EXCHANGE POOL

Evening Star, Issue 21037, 26 February 1932, Page 2

EXCHANGE POOL

BANKS AND GOVERNMENT FARMERS' EXCHANGE COMMITTEE OH BANK CHAIRMAN'S STATEMENT (Contributed.) Mr Grose, the chairman of the Associated Banks, begins his statement by setting out the difficulties the Government was faced with in meeting its London obligations and the arrangements that were come to between the Government and the banks to overcome them. "We have no quarrel with the hanks over this arrangement; our quarrel is with the Government which has attempted to solve itsv difficulties by taking t:i; primary producers’ property at a price to be fixed by a third party (the banks) without the primary producers having any say in the price, or being consulted in any way. Wo quite agree with Mr Grose’s statement that the 10 per cent, rate charged during practically the whole of 1931 was a true and fair rate, and in accordance with the requirements of supply and demand during that year. We would like to point out, however, that the supply of London exchange was increased during 1931 by the £5,000,000 three years’ London loan that was issued, and by the issue of £4,000,000 of Treasury bills. But for the issue of these loans the supply of London exchange would have been £9,000,000 less. This must have had its cnect on the exchange market. For the current year (1932) the Government, instead of borrowing 000,000 in London, will have to repay £4,000,000. The Government requirements in London for 1932 are therefore £13,000,000 greater than they were in 1931. It is the last part of Mr Grose’s statement that we cannot see eye to eye with him. He makes one statement that we think he will admit himself was an error. He says, “The calendar year 1931 showed an excess of exports of over £10,000,000.” Tb Customs Department itself states that exports are quoteij -in New Zealand money and imports in English money, and exchange adjustments must be made to bring them together. As .all our oversea accounts are • settled in English money, 10 percent, must be deducted from our 1931 quoted exports to state them in English money. This means a deduction of approximately £3,500,000, which reduces our excess of exports over imports for 1931 to something Over £6,500,000, a sum that would have been very short of our requirements had there been no loan money. Mr Grose then gives an estimate of 1932 excess of exports, which he puts at £14,000,000, and on this basis he. states that there is no reason for an increase in the exchange rate. We quite agree that Mr Grose s estimate may very_ likely be right if the present Order-in-Couucil remains, because this Order enables the banks to make their estimates work out correctly through the power given them of rationing imports, a power which it is common knowledge the" are using at the present moment. Formerly it an importer could not obtain the London exchange he required from his banker he could go on to the open market and purchase his requirements there. Under the compulsory exchange pool he cannot do this. The bankers’ decision is final. Without his banker’s permission no one can import. The demand for the farmers’ drafts is reduced to the amount fixed by the banks under (probably) pressure from the Treasury, and the law of supply and demand in a free market is no longer operating. Drafts against farm produce are just as much farmers’ property as the produce itself, and the Government has no >more right to dispose of these drafts without consulting the owners than it has to dispose of the country’s production of dairy produce, meat, and wool without consulting the farmers. During the war produce and manufactures of all 1 kinds in many parts of the British Empire were k commandeered at fixed prices to meet a national emergency, but in no case was anything taken w'ithont consultation with the producers, and a fair price fixed in agreement with them. This is the first time on record that any Government in the British Empire has taken the products of a large section of the community without consulting the people who produced and owned the produce and without giving them any say in the price. No other section of the British Empire has done such a thing. Australia let its exchange go first to 30 per cent, and now 25 per cept,, and is meeting its oversea debt payments on this basis; and the general Australian opinion is that the result is a benefit to Australia, as its export producers are thereby enabled to pay their way. Great Britain has let its exchange go to 30 per cent., and is meeting its American debt payments on this basis. The general British opinion is that the change has benefited Britain, as it has enabled her export industries to pay their way. New Zealand is the only British country that is refusing its export industries a free exchange market. Farms are New Zealand’s export industries. Their gross income has fallen over 40 per cent., and their costs have not been reduced. Our farmers have now no net income, and they cannot pay tlieir way. The farmer' has suffered more than any other section of the community except the unemployed. The exchange situation offered them some prospect of similar relief to that already obtained by the export producers of Australia and Great Britain, and the Government has stepped in and blocked it. The farmers on this question are not asking for any Government assistance or help; they are only asking to bo let alone and to be allowed to sell their products in the best market they can get, in the same way as export producers in every other part of the British Empire are allowed to do.