THE BANK’S PART

Hokitika Guardian, 21 November 1932, Page 5

THE BANK’S PART

RATE OF EXCHANGE STATEMENT n BY THE PREMIER. (Per Press Association — Copyright.) WELLINGTON, November 19. A denial that the Labour Party has given consideration to , the exchange question was made by the Leader of the Opposition, Mr H. E. Holland..V Mr Holland said: “The Prime Minister’s statement of this morning, to the effect that the banks must decide the country’s policy on the exchange question, emphasizes the truth of the Labour Party’s contention that this country is being run by banks and financial institutions, and not by the Government.” A prediction is still current in political circles that action will be taken early this week to increase the exchange rates New Zealand on London to 2o ner cent, above parity. A meeting of the directors of the Bank of New Zealand will be held on Monday.

Mr Forbes was asked whether, in the event of the exchange rising and surplus credits accumulating in London as an outcome of the contraction of imports, the Governments would come to the rescue of the banks and guarantee them against loss, “The banks have not raised this* question with the Government,” replied Mr Forbes. “They have ndt approached us with any propositions at all.”

“Members of Parliament,” added Mr Forbes, “hav© been very nctive in the matter and have interviewed the banks and have made representations to the Ministry as well. Naturally members have a right 'to submit to the Government any proposals which they consider would meet the present position.” •

In reply to a question, the Prime Minister stated emphatically that the hanks hhd not approached the Government on the question of exchange. He’ added: “Let me make it .clear that we have not altered our attitude from the one which we took up when the controversy was previously before the country. On that occasion, we said that it was a question for the banks and if the banks decided that there should be an alteration the Government would have to accept that decision in the same way as any other section of the community and would be prepared to do so. From that attitude we have not departed.” .

COALITION'OPINION DIFFERS. . ON, exchange RATE question. WELLINGTON, November '2O. “If the Government takes a deliberate step in the direction of an artificially high rat 6 of exchange,” said a Coalition member who opposes such a step, “a group of members would probably vote against the Government in order to bring the question before the country. In such a case the group would not stop at opposing the high rate of exchange. It would go further and openly advocate the Dominion to rid itself of agrarian domination .in Parliament.” It is believed that ten members of the Coalition could be persuaded to support such a step, and if tin's we’done they would form themselves into a new party. One said that through a system of control which obtained in the Coalition it was virtually impossible for anyone except a farmer to obtain nomination, for Parliament. Except in a few city seat*? in mixed electorates, farmers were always nominated.

This was because the party was dominated by farmers, who endeavoured to preserve their control of the .Dominion by seeing that the continuity of a rural majority in the House was preserved. The farmers’ leaders did not realise that there were more people in the towns than in the rural areas, and dad not recognise the fact that of the three classes, farmers, wage-earners and people with other sources of income, the farmers were in a great minority. Yet the farmers governed the country in the interests of that minority.

While it iis believed A large majority of Coalitionists favour the manipulation of the exchange rates, several including Messrs Wright, Veitch, Holland, Stallworthv and Harris, representing urban districts are strongly averse. Messrs Rwshworth and Atmore are also opposed to it. It is stilted the Government is against the deputations’ proposals to cut wages and salaries further, or to cut interest and principal, or to pay exporters a bonus on what they send overseas. It is pointed out that from a bpnus only one action of the farming community would benefit, because the idea involved would mean the raising of a lchn of sav £5 000,000 from the banks, and the distribution would be such that the money would in the main benefit only, the assets of the hanks, while the GoVernment would have to bear that addition to the public debt. Mr Forbes says the banks mud tak 2 the first step, us it is they who have* the responsibility for the financial effect on the country.

One Coalitionist stated he would sever his associations with the Government. if it allowed itself to be forced by exporters’ spokesmen into a high pegged exchange of ’25 per cent. Or.e or two whan Coalitionists are now disposed to agree to exchange manipulation. Obiectors point out the cost of living will be raised 1 , trade dis-

located, purchasing power lessened and the amount of the interest toll raised if exchange is raised, as desired within the 15 present month. An experimental rise to 15 per cent, is also suggested. ’The banks ar& known with one exception, to oppose a 25 per cent, rate, they finding 10 per. cent. a,s now is the correct rate. The banks will not take the responsibility if the rate is issued. The high exchange element, however, argues that the banks would he afraid of the Government being ousted as the result of a cleavage in the Coalition.