EXCHANGE RATE

Evening Post, Volume CXXVIII, Issue 11, 13 July 1939, Page 14

EXCHANGE RATE

SHOULD GO HIGHER

APPROACH TO GOVERNMENT

BURDEN OF COSTS

The great burden of costs bearing on the farmers was stressed by speakers during the debate on a remit from Southland urging the freeing of the exchange rate. There, was a sharp division of opinion on the subject, but finally a motion was generally accepted urging either a reduction of costs or the raising of the" exchange rate. This was adopted with only one or J • two dissentient voices. ; • j Mr. E. A. Cameron (Southland) said j it would appear that tlie freeing of J exchange would sbe the best way of meeting the difficulties of the farmers. It was a matter, more for. experts than j for the man in the street. ; : ; A delegate: We're experts. Mr. Cameron said they all knew what the result of freeing ; the exchange would be. He considered it was the best remedy for farmers' ills. Mr. R. S." Thompson (Otago) said that if the exchange were freed and stabilised at 150, farmers would receive a2O per cent, increase. Increased farmers' purchasing power meant increased' prosperity for all: / . Mr. A. E. Martin (Auckland), said the freeing of exchange looked a wonderful thing. When the exchange was raised before,' there was an accumula tion of £44,000,000 overseas. A goo»' season neki year would increase fundu overseas. If exchange were freed,, and the Government went in for borrowing, exchange would drop to par or below. . . \ ~ Mr. H. O. Mellsop (Auckland) agreed with Mr. Martin,; and saidv that not only would the exchange drop, but it would leave higher costs. The farmers had opposed tariffs, and a higher sxchanfie would increase tariffs. Freeing the exchange would put up costs. NO "FREE" EXCHANGE. Mr. A. E. Robinson (Auckland) asked what was meant by "free exchange." There never had been a "free exchange" in New Zealand. He opposed ail increase in the exchange, but said a primage duty on imports, an excise duty on manufactures, and a bounty on exports would make a preferable policy. Mr. B. Clearwater (Invercargill) said free exchange was an ideal to work for and he was not one who had supported the pegging of exchange at its present level. High exchange would have a blanket effect and would be a distinct breach of the Ottawa Agreement. There were some who did not

need a lift but- it the exchange were pegged everybody would receive a benefit, whether they needed it or not. Moreover, a high exchange would increase costs all round and would help speculators. He believed that in the past the farmers had been led' by people who were not really concerned with the welfare of the primary producers. Mr. A. E. Lambert (Auckland) said that if a surplus eventuated in the Dairy Industry Account as a result of an increased exchange, there was no guarantee that the dairy farmer would receive any increase, though the dairy industry would have to bear all increased costs. Mr. L. Hammond (Marton) said he was surprised at the opposition of Auckland farmers to a high exchange. High exchange was an economic method of meeting the difficulties of the primary producer. When the exchange was pegged at 125 there was an actual fall in the cost of living, but the benefit had been cancelled out by the action of the Arbitration Court in raising wages. The importers would welcome the freeing of the exchange. Mr. L. T. Daniell (Wairarapa) said that the proposal would help the Gov- 1 erhment as holders of dairy produce. It would also help .proprietary freezing: companies sending produce overseas, banks holding balances overseas, and the wheat growers. If there were overseas borrowing, and Mr. Nash fulfilled his hopes, there was a danger of exchange dropping. He, ventured the opinion that when the armament rush was over England, America, and France might go a few points further away from gold. Mr. A. C. Cameron (Otago) said the fanner was definitely entitled to more than he was getting. One advantage of the high exchange was that the benefit applied at once. That was what had happened when the exchange was pegged at 125. The farmers should be consistent and should support the Dominion executive of the union, which had linked up with the Primary and Ancillary Producers' Council in its advocacy of a free exchange. Mr. W. J. Thomas (Wairarapa) said that the exchange should be fixed according to the value of the English £ and the New Zealand £. "Free exchange" was not a correct thing. The farmers wanted a true relationship between the English and New Zealand pounds. TO FINANCE COMPENSATED I PRICE. I Mr. Briscoe Moore (Auckland) moved I the following amendment:— That while we believe that longterm policy should be directed to reduction of costs to a point that enables profitable primary production as an emergency measure to meet the present crisis in- sheep farming, we advocate the issue of a special Reserve Bank credit, non-, repayable and non-interest bearing, i for the payment of a compensated! price on meat and wool; such price] ,to be paid through freezing works i and woolbrokers without the com-1 , mandeer of produce, and to be suffl-J ; cient to satisfy the following con-j ditions: — ,' '; 1. To allow the farmer to pay competitive rates for wages; ;2. To allow him interest on, capital invested in land and stock: •To enable Kirn to meet increased :• costs imposed by legislation, includ-, ing tariffs; N 4. To allow him a remuneration commensurate with the service he renders and - with , that obtained by ; other members of the community who' render equal service. Concurrently we recommend^ the immediate setting up of a Royal Com- :■ mission to investigate the economics .■ of the industry and its place in the economics of New Zealand. : Mr. Moore said. they all disliked inflation, and his proposal was less inflationary than high exchange, under which a present was made to the un: deserving and costs increased. 1 Qaptain H. M. Rushworth (Auckland) said that the money resulting from a higher exchange was costless, noninterest bearing, and non-repayable as long as it was rising. The position was that the conference was asking for an inflation of the New Zealand currency to tile extent of £10,000,000 or £12,000,000 for the purpose of devoting £3,000,000 to where it was" wanted. How much better it would be to have a special issue ot, money so that it could be put where it was wanted. The president said that any alteration of the exchange rate was detrimental and the committee which recommended the freeing of the exchange did so in the belief that it was the least objectionable method of overcoming the difficulty. Whatever was done—whether exchange went up or whether it went down —the Government could do what it liked by its own actions. A free exchange tended to prevent an increase in costs by Government action, and it enabled the public to realise that inflation was taking "place. A fixed increased exchange would bring some disadvantages, but the suggestion that

