HIGH EXCHANGE

Evening Post, Volume CXIX, Issue 73, 27 March 1935, Page 3

HIGH EXCHANGE

Payments in London

' Questions relative to the payment of exchange were asked by Sir James Allen in the Legislative Council. Sir James asked if the cost of exchange on payments made in London in respect of numerous Government accounts had been paid.' The Leader of the Council (the Hon.R.Masters) replied that remittances to London were not made for specific payments on account of the various departments of State. Such payments were made out of the Public Account, London, which was kept in credit by receipts in London and by the transfer of large sums from time to time. The cost of exchange on such transfers was shown as a separate item in the accounts of the Consolidated Fund. The net cost for the financial year, 1933-3U, was £1,797,188. Sir James also drew attention to a statement in the Statement of Accounts that credit had not been allowed for exchange on the proceeds of sales of > farm produce overseas. Mr. Masters said that a small quantity of farm produce was sold in London, but the cash proceeds were paid to^ the Public Account in London for the general expenditure of the Government. As the cash proceeds were not remitted to New Zealand, no exchange was earned. In reply to a third question, Mr. Masters said' that securities to the face value of £1,000,000 had been issued to the Reserve Bank. The Reserve Bank of New Zealand Act, 1933. provided for the payment to the general1 reserve fund of the bank to be recorded as an investment of balances of the Public Account, and in accordance lwith law the transaction had been treated as such. The trans- . actions were dated July 31st, 193U-- The investment was cold to the Public Works Fund on September 26th, 193U, and was shown as an investment in the balance of that account. "It may be explained", said Mr. Masters, "that, for policy reasons, the State provided the general reserve fund of the bank in lieu of subscribing share capital, and the surplus profits of the Reserve, Bank, payable to the Consolidated Fund represent the return on the investment. The investment of £1,000,000 is, of course, offset by an addition to the Public Deb"t of an equal amount. The net effect of the entries made is exactly the same as if £1,000,000 in cash had been borrowed and paid to the Reserve Bank for investment in the equivalent of shares and the Reserve Bank had used the cash to purchase Government stock. An issue of £1,000,000 of Government stock was involved in any case, and it simplified matters to issue it direct to the Reserve Bank in the first instance."