The Hawera Star. SATURDAY, NOVEMBER, 19, 1932 THE EXCHANGE RATE.

Hawera Star, Volume LII, 19 November 1932, Page 4

The Hawera Star.

SATURDAY, NOVEMBER, 19, 1932 THE EXCHANGE RATE.

Deliverer ersry eventDK by 5 o’olock In Hawera, Manaia, Kaupokonui. Otakeho. Oeo, Pihama, Opunake, Ncrmanlw, Okaiawa, Eltham, Ngaere, Mangatoki. Ka>ponga, Awatuna, Te Kiri. Mnhoe. Lowgarth, Manutchi, Kakaramea, Altoia, Hurleyville, Patea. Whenuakura. Waverley, Mokoio.. Whakamara, Ohanga i. Meremere, Fraser Road, and Ararata.

The exchange rate controversy, which was such a burning topic of public discussion at the beginning of this year, has broken out again. On this occasion the agitation for an increased rate emanates from the inside of Parlia-

ment, not as a party .measure, but as the result of the fears of private members for the future of the pastoral industries of New Zealand. The revelation in the Press of the comings and goings between' a group of 30 private members of the House, the Prime Minister and the general manager of the Bank of New Zealand, discloses a unique and disturbing state of affairs. Whether the pegging of the exchange at a higher level be the way out or not, it is still disturbing to find that a large section of the legislature is so perturbed about the future of primary industry as to actuate them in this direction. When experts differ so sharply, it is difficult for the layman to be wise on such a subject of high financial policy as exchange. On the face of it, the farmer naturally favours the agitation for a rise, but Cabinet Ministers and heads of banking institutions are compelled, by their sense of responsibility, to take a longer view than the man on the land, who is concerned, naturally, only with his own position. However, it has to be admitted that there is more likelihood of the change being made now than there was eleven months ago, mainly for the reason that this country has seen Australia try the experiment with a measure of success. It is contended by its advocates that an increase in the rate would offset the low prices prevailing for our exports sufficiently to mean the difference between solvency and insolvency for the. primary industries. Those who oppose it fear, on the other hand, that such inflation would bring troubles of its own which would neutralise its benefits. The Australian experiment has proved 1 that the primary producer can, and does, benefit by a movement which increases the value of his returns by 25 per cent. —.15 per cent, above New Zealand's existing rate. But the question is, how long will such benefit operate? It has to be admitted that it has lasted longer without repercussions in Australia than was first anticipated in this country by observers who disapproved of the movement. Though it ‘has prevented living costs within the country from falling to their natural level, it has kept the primary producer on his feet, and there are those who argue that anything that does that is worth its price, the only alternative being the collapse of the export industries and everything else with them. The position has been considerably complicated since last January by the Ottawa agreements. Under these agreements Now Zealand has un'dertaken to give the manufactures of Great Britain an increased measure of preference in return for preferences granted our primary exports. What is going to be the British attitude towards an artificial raising of the exchange in this country? It seems certain that British manufacturers—and particularly the Free Traders who have never welcomed the protective tariffs and quotas granted the Dominions —are going to accuse New Zealand of giving with one hand and taking away with the other. A reply to that, of course, is that Australia, which went to Ottawa already armed with a pegged exchange, was not penalised by Britain on that account when it came to signing the agreements. The Australian experiment has proved that inflation is a workable . short-term measure; but what of the future? How is the rate to be brought back to normal? And how are demands for even greater measures of inflation to be resisted? These questions are alrqady causing concern to some people in Australia—and in New Zealand also, wlicrc one of the most influential advocates of a rise has admitted privately to the "Star” that when he favoured a 30 per cent, level last January he did not anticipate that it would be needed for more than one producing season. It is difficult to see, however, how a deter-

mined demand for an increase can be held off, in view of the continued low export prices, the perturbation of farmers and the uneasiness of members of Parliament. There is a growing number of people who, though they prefer the soundness of orthodox methods of finance and once frowned upon the exchange agitation as an inducement to gamble with the future, now say that a gamble is preferable to the certainty of ruin. The weakness in ideas of those who offer alternatives is another factor which must weigh with the Government. The only alternative that has been put forward by those who admit that something must be done to counteract low prices is something in the shape of an export bounty. But a bounty cannot be paid out of anything but borrowed money and public opinion does not favour further borrowing. Under a bounty system the country would have the advantage of knowing how much debt it was piling up for itself or for posterity —whereas it is- impossible for any man to forecast with accuracy the final outcome of inflation. However, not even that argument is likely to avail much now when the whole world is forced to live very much in the present and forgo much of its anxiety for the future.