TRADE AND PROFESSIONS WILL PAY “A HUGE GAMBLE”

Evening Star, Issue 21315, 20 January 1933, Page 8

TRADE AND PROFESSIONS WILL PAY

“A HUGE GAMBLE ”

BUSINESS LEADERS' STRICTURES FLAGRANT BREACH OF TRUST [Per United Press Association.] WELLINGTON, January 20. Mr Salmond, president of the Importers’ Federation, when interviewed, said the effect on the importer would bo to increase his costs. “ The importer will have to increase soiling prices by that increased cost, plus the usual proportion of profit on that cost. The retailer, in turn, will pass on the increased cost to the consumer. The effect of the increased exchange ratc_ will bo that the public will pay an increase for the benefit of the financial institutions. “ Inevitably the Government will be faced with increased debt charges, estimated round about two millions per annum, which amount it no doubt will endeavour to collect by an increase of income tax, which will come out of the pockets of the trading and professional members of the community. “ It will mean a decrease in the turnover of many businesses, with the result that staffs will have to be reduced, thus creating further unemployment; and this probably will mean a further addition to the unemployment tax,” At a meeting of the Businessmen’s Committee, held this morning, at which Mr Salmond presided, a resolution was carried unanimously which says; “ This committee regards the Government’s decision to impose political control of exchange as a deliberate and flagrant breach of confidence, recalling that last November, Mr Forbes reiterated his previous declaration that exchange was a matter 'solely for the hanks, and told a deputation that he thought it would have been in the proper place if it had waited upon the banks. It is this reversal of the Government’s previous policy that we regard as a flagrant breach of confidence and public trust. We believe it can only have consequences of the gravest effect to t|io dominion as a whole.”

UNNATURAL INTERFERENCE DANGEROUS CONDEMNATION FROM BUSINESS MEN i “ The artificial pegging of the exchange rate is a huge gamble—and not a sound gamble, at that,” declared a leading stock and station agent, whose opinions are always highly respected in the business community, to a ‘ Star ’ reporter to-day. His views on this question are well-known in commercial circles, as he' has been unwavering in his condemnation of any pegging of the exchange. “ Those of us who hold the views we do, not only agree with Mr Downie Stewart’s action, but consider that he has shown remarkable pluck,” said the agent. One could not help thinking that anything which interfered with the natural course of events must lead to trouble. One could not see what all possible troubles might be. But considering that the Government had reached the limit of its power of taxation, one could not help wtondering just how much value there was in the Government’s guarantee to the banks. If the Government could not raise the extra millions that it was going to cost by the raising of the exchange to 26 per cent., it simply meant "that the banks t would have to lend the Government the amount they would lose, which was equivalent to the banks lending the Government four or five millions to be paid out in bounty.

But one had to bear in mind this: That if this high exchange went on for two years, and the accumulated losses ran into four or five millions, 'and the surplus of New Zealand money in London became, by that time, so great that there was no justifiable reason for carrying on the high rate, what was the effect going to be on the general community when the high rate had to be seriously reduced or wiped ' out, as would be the case if a large surplus of New Zealand funds were in -Loudon ? If one bore in mind that the prospects seemed to indicate that the natural courses in our markets for meat, wool, and dairy produce were towards prices slightly higher than the unpayable prices that had existed, it seemed very likely that the accumulation of New Zealand funds in London would, within a little more than twelve months, and particularly in view of the increased rate of exchange, be very heavy. There was no way out of getting that money out of London except by the purchase of goods, and one could not imagine that, so long as this unnatural-rate of exchange existed, traders would buy freely enough in Loudon to have any appreciable effect on the accumulated surplus of New Zealand money. The internal effect in the dominion of the raising of the rate would be that prices for meat, wool, and dairy produce, being based on their sale price to go overseas,"' would be raised, and the cost of living thereby increased, said the manager. How, under such circumstances, it ,was going to be possible for the. Government to increase taxation in any way to cover oven a portion of its loss, was a mystery, particularly in view of the fact that their unemployment schemes seemed to bo growing unfinaueial, indicating that possibly increased taxation for that purpose would be required. The immediate effect on wool, irrespective of any other market movement, would be a rise of" anything from Jd to Id a lb, according to. the value. The effect on meat and dairy produce would be id a lb. It had also to be said that wool, at the last sale, averaged only about 6d a lb. The rise that would come through this increased exchange would still not bring the price up to such a value as would leave a margin over the cost of production. “ Hence there is no doubt that most of the improvement will go to the mortgagees or landlords so far as the farmers are concerned,”, concluded the agent.