The Guardian (And Evening Star, with which is incorporated the West Coast Times.) FRIDAY, APRIL,28, 1939. THE EXCHANGE RATE.

Hokitika Guardian, 28 April 1939, Page 4

The Guardian (And Evening Star , with which is incorporated the West Coast Times.) FRIDAY, APRIL,2B, 1939. THE EXCHANGE RATE.

The bombardment of the Government by the Farmers’ Union and Sheepowners’ Union, for a 1 free exchange as the panacea to assist the man on the land, continues without abatement, The Government has been interviewed, and offered a form of guaranteed price level for wool and meat, the cnief contested commodities. The guaranteed price operates in respect 'to smaller classes of production from the land, including butter, cheese, wheat, fruit, etc. The guaranteeing of butter and cheese was a big stroke, provoking much controversy. The country carried the first year’s loss, which remains a debit in the books of the lieserve Bank, whence the pay-out cheques. The deficit at. present is far more formidable, estimated at about two millions, and-because of that substantial drift, due to lower prevailing average price on the London market, Mr Nash has intimated to those concerned, it would be useless to ask for any increase in the guaranteed , price. The Farmers’ Organisation and its all}' consider that subsidies payable in the form of guaranteed prices, are an impossibility on account of the heavy expenditure involved. The plea is made a strong one, that by allowing free exchange the necessity for import control would disappear, and the position would adjust automatically the present crippling difference between costs and prices. In presenting this alternative course to the Government, a fresh situation is created, which doubtless has had 1 every consideration from all points of j view. The ramifications of tile exchange rate spread very far in the control of prices for consumption, and it is that phase concerns the Government very closely, While much can be j said for the open exchange, the freeing 1 of the rate from the present pegged limit, the alteration would have an 1 unbalancing effect in many walks. If the producer by a higher excfiange | rate, received more for his goods, it

does not follows that the consumer of other imported goods could expect to continue at old prices. If exchange costs rose as they would, imported articles would rise likewise and the consumer would carry a greater burden. The effect of. import control lessening goods brought in, would cause the consumer to use the local article, which it is to be inferred would not rise above the price of the prohibited article. This is an alternative which has to be considered in relation to the control regulations, for the prohibition means more production ( entailing more labour here. Exchange raised and costs would increase, necessitating a further advance in wages. Certain adjustments of costs might be possible, hut in the aggregate the shifting of the burden woxrld not solve tjie difficulties which would have to be borne by one class or another. The problem is the most difficult to be faced by the Government, due to the financial drift. Artificial moves

have been tried, and still the problem 1 remains. The latest action requires time to prove its efficacy, and as it is considered the best in the • eircum- j stances, the outcome must be await- j ed with all the patience that can be j exercised. I