123-Cent Cut Is Called “Realistic” By U.S. Spokesman in N.Z.

Grey River Argus, 20 September 1949, Page 5

123-Cent Cut Is Called “Realistic” By U.S. Spokesman in N.Z.

WILL IT STAVE OFF UNEMPLOYMENT? WELLINGTON, September 19. Mr A. W. Snelling, Acting High Commissioner for the United Kingdom, said: “This is a realistic decision. It faces up to the economic facts of life. It means that the relative purchasing power of the dollar and the pound will be brought into line. The reduction in the dollar value of the pound has been deliberately large, for devaluation fails in its purpose if it leads to an expectation of further devaluation. It is far better to take one bite at this cherry”. He said the devaluation was in the present circumstances the only alternative to unemployment and New Zealanders, with memories of 1932, knew the agony of long drawn-out unemployment. Answering questions on the likely effects of devaluation on New Zealand, Mr Snelling said he did not think the drive to increase the sale of British goods in the dollar area would lessen the volume of British goods available for export to the sterling area,.including New Zealand. DEARER AMERICAN GOODS Mr Snelling said that to the extent American goods would become dearer British manufacturers would be more favourably placed to supply equipment for major development schemes in New Zealand, such as the Roxburgh hydro-electric station and the proposed pulp and paper mill at Murupara. American cars, agricultural machinery, and other goods would become dearer in New Zealand. “I don’t know yet how the change will affect the price of petrol”, said Mr Snelling. “Petrol is always an immensely complicated question and decisions as to the price of petrol everywhere will probably be taken in the next few days. It is not a question of the percentage of petrol which comes to New Zealand or another sterling area country from the dollar area or from the sterling countries. It is rather a question of how much petrol comes from the sterling companies and how much from the dollar countries. There is not yet enough petrol from the sterling companies to supply the needs of the sterling area and there is some drain on the dollar pool to supply the balance of the petrol required, although that is being overcome by building more refineries”. BLACK MARKETING Mr Snelling stressed that devaluation should stop all or most of the black market operations in which continental racketeers had been appropriating dollars, rightly belonging to New Zealand and other sterling area countries for goods such as hides, skins, pelts, casings and wool which had been re-sold to the United States. This alone should save scores of millions of dollars altogether. Devaluation should assist th fi sterling area towards achieving dollar independence by 1952, when Marshal? Aid was scheduled to cease. The British Government had decided that in the circumstances the existing advantages of devaluation enormously outweighed the disadvantages, or else the steps would not have been taken. “But devaluation is not a panacea and cure-all", he said. “The dollar drain continues. The reserves of the sterling area have fallen to a dangerously low level. The need to avoid inflationary pressures remains, because such pressures would rob us of all the advantages and opportunities of devaluation. “The British Government will intensify its anti-inflationary policies It intends to review the investment programme, to cut out all waste and exercise the most rigorous economy in public expenditure”. OVERVALUED CURRENCY Devaluation was the best means of casting aside the crushing burden of an overvalued currency. Mi' Snelling thought Britain had good prospects of substantially increasing her exports to the dollar area. The volume of production in Britain was higher than ever before, and was rising at the rate of six per cent, a year, and there would now be immediate opportunity and incentive for exporters to expand their sales to the dollar markets. Devaluation had its disadvantages, too, but the cost of living in the United Kingdom appeared unlikely to rise by more than about one and a-half per cent. Moreover, the bigger the cuts made in dollar imports, the smaller would be the rise in the cost of living. .