PARLIAMENT.

Manawatu Standard, Volume LIII, Issue 52, 28 January 1933, Page 3

PARLIAMENT.

DEBATE ON EXCHANGE QUESTION. OPPOSITION TO BANKS INDEMNITY BILL.

The House of Representatives spent the whole of yesterday afternoon discussing the Banks Indemnity (Exchange) Bill, which was introduced by Governor-General's Message. After the measure had been accorded the first reading, the Minister of Einance (Rt. Hon. J. G. Coates) moved the second reading, and in so doing explained the provisions of the Bill.

An amendment was moved by the Leader of the Opposition, Mr H. E. Holland, which stated that the Bill fails to provide’ an adequate method of dealing with the serious . eco-, nomic distress of the country. The debate was unfinished when the House adjourned at 5.30 p.m. until Tuesday afternoon.

BAMS INDEMNITY BILL. DEBATE ON SECOND READING. MINISTER EXPLAINS PROVISIONS Per Press Asi^oiation. WELLINGTON, Jan. 27. The Banks Indemnity (Exchange) Bill was introduced by the GovernorGeneral’s message when the House resumed at 2.30, and was read a first time.

In moving the second reading, Rt. Hon. J. G. Coates said the Government accepted full responsibility ‘ for tho action which had been taken in respect of the exchange rate. “I wish to . associate myself with the Government’s action,” he said. “1 believe it is tho right one and the only one in view of our economic circumstances.” The Government had made an exhaustive inquiry into tho country’s economic position and every avenue had been explored before the decision was reached.

Mr Coates said he believed the concern expressed by business men and others could bo explained away. They would find after a while tho benefits which would accrue from the Government’s' action, Mr J. McCombs: It will create more unemployment. Mr Coates: It will prevent further unemployment.

The Minister said there were two courses open to the' Government. The first was to lot matters take their course and allow further deflation. That might be the right policy, but he did not think so. The country at the present time was facing tremendous difficulties and tho economic structure had been endangered. Mr J. A. Lee; By the Government. Mr Coates said world conditions had placed a strain on the economic structure. In his opinion, if the Government had been content to stand by and watch the policy of deflation continue, it would have meant wrecking the primary industries and the people of the country and would have resulted in incalculable distress. BRIDGING THE GAP.

The other course open to the Government was to endeavour