PAR EXCHANGE DEBATE OPENS

Grey River Argus, 25 August 1948, Page 5

PAR EXCHANGE DEBATE OPENS

OPPOSITION ON THE RAIL LEADER’S CRITICISM MOSTLY FOR MINISTER WELLINGTON, August 24. The Budget debate was opened in the House to-night with crowded galleries. Mr S. G. Holland, Opposition Leader, opened the debate.

Mr Holland said that Mr Nash should ask leave of the House to withdraw his Budget, and replace it with one which really meant something in the light of his announcement of the restoration of New Zealand exchange to a par with sterling. Mr Nash had concluded a dreary Budget on Thursday with a few sentences of far-reaching importance for every New Zealander. Mr Holland said that he believed that Mr Nash’s announcement has been not unfavourably received. He believed, however, that the reaction of the public had been based on the Minister’s announcement, which did not contain the full facts. There would be, he said, an upheaval of trade, with importers trying to rid themselves of goods bought on the old exchange rate, and with the public resisting sales in the hope of cheaper prices. RIGHT OR WRONG? . He said that as the exchange parity now was an accomplished fact, there would be no point in discussing whether it was right or wrong. He said he would leave no doubt in the public mind as to where he and his Party stood on the matter. MINISTER CRITICISED He said that the Minister knew perfectly well that New Zealand, as a whole, would not be able to buy one pound more in goods It was money which we had overseas that would buy goods, and not money that we had in New Zealand. The Minister, in the shelter of a broadcasting studio, had put the maximum emphasis on the benefits of the altering of the exchange rate, but had made minimum reference to those who • would suffer. He said that the simple facts were that for every pound in benefits to people, there would be a pound of disadvantage to others, FARMERS' INCOME DOWN He claimed that the variation in the exchange rate meant that exporters’ income was down by thirty millions. Would the Minister be prepared to go to watersiders, miners, and others and ask them to accept a twenty per cent, slash in their incomes and then draw on their savings in order to maintain those incomes? That was what, in effect, the Minister had told farmers. Other problems had been glossed over by the Minister, who had said that importers and manufacturers with stocks landed at higher prices might worry a little, and their best course would be to meet the situation at once. That meant that they would have to write their stocks down and sell at below cost price. TIME TO CLEAR STOCKS Mr Holland said that he believed that it would be the Government's plan to give the traders a certain time to clear these stocks, and then force them to sell below their cost price. He thought that the Minister was having “a bit both ways” during his broadcast talk on Sunday when he said that the manufacturers might have to meet sharper competition, but would be adequately protected by import control. ' . GUARANTEE WANTED He asked whether, after endeavour- 1 ing to create an impression that everyone would be better off, the Minister would guarantee that, and whether he would meet the proved deficiencies. He doubted if there would be any redress. He said that the Government’s attitude io reply to those attempting to gam redress would be that it was “just too bad”. LOWER COSTS PREFERRED TO HIGHER WAGES The Opposition, he said, had always fought inflation. The Opposition believed that, where a choice lay between higher wages and lower costs, then lower costs were the preferable course to follow. He believed that the return to exchange parity would assist to that end. ... .. . Mr Holland agreed with all that the Minister had said as to the need for secrecy in th2_move that had been made. He complimented the Minister on the completeness of the secrecy observed. NOT TOO BAD! Mr Holland said that, fortunately, the farmers, who were those mos. adversely affected, would, through their own savings and their recent increases in their overseas prices, have something to work on to ease the burden, but that many exporters without reserves would have a difficult adjustment period. TIME FOR A CHANGE. “Let there be no doubt as to the attitude of the Opposition on the question of exchange rates’, said Mi Holland, “we have always wanted our currency to be on a sound basis, and the relationship between the New Zealand and the British currencies to be real. The New Zealand currency has been on an artificial basis for many years”. HEAVY IMPORTING ADMITTED Mr Holland said that there could be no quarrel with the getting back to a sound basis. But the Opposition believed that the process should. have been a gradual one, taken, in progressive steps at irregular intervals. Mr Holland said that if this step were to be taken, a better time would have been a year ago, before the heavy year’s importing began. However, with nothing having been done earlier, it was better to start now than to delay any longer. Mr Holland said that Mr Nash had much to explain as to why he allowed his negotiators to go to London to enter into produce negotiations With the United Kingdom on a basis which had now been rendered entirely false, almost before the ink was dry on the agreements providing that anv rise or fall in prices be limited to *7* per cent, yearly. Mr Nash, in three minutes, had cut the farmers’ income by twenty per cent., which was as much as the United Kingdom could do in three years. For the producers of dairy produce, meat, tallow, skins, and pelts, the position was not an unsatisfactory one if our internal costs did not rise. However, the producers of wool, which was one of our biggest exports, • and for which there was no contract price, were hard, hit by a twenty per cent, reduction in income. Last year, he said, our wool prices had reached a new high level. But now, after enjoying that level for only one season, ,wool growers had

