. Hargcst), who contended that two beneficial effects of the Government's policy had been, fo cause ;i revival of industry and to lead to an increase in savings bank deposits. Mr. Hargest said it was a fallacy to say that the high exchange rate had led to an increase in. the cost of living of the workers, as all the goods they consumed were either grown or manufactured in the country. He admitted at once that high exchange did not ■bring any fresh money into the country, but he did suggest that tho effect was to create fresh money. Mr. J. A. Lee (Labour, Grey Lynn): Who creates it? The banks? Labour, said Mr. JTnrgcsl, suggested a guaranteed price. If that plan were pnt into operation, Labour would have to pay as high v price or a, higher price than that ruling today, and although the system, might work for a year or two the time would ivCTilably come when there would |jr

"a. show-down. Labour would have to borrow money, create new currency, or create new credit. Mr. Lee: Thcro is another way, increased wages. NO OTHER WAY. Whatever happenod, said Mr. Hargesl, Labour would have to devalue the currency, and the effect would be the same as the. high exchange policy. He could see no other'way out of th© argument. He was'one of those who had advocated high exchange and he still bclioved in it. Thoso who opposed the Government's policy, both inside and outsido the House, had neglected to consider the beneficial effect which the policy had had on industry. Industries in all parts of tho country had been enabled to keep going as a result of the oxchango manipulation. Ho personally knew several industries which had been languishing- a year ago and which were now making progress and employing more workers. Mr. Hargcst instanced increased activity in the woollen mills, in the timber industry, and in tho flax-growing industry. Mr. A. M. Samuel (Government, Thames): Tho 'flax industry has been subsidised by the Unemployment Board. Mr. Hargest:- Yes,.and they needed that, too. It was also claimed that tho smaft farmers had received no benefit, but in Southland there was a factory which had been able to pay its suppliers a bonus of Id a pound, said Mr. Hargost. He wondered if opponents of high exchange had reflected on the serious consequences which would follow a sudden, reduction in the rate. He contended that if the rate was to be lowered tho action should be gradual, so as to prevent the speculator from taking advantage of the position. Mr. Hardest also referred to the fact that deposits in the savings bank had increased since the exchange rate , had been raised, and said that in May last the doposits had" exceeded tho withdrawals for the first .time in five years. That represented the money of the small people. ' Mr. Hargest also paid some attention to the affairs of the Southland Power' Board, defending it in. its action in paying interest in New Zealand currency. The Power Board had not been responsible for raising the rate of exchange, and it was determined to obsorvo its legal responsibilities and nothing else. . ■ "COUNTRY WOULD ENDOESE IT." Support for the Government's high exchange policy -was given by Mr. A. E. Jull (Government, Waipawa), who said that if there was an election the Government would be returned with its policy endorsed. Defending the increased exchange, he pointed out that even if the bounty had been given it would have been class legislation. Mr. Jull said he still supported the high exchange. As long as Australia had a 25 per cent, exchange, New Zealand had to be very guarded about altering the exchange rate. Referring to imports of British goods and the state of British agriculture, Mr. Jull said that there would be no differentiation between one Dominion and another, even if one Dominion treated the Old Country better than another. Members should pay a littlo more attention to their neighbour on tho other side of tho Tasman than to the gentlemen who posed as the Importers' Federation. "I venture to say," said Mr. Jull, "there are thousands of people in this country who would not notice any difference if the members of the Importers' Federation packed up their typewriters, formed a procession with their president at the head, and cleared out of the country. It is an awfully ?ad thing, but that is the position. These people seem to spend the whole of their time running round the country tolling the people that if only we could fix up ..this exchange business it would meah the salvation, of tho world." Ho suggested that the Government should make a statement to tho effect that the exchange rate would not be reduced for a long time; and when it was reduced, it should be reduced very slowly: 5 per cent, at first, and then 2$ per cent, perhaps. The country had made up its mind, and having made up its mind could not go back on its decision. AUSTRALIAN POSITION. Mr. "W. E. Barnard (Labour, Napier) said that the Australian high rate of exchange, first, of 30 per cent., and then 25 per cent., was; in operation for something like two years before New Zealand's rate was lifted from 10 per cent, to 25 per cent. ' The Prime Minister in December said he was satisfied that New Zealand had acted pro-, perly in leaving tho settlement of the exchange rate to the banks, the rate then being 10 per cent. Despite the bogy of the handicap that the member for ''Waipawa apparently saw, the country got along at least reasonably well for two years, and it seemed to the speaker that a groat' deal of what the member for Waipawa had said must go by the board.