BANKS TO DECIDE

Hawera Star, Volume LII, 19 November 1932, Page 5

BANKS TO DECIDE

Higher Exchange Suggestion NO STATE INTERFERENCE Prime Minister Emphatic PASSIVE PART IN CONTROVERSY COALITIONISTS NOT UNANIMOUS An emphatic statement that the New Zealand) Government would not tolerate political interference with the exchange rate, was made in. an interview last evening by the Prime Minister, the R.t. HOn. G. W. Forbes “The question of exchange is entirely one for the banks and bankers,” he said. “It is for them to decide what is the best course .for them to take in the interests of sound banking and of the country,’’ states the “Dominion” report. ■ The Prime Minister added that although the, Government was keenly interested 1 to the extent that it had to make( heavy payments of interest overseas, it could take no more than a passive part in the present controversy. The representations which had been made to the Government Ov private members of Parliament would be handed on to the banks, and it would be for them to decide if the rate were to 1 be increased. Whatever was the verdict of the banks, it would be accepted by the Government.

“UNTOUCHED BY| POLITICS” New Zealand had always prided itself on the fact that her banking wa-s untouched by politics, Mr Forbes added. In this respect the Dominion had followed the ideal laid down bv Lord Snowden. When the question last arose and strong representations had been made by the banks and mercantile firms on the one hand and primary produeig interests oil the other, the Government had appointed the committee of economists as an independent arbiter. The decision of that committee had been in favour of a •higher exchange rate. About 30 signatures, had been, obtained! to the letter to the Prime Minister which, was circulated among members of Parliament on Thursday evening, and which contains ai request that the exchange rate should be raised to 2o per cent. It is understood a few more signatures will be secured. However, it is frankly admitted by those Sponsoring the move to induce the Government to secure the higher exchange rate that there will be no unanimity on the question among Coalition members.

Most city members of the Government, having in mind the likely effect of exchange inflation on importers, remain 'hostile. Mr W. P. Endean and Mr J. H'argest provide notable exceptions, but it is understood that Mr A. Harris, Mr R. A. Wright, Mr A. J. Stallworthy and Mr H. Holland are definitelj l, opposed to the move, while Mr W. Ai. Veitch has not yet clearly defined his position. One of the most ■uncompromising opponents “is likely to be Mr C. A. Wilkinson, Independent member for Bgmont.

COUNTING OF HEADS One member who has taken a prominent part in placing the deputation’s views before Cabinet stated, yesterday that a preliminary counting of heads showed that there were ten Government members who 'were definitely against the high exchange. The Labour Party has decided that it will not enter into the controversy meanwhile. It held a meeting to consider the position as revealed soon after the fact tlnat t'he deputation had waited on Cabinet was known, and it is understood the party will, again consider the question on Tuesday with a view to defining its attitude. Although there are some in the Labour Party who are entirely opposed to the raising of the exchange rate, it is understood! others take the view that some increase in exchange is warranted by the present extraordinary conditions, holding that it would probably benefit local manufacturers. There is, of course, no definite prospect of the exchange question being raised in the. House.

Reasons for Proposal

AID TO FARMING INDUSTRY FACING SERIOUS POSITION FULL VIEWPOINT STATED. The viewpoint of those members of the Government who waited on Cabinet last Wednesday evening with a request that the exchange rate should be increased to 25 per cent, as the only effective way of helping the pastoral industry of the Dominion oat of its present troubles, was outlined in the course of an interview yesterday by the Hon. A. D. McLeod. He also released the text of the statement read by him to Ministers on behalf of the deputation. Mr. McLeod said that in view of the more or less inaccurate statements being published, and the manner in which his name and the names of others had been prominently associated with the present controversy, he felt that the full facts, as far as he knew them, should be given to the public. It was quite correct that more than a. week ago Messrs J. Hargest, T. ]). Burnett, H. M. Campbell, K. S. Williams, and himself, but not Mr. W. P. Endean, had had a conversation with the Prime Minister in the lobby and bad told him there was a danger of a debate being forced on the floor of the House concerning the. serious position of primary producers.

It was suggested to the Prime Minister that it should be possible to give relief by increasing the exchange rate. “Wo assured Mr. Forbes thnr we were not in sympathy with such a move,” Mr. McLeod added, “but• we said that if a debate did take place, many of us would be placed off-side with our constituents if we did not take part. Mr. Forbes thanked us lor mentioning the matter to him, and lie told us frankly that Hie Government was gravely concerned about the position of farmers in general, and, through them, the position of all sections of the community. He concluded by suggesting that we interview the general manager of the Bank of New Zealand and hear his views, as the

Government’s banker, on the farmers’ problems.

DISCUSSION O'F BONUSES

“We did so, but beyond discussing the possibility of bonuses, Sir Henry Buekleton declined to go into the exchange question, apart from any opinion which might be held by ins directors, which, of course', he was not in a position to discuss. This was followed, as is now generally known, by the deputation which waited on the Prime Minister and his Cabinet on Wednesday evening last.” Continuing, Mr. McLeod said he had not looked for any prominence in that deputation, but the Reform group of the deputation requested him to act as their spokesman. This he consented to do, but only by way of a written statement which had previously been approved. He assured the Prime Minister that the deputation had no desire to.embarrass the Government in any way. He then read the prepared statement as follows:

“This deputation represents some 30 supporters of the Coalition, apart from members of the Cabinet, who daily are becoming nfore perturbed as to the serious- position of this country’s foundation industry—namely,, its great pastoral industry. By its pastoral industry we mean the. industry which in meat, wool, dairy produce and byproducts is responsible for more than 95 per cent, of New Zealand’s total exports. We feel that if something is not immediately attempted here in New Zealand to bring price levels of pastoral products more in line with costs directly or indirectly borne by the pastoral industry, in the shape of wages, interest and other costs, the end of the present exporting season is going to find the vast majority of pastoral producers insolvent and the economic, position of this country seriously jeopardised.

