MR HOLLAND ANSWERED ON INFLATION

Grey River Argus, 17 December 1948, Page 4

MR HOLLAND ANSWERED ON INFLATION

Mr Nash Quotes Recognised Authority P.A. WELLINGTON, Dec. 16. A reference was made by the Leader of the Opposition, Mr S. G. Holland, in his address at Christchurch last night, to the alleged inflationary effect of the Government’s action in connection with the adjustment of accounts by the Reserve Bank, which was rendered necessary by the Government’s decision to bring back New Zealand’s rate of exchange to a par with sterling. This reference was the subject of comment by the Acting Prime Minister, Rt. Hon. W. Nash, to-night. Mr Nash, to-night. Mr Nash said that, without any personal comment, he would quote an article by Professor Murphy in the current number of “The Financial Times”. The article referred to has discussed the probable effect of the exchange appreciation as concerning the repayment to the Reserve Bank. Professor Murphy in this said: “The amount of loss, through the reversion to sterling party* incurred by the Reserve Bank, or for which the bank or the Government is responsible, was over £21,000,000 —a very large sum indeed. The 1934 Act said that the Government should pay the bank an equivalent amount. This obligation has been interpreted by issuing an equivalent block of Government, stock to the bank. In effect, the Government has filled the gap by giving the bank its 1.0. U. The rate of interest on this stock is immaterial, since it is paid by the Government to the bank, and it comes back to the Government from the bank, as part of the profit annually payable into the Consolidated Fund. “This transaction”, continues Professor Murphy, “appears to have been neither inflationary nor deflationary/ and it will not be as long as the f bank refrains from disposing of the, stock, or its equivalent, on the investment market”. Mr Nash remarked: “Whatever his qualities, it is urffikelj-Mhat anyone would suggest that the experience and the knowledge of Mr Holland exceeds that of Professor Murphy on this particular subject”. Mr Nash added: “The general report of Mr Holland’s address was interesting reading, though some of the assertions made would not bear close examination. But I am sure that the mind of our people is entirely absorbed by the spirit of Christmas; and everyone seems so happy that their circumstances cannot be so very bad; and I hope that Mr Plolland and the members of the National Party, the Labour Party, and all of the citizens will have a very happy Christmas, and that they will return to work in 1949 invigorated and refreshed, so that we can make it the best year yet for our people and country”.