EARLY AUST. MOVE TO RAISE POUND THOUGHT UNLIKELY

Gisborne Herald, Volume LXXV, Issue 22728, 28 August 1948, Page 5

EARLY AUST. MOVE TO RAISE POUND THOUGHT UNLIKELY

(N.Z.P.A.—Reuter— Copyright.) (10.30 a.m.) LONDON, August 27. Well-informed London quarters do not support Australian conjectures that Australia will appreciate her currency to parity with sterling this week-end or the near future, says Reuter’s financial correspondent. They regard as open the question whether she will eventually do so.

If a change is ever made, the decision • would be made wholly in Australia and would be announced suddenly. The mere fact that the Australian wool-selling season opens on Monday is not regarded as warranting expectations of action before then. If action came from London it could certainly not be expected this week-end or the near future. Such London action could only take the form of depreciating sterling against the dollar. While many believe this may happen eventually, no well-informed London quarter expects it in the near future. New Zealand’s independent action itself negatives any early expectation of sterling depreciation against the dollar. If New' Zealand had seen any indication of that coming quickly, she would certainly have waited for it. Her independent action saddles her with an undcsired appreciation against the dollar as well as the desired appreciation against sterling. Australia’s dollar trade is relatively more important than New Zealand’s, and the undesired appreciation against the dollar would thus be more serious for Australia than New Zealand. The consensus of opinion of leading British economists is that the depreciation of sterling against the dollar should come eventually, but not before the present world inflation turns into world deflation. That will not happen this week-end or any near w-eek-end. "Indications are growing that an adjustment in the exchange value of the Australian pound may not be far off, says the financial editor of the Sydney Slim “During the past w’eek money lias been pouring into Australia, especially from the United Kingdom and British possessions in the East. This flow, which began when New Zealand currency was placed on a par with sterling, has been increasing daily, according to reports from the trading banks.

“This rush by people overseas _to convert their money into Australian nounds is understood to be due largely to the belief that Australian currency will be brought, partly or wholly, to parity with sterling sooner rather than later.

“Some financial circles, reading between the lines of the. Prime Minister’s statement to the Loan Council that Australia would not vary the exchange rate with sterling unless sterling was depreciated, see an indication that the move which would bring Australian currency closer to sterling may come from London.”

“Sterling depreciation would automatically cause the appreciation of the Australian pound in relation to the English pound without any direct move on the part of the Australian Government which could then disclaim responsibility. In t.he circumstances financial circles say that Australia would also he relieved of the obligation under Bretton Woods agreement not to vary by more than 10 per cent, its rate of exchange without, the permission of tlm international fund. “The oninion is widely held in business circles that it, would be well if the air was cleared before the opening of the new season wool sales on Monday. Some go even as far as to sugfest that an announcement regarding the exchange rate may be made over the week-end.”