EXCHANGE QUESTION.

Manawatu Standard, Volume LII, Issue 230, 29 August 1932, Page 8

EXCHANGE QUESTION.

VIEWS OF DAIRY BOARD. CASE FOR THE PRIMARY PRODUCER. Tlie New Zealand Dairy Board, in its draft annual report, makes reference to the exchange question, New Zealand on London. Outlining the history of the steps taken by the Government to establish control of exchange by the licensing of exports, the report states that the six banks operating in New Zealand assumed complete control over all credits and effectively prevented any free marketing of exchange. “In other words, the banks secured a monopoly over all overseas funds, which gave them power to dispose of these at such prices and under such conditions as they might determine.” The letter of the Prime Minister, dated 22n<l December, giving reasons for the imposition of the export regulations, is described as “a bombshell.” The report continues: “It became abundantly evident that the Government had allowed itself to get into a position where it had to find in a few days’ time £4,000,000 to meet Treasury bills falling due in London. The New Zealand banks were the only source of supply, and they dictated their own terms, viz., complete control of exchange. The Prime Minister and other members of Cabinet have again and again from public platforms disclaimed any responsibility for fixing the exchange rate. Nevertheless their action gave the banks this power, which they exercised most effectively. “The control scheme evoked widespread protest from all primary producers, as they were the principal sufferers. The Government’s requirements in London would undoubtedly have forced up the exchange rate had there been a free market for exchange, and as almost the whole of the overseas credits are provided from the sale of export primary products, the producers lost heavily under the arrangement. The board joined with the Meat Board, the Fruit Board, the Farmers Union, and the Sheepowners’ Federation in deputation after deputation to the Government in an effort to secure relief. In a great many reports the issue was clouded, intentionally or otherwise, as to the aims of the Farmers’ Exchange Committee, which represented the above-mentioned organisations. This committee made but one request, viz., for a ‘free exchange “A large section, in what certainly appeared to be an effort to drag a red herring across the trail, frequently reported that the committee was seeking to have a ‘high fixed exchange rate.’ Bankers and other commercial interests pointed out the evils of an inflated currency which would be brought about by a high exchange rate, entirely overlooking the fact that the rate of exchange is not responsible for the inflation, but is simply a symptom indicating that it has taken place. It was not until late in April, 1932. that in response to a deputation of tlie Dairy and Meat Boards the Prime Minister stated that the regulations would be lifted at 30th Juno. “It should be mentioned that during the period of Government regulation the Treasury floated a New Zealand loan of £5,000,000 in London, thus effectively reducing the value of New Zealand funds in London. At time of writing this report (31st no alteration in the rate of exchange has taken place, this still standing at £8 10s per cent, premium for sight drafts.”