increased costs would result from, th* freeing of the', exchange was somewhat exaggerated. There would be a small increase in farmers' costs possibly, but they would receive a much . larger return. A credit that would be non-payable and non-interest-bearing would be of no value at all. A delegate: Not non-payable—non-repayable. 1 Mr' Mulholland: A nonvrepayable credit is non viable. . The amendment, if *dopted, would have the effect of malring the, position very much worse for the primary producer. What the amendment was really asking for was a subsidy by inflation. CONTROL BY RESERVE BANK. Answering a. question, Mr. Mulholland said that by "free exchange"-the committee meant a .free exchange controlled by the Reserve Bank., "The external value of your money should be the proper value; and not an .artificial " value," said Mr. Mulholland. Mr. Martin said that if they . lent themselves £6,000,000 from their ownbank there could be no, question of having to pay it back. Mr. Mulholland:; Oh, no. The money is lent to individual people. If the money is writen off everyone of those people will lose the'; amount: that has been lent to them. " '. ' Voices: Oh, no. They've still got it. ' ' <■■ Mr. H. Morrison (Wairarapa) said that if the exchange went up. to 140 it would have to come down,, and there would be a crisis again. There could not be a free exchange, as stability was essential. " '. - Mr. R. O. Montgomerie (Wanganui), said that until the internal price level was lowered they would never get anywhere. What was wanted was a nation-wide writing down of costs. At present they were only nibbling'at the problem. • . Mr. W. A. Sheat (Tafanaki) said th» real solution was a reduction of costs. •'When we speak of, 'high costs we are really, referring to the lower value of our money," he said.: "The rate of exchange today does not represent the true relative value of our money and, sterling." Mr. D. G. Gordon ;■' (Wellington) asked what guarantee was there' that the Government CQuld stabilise" costs, and if the exchange came down the farmer would be in a worse position. He opposed free exchange. The amendment was lost by 22 votes to 40. 4 } Mr.\ Thomas moved, as a further amendment: ' ' That in order to: bring fanners* costs and prices into line, this conference urges the Government either to bring costs down or'else, through the Reserve Bank, raise the exchange rate of the New Zealand pound to the pound sterling, which will reflect the difference in.the' price, level of the two countries, at the same time . "reducing tariffs proportionately. This „ would necessitate an* adjustment of . guaranteed prices oi products for export. J j-1 r This was carried with'" a few dissentients. : MARCHING ON PARLIAMENT. "Now, what are .we going to do about it?" asked a delegate when, the motion < had been carried. • :■ \. ..' Mr. A. C. Cameron said he understood that Mr. Savage had intimated that he would be unable to meet "a deputation from the conference today or on Friday. "Well.'* said-Mr. Cameron, "we should demand the presence of the Prime Minister.' .._lf- .wharf • lumpers can go up and;see the Ministers w,hen they want.to, ■'then surely we can. Surely if we jgo-j up to Parliament, tomorrow, we can his presence. I will move jthjjrt.'' Mr. Sheat: And I will second" that. If Mr. Savage can find im\e to- perambulate the country inspejeting-'-factories and being kissed by employees,: he should at least make it possible for us to see him. , : ■ -' - Mr. H. J. McLeaney (M^nawatu) said that Mr. Savage had tdld>-the Kuku farmers that they had' no- ne.ed to come to Wellington to see him. They could have rung him- on the telephone. A delegate: Let's givq ljim. 'a" ring now. (Laughter.) ,.1 '<- Mr. Mulholland: Mr. Savage, no t doubt, has a reasonable excise. I suggest that we inform- him! tliat- a deputation is coming up tomorrow -after- . noon and ask him to.makje arrangements for some Minister $o receive us. ,"'%.■.' Captain Rushworth: As the chief constitutional adviser to-,, his Majesty is not available, his deputy ;shptild be communicated with. - 7 Mr. Mulholland said \t rwould be more proper for the conference to communicate with Mr. Savage and ask him for other Ministers'to be present. The Hon. F. Waite (Otagfo):. said that the farmers would make fdolfe of themselves if they marched on Parliament without making decent arrangements. If Mr. Savage was too busy,-'then arrangements could be mads for" other Ministers to see them^ -V _ '- It was decided to leave the" arrange* merits to Mr. Mulholland and CaptainRushworth. , ... * .