their incomes slashed by their return to exchange parity with Britain. GUARANTEED PRICE OPPOSED Mr Holland said that the farmers’ pool accounts had been built up for a specific purpose out of farmers own money, but if farmers wanted their money, the Government would have to borrow or inflate so that the farmers could get their money. It seemed fairly obvious, from the Minister’s statement last Thursday, that he desired to force primary producers into a series of Government-control-led guaranteed price schemes. But with the experiences of dairy farmers in their negotiations with the Minister and their final carrying of a unanimous vote of no confidence in him. the farmers would shy clear of any such schemes in future in which the Minister of Finance was the principal negotiator. EFFECT ON FARMERS

Mr Holland said exchange parity would have a varying effect on farming costs. Those on good, high production land, producing lamb and butterfat, would receive the advantage of the higher prices just arranged. They would receive some reduction in costs through the lower prices of imported goods and materials. Farmers on marginal land or high country would face a difficult position.

EFFECT ON PRICES Mr Holland said that in the balance sheet survey of the position created by the lifting of the exchange rate to par, importers would benefit by 10 to 25 per ..cent, or more in the prices of the goods. The reduction would not be felt by the individual. Imported goods would be cheaper. They would not be more plentiful. He -asked would the Government, to protect local industries from stronger competition, impose a lockout of competing lower-priced goods? New Zea-land-made goods might be expected to fall in price. The fall he calculated at from 5 to 10 per cent., depending on the imported content. Manufacturers would have to meet much sterner competition from overseas, especially from Australia. Many New Zealand manufacturing industries would only be able to continue if Australian competitors were locked out. So fax’ as the family budget was concerned, there would be no reduction in bread, butter, rent, coal, gas, electricity, wood, clothing, housing, milk, eggs, sugar, tea, meat, transport, fruit, and vegetables. Mr Holland said that the imported boots and shoes that were allowed to come into the country would be about twenty per cent, cheaper. These would provide substantially stronger competition for local manufacturers. The test was, however, whether- such goods would be allowed to entei’ the country in greafex* quantities. The gold industry would face a big cut in income. It was feared many of the claims on the West Coast would cease, through being unprofitable. Parliament had passed a bill to abolish the gold tax of 12s 6d an ounce, but the whole industry received a knockout blow by the removal of its exchange benefit of approximately 42s an ounce. AGAINST DEBT REPAYMENT Mr Holland said it was impossible to consider the exchange situation without also considering inflation, which was our greatest and most urgent present-day problem of finance. Whatever might be accomplished by the exchange adjustment could, and probably would be cancelled out by inflation. He said the supply of overseas goods could be increavgd by changing our debt repayment policy, and buving goods instead. He did not mean that New Zealand, by paying off £47,645,000 of its overseas debt had gone without that amount of goods. Mr Holland said the Government had made a momentous decision m lifting the exchange rate. It was a decision which would have far-reach-ing consequences. It would result in a tremendous upheaval of trade. While, in some instances, costs would be lowered, and some people would make money, others would lose, heavily. There would be severe consequences to those who had insufficient capital to meet competition. An important phase of the situatioix had. however, been left untouched by the Minister of Finance. Whatevex- exchange gain there might be made, it would be offset by inflation, a problem which the Government had shown no inclination to deal with. He hoped that the decision to lift the exchange -rate would not have serious consequences that he believed would be felt by exporters whose incomes could not be cut without harmful reSU Mr Holland spoke for an hour and three-quarters.