BANK’S ANSWER

Manawatu Standard, Volume LII, Issue 308, 26 November 1932, Page 6

BANK’S ANSWER

NO HIGH EXCHANGE RATH. ALTERNATIVE OFFER OF HELP. WELLINGTON, Nov. ! 26 The Bank of New Zealand s opposi tion to any increase in the exch g rate, New Zealand on London, to parity with Australia * aß “ of a resolution passed at a meeting the Board of Directors yesterday, ami forwarded to the Prime Minister Rtj Hon. G. Wi Fotbcs by the general manager of tlie bank, Sir Hen y l6 The text of the resolution passed by the directorate is as follows: ~ “The Board, having given consideration to the request of a number members of Parliament that, to m sist farmers to surmount their climculties through the present low prices for farming produce, the rate or exchange on London should be raised a parity with the rate ruling in - u tralia, reaffirms the views expressed by the chairman at the meeting of the bank held on June 1' last. "Briefly, these views are that it is not the business of the banks to adjust exchange rates to meet variation in the price of produce, nor should the banks be influenced by the rates prevailing in other countries, but . the supply, and demand of money tween London and New Zealand.

“The board fully realises the difficulties confronting the primaryproducers at the present time, but i is satisfied that the raising of the rate of exchange under existing conditions, while it might be a palliative. would not be in the best interests of the Dominion, and the board is, therefore, not prepared to depart from sound banking principles for the sake of expediency.

“The other alternative to affording material assistance to the primaryproducers appears to be that of granting a subsidy, but as the Government has indicated its objection to such a course, the. board does not see the necessity of elaborating Its views thereon. If, however, the Government reconsiders its objection to a subsidy, the board will be pleased to collaborate with it with a view of granting financial assistance to the full limit of its resources.

SUGGESTED TAX REMISSIONS. “As another alternative to either of the above methods, the board suggests that the Government consider the question of paying all farmers’ rates to local bodies for the current vear. and at the same time waive its claim for land tax. It is estimated that this would cost the country £2.000.000. against which must be set the cost it would incur on Government operations if the rate of exchange were raised, if desired.

“Such a remission would have a two-fold benefit. Not only would it be the means of assisting the majority of farmers to carry on, but such a payment to local bodies by the Government would enable them to carry out their overseas commitments in connection with their interest on loans without the increased costs which would be entailed by the raising of the exchange rate. “Should the .Government favourably, consider this method, the board will be prepared to provide the amount required, on reasonable terms.” No comment upon the resolution was made by the Prime Minister, who later released its text for publication. He said that although nothing could be said concerning the bank’s decision, Cabinet would meet this morning ix) consider the proposals contained in the resolution. The chairman of directors of the Bank of New Zealand, Mr Oliver Nicholson, called on the Prime Minister within a few minutes of Sir Henry Buckleton’s letter being delivered by hand. They were joined shortly after bv the Minister of Finance, Hon. W. Downie Stewart, the three being in conference for some time. Following the Bank of New Zealand board meeting, a meeting of the Associated Banks was held immediatelv. The chairman. Mr J. T. Grose, subsequently stated that be had no announcement to make. It is understood that the board of directors of the Bank of New Zealand decided by a majority of five to ono against any advanoe in the rate of exchange. The question, it is believed, was not the sole topic of discussion, but that the board had under review the general financial situation, in regard to which certain important proposals may be made in concert with the other grading banks.