PAR EXCHANGE LOSSES TO THE N.Z. BANKS

Grey River Argus, 29 October 1948, Page 5

PAR EXCHANGE LOSSES TO THE N.Z. BANKS

P.A. WELLINGTON, Oct. 28 The Minister of Finance, has endeavoured to convey an impression that a clause in the Finance Bill providing ror the issuing or slock io pay tne Reserve Bank, due to the alteration in the exchange rate was just "tiddiey winks” said Mr S. G. Holland (Nat., Fendalton) in tne House tonight. He could not over-emphasise the importance of having a sound financial system. This system, however, could so easily be wrecked by the creation ot what was now know as "runny money.” There would never be a stable price level while the Government continued to create credit without a corresponding increase m goods. He asked how much had losses totalled when the exchange rate was adjusted? Kt. Hon. W. Nash said that the losses were seventeen decimal four millions to the Reserve Bank; two decimal five millions to the trading banks, and one domical eight million., on account of forward exchange, makinr a total of twenty-one decimal seven millions. Mr Holland asked how the Government was going to find that sum. The Minister did not even give an indication in his reply to the budget debate. When prices decreased after the reduction in the exchange rate, the amount avaiiaoie to purchase goods should have also oeen reduced. Provision authorising the bank, through the Minister, to create additional money through the printing press would- alfect the everyday life of all the people. One way they would understand it was when they went to buy goods. He said that the reduction in the price of goods caused by the exchange adjustment would oe counteracted to a considerable extent by the passing of the Finance Bill. i Mr Nash, replying, said that the adjustment was only within New Zealand in the terms of New Zealand currency. As for the decline in the sterling balances in recent weeks, it was inevitable that there should be such a decline when the importing season was at its height. But, as in past years, the funds would be built up again when the new export season got under way. Mr Holland: “Is the Minister content with the State of our funds in London?” Mr C. M. Bowden (Nat Karori): “We know how disturbed he is.” Mr Nash: “I don’t know of anyone who knows that. Mr Bowden: “The tide will go out further yet.” Mr Nash said that seasonal decline occurred every year; but it was also inevitable that, for a time, we would import more than we would export. Did anyone suggest that we should keep a balance of sixty-three millions in London when we were in need oi a wide range of goods? It was a question of watching our sterling funds and of preventing any dangerous fall. , The Fed-v?’ Bill was read the second time.