HIGH EXCHANGE

Evening Post, Volume CXX, Issue 116, 12 November 1935, Page 6

HIGH EXCHANGE

GOVERNMENT CENSURED

COL. MCDONALD'S SPEECH

The Government's, administration policy, particularly so far as the exchange rate and the ' Reserve Bank were concerned, was severely criticised by Colonel T. W. McDonald, Democrat candidate for Wairarapa, in an address at Upper Hutt last night. A feature of Colonel McDonald's address was that at no time did he attack Labour. Despite the adverse weather there were about 180 people present,, and at the conclusion of his address the candidate was accorded ■ a vote of thanks and confidence, there being only two or three dissentients. There were many interjections, but the candidate dealt with them effectively.' "The greatest problem facing New Zealand today is the exchange question," said the candidate. "It is, in, my opinion, responsible more than anything else for the state of depression we are going through." There would have been a depression without it, and there was one before it, but the exchange inflation, the manipulation of the exchange, had accentuated thev unemployment problem, the business depression, and the lack of confidence, both of the people inside and outside the country, with the obvious result that the wheels of industry had refused to turn at the rate they should. If the Democrat Party got into power the wheels would turn at the right speed before long, because the party knew the principles which were operating against the smooth running of the wheels. Exchange manipulation operated in the interests of those few speculators who were favoured with advanced information of the Government's intention to raise to and peg the exchange at 25 per cent. One big firm that was tottering on its feet was able, as a result of the increased exchange rate, to • pay preference dividends, pay out a good sum on its ordinary shares, put a large amount into its reserves, and was not required to make provision for borrowing. The people paid for this. OTTAWA AGREEMENT. Mr. Coates went to Ottawa and Mi\ Stanley Baldwin entered a solemn compact that Britain would raise the foreign tariffs for goods coming into England in order that New Zealand would continue to have a preference for her goods. Mr. Coates gave his word that if England would do this New Zealand on her part would lower as rapidly as possible the tariff barriers that were operating against English goods coming into the Dominion. This was the proper thing to do. Mr. Coates gave his word, but what happened? Mr. Baldwin carried out everything in the agreement, and Mr. Coates led this country to believe that tariffs would come down, but instead of doing this he raised a tariff against British goods coming into New Zealand to the tune of 25 per cent., plus another 5 per cent, because it operated on the insurance and freight as well as on the goods. What did Mr. Baldwin and England think of that? They said: "Oh, well, we have nursed you long enough, w.e will-, nurse you no longer. We will now send our money for investment into foreign countries." And this was what happened. England kept her word; New Zealand failed to keep hers, and the quota was to be applied to the Dominion on August 20 last. Mr. Coates and his retinue went to England again, and with the full concurrence of Mr. Forbes he figuratively prayed to -Mr. Baldwin not to apply the quota until after the General Elections were over. This Britain agreed to do. The quota, however, was coming, and nothing in the world could stop it while the present Government remained in power. If .the people voted for the Government they were voting for the quota against their own goods. The exchange, continued the candidate, had nullified itself. The British people who had been trading for hundreds of years could not fail to see through the trick. The exporters of English goods to New Zealand said: "We will neutraliss this straight away. We will pay you 25 per cent, less for the goods that you send over here," and that was precisely what they did. The total known direct cost of the exchange to the taxpayer up to March 31, 1934, was £8,853,272. I

The increased exchange rate was a direct breach of both the letter and the spirit of the Ottawa Agreement, The Democrat Party would bring the exchange back to its proper basis.

RESERVE BANK.

Colonel McDonald criticised the Reserve Bank, which he said did nothing more or less than hide the exchange manipulation. Wrapped up in the Reserve Bank was a heavy liability on the shoulders of the people, and the day the exchange came off — and it must come off to save New Zealand—they would have to foot a bill for £4,000,000 immediately. There was not the slightest need for the Reserve Bank in New Zealand.

The Mortgage Corporation and the sales tax, which, he said, was the twin brother of the exchange, were also attacked by the candidate. The sales tax, he said, was taking over £2,000,000 a year out of the people's pockets.

PARTY'S POLICY.

The Democrat Party, continued Colonel McDonald, would not wait for financial conditions to permit; it would create the requisite financial conditions by its bold, positive, and constructive policy. It would give assistance to those farmers who needed it, and only so long as they needed it, by a direct production bonus.

A voice: Where is the money coming from?

Colonel McDonald: From the savings out of the exchange, which we will taka off.

The party would give the utmost possible support to all those industries, manufacturing and otherwise, which could be developed upon sound, economic principles, and its policy of putting the unemployed into work at standard rates of pay would be of incalculable assistance to all such industries.

"We must rid ourselves of the false belief that we are merely a farm for the Old Country. Britain, by the application of the quota, is ousting this idea. Regarding tariffs, we will follow the Ottawa Agreement, which the National Government has so unceremoniously thrown overboard."

Among other tilings' the Democrat Party intended to do was to restore in full to all branches of the Public Service the salary and wages cuts, increase old age, widows', soldiers', and all other pensions under a national health and superannuation scheme, reduce the unemployment tax to ad in the £, abolish the levy, restore the main highways funds to the purposes for which they were intended, abolish the sales tax and gold tax, reduce the number of members of Parliament, cease to do capital works out of taxation, unify and co-ordinate the education system, restore the cuts to teachers, Increase the powers and allowances of school committees, and abolish the Rural Mortgagors Final Adjustment Act. i