“We recognise to the full the difficulties of the Government, and this deputation has no wish to add to those difficulties. We, however, honestly feel that unless some further earnest and determined attempt is made by the Government to restore a degree of equilibrium to this country’s internal price levels, the national results before next winter is over will bo far from pleasant. “We feel that an adjustment in the internal price level can. be brought about only hi one or three ways:

(I) By further drastic cuts in wages and interest.

(2) Bv payment of substantial subsidies to 'those in the pastoral industry. (3) By further raising the exchange against sterling through exports. ‘ ‘W© tfo not urge further drastic cuts, more in wages, and we cannot support subsidies if provided from borrowed moneys. We do, however, believe that much can be (accomplished toward all-round relief by a raising of exchange to at least 25 per cent, over sterling, and we feel that every effort should be made toward getting the trading banks of New Zealand to adopt such a policy.

QUESTION OF CURRENCY. “We confess to having-no clear idea, as yet as to what is chiefly aimed .at in the setting up of a Central Bank. If one of the chief aims is to bring New Zealand currency to a par with sterling as early as possible, then we believe that a very .grave risk is being taken. However, the necessity for the Government attempting something on behalf of the pastoral industry is exceedingly urgent, and this is the only reason for so large a deputation of members waiting upon you as Prime Minister of New Zealand.” On behalf of the United members of the deputation. M’-'t -Q. H. Clinkaiy] then expressed his views briefly. Mr McLeod said that in replying to the deputation Mr. Forbes and Mr. Coates both definitely stated that the moving up or down of the exchange was not a matter for t'he Government's decision, but for the decision of the banks. They both, however, went on to say that the banks, if doing their duty, could not divest themselves of ( a national responsibility which was almost as great as the rasponsibilty or the Government.

They both were, they said, as genuinely perturbed as xne members of the deputation concerning the serious position which had arisen regarding the country’s exports, and they sincerely thanked the deputation for so frankly nutting its views before them. After a few minutes’ chat regarding Central Bank proposals and tin* l danger arising of the need for a general moratorium the deputation thanked tho prime Minister and withdrew.

OPINION FROM AUSTRALIA. In justice to Mr. Endean, continued Mr. McLeod, it should be stated be took no part in organising the deputation to the Prime Minister, but his anxiety for the primary producers and the country generally under the present deplorable conditions is well known. On Wednesday last, however, lie sent the following cablegram to the general manager of one of the largest manufacturing firms in the Common wealth : “Has high rate of exchange been to the benefit of Australia ” The reply received was as follows: “Definitely yes. Initial immediately benefit to export producer ultimately reflected stabilised pfice levels, increased purchasing power. General benefits high Exchange now recognised. Difference

opinion now only whether present rate should be increased.”

Adamant Opposition CHAMBERS OF COMMERCE

.SCHEME CAUSES ALARM

(By Telegrapn —Cress Association WELLINGTON, Nov. 18,

The adamant opposition of the Associated Chambers of Commerce to the proposal to artificially peg the rate o± exchange was expressed to-day by the president of the association, Mr A. i>. Burgess (Wanganui), who is at present at Wellington. The Associated Chambers view with the greatest alarm the present determined agitation to fix the rate of exchange at an artificially high level and strongly urges the 'Government and the banks to resist the pressure being exerted to. bring this about,” said Mr Burgess. “It will be a calamity if the agitation is successful. My association long ago declared as. its considered opinion that the riite of exchange should be permitted to find its own level in accordance with supply and demand. The association steadfastly adheres to that view and is. definitely opposed to thy artificial pegging of the exchange rate, whether at a high or a low level.

‘ ‘Supply and demand at the present time do not in the least justify a rate in excess of 10 per cent. —if, indeed, they justify a rate as high as that — and to artificially peg the rate high is inflation. Such a step as is proposed would have a disastrous effect on business. Large firms have already stated that, it will mean they will have to dismiss perhaps half their staffs and close branches. Many concerns may be wiped out. altogether. “There will be serious losses throughout business, heavy additions to the unemployed and so slight increase in the cost of living. The very class that is seeking to benefit —the producers—will meet a reaction in that the price of all commodities will rise so that the exchange bonus they receive with one hand they will pay out again with the other. Moreover, the pegging of the rate high would be a grave breach of the agreement made at Ottawa, as it would have the effect of increasing the duty and placing a restriction upon British industry.’’ The following resolution was unanimously passed by a meeting of the council of the United Kingdom Manufacturers’. New 'Zealand Representatives’ Association to-day: '“This meeting strongly protests against any increase in the exchange rates. It is of the opinion that even the present rate is not justified on account of the accumulated funds in London, and further, that any increase as suggested would be entirely opposed to the letter and spirit of the Ottawa agreement.

Support By Farmers REMEDY FOR DIFFICULTIES OPINIONS IN OTAGO. DUNEDIN, Nov. IS. Although the main object of a meeting of farmers held at Invercargill this afternoon was to hear addresses by Messrs David Jones (chairman) and James Begg (a member) of the Meat Board, the opportunity was also taken to pass the following resolution in accordance with a request received by telegram from a member in the House: “That this meeting of producers of primary products respectfully urges upon the Government the immediate necessity for lifting the rate of exchange between New Zealand and London as a means of relieving the economic position of the Dominion.’’ Air Jones stated that the raising of the exchange rate was considered to be one of the best remedies for getting New Zealand out of its difficulty. 'He referred to what had been done in Australia and concluded: “'There is not a better method of assisting the farmer to-day than by giving to us a rate of exchange not less than that of Aus r trnlia. ’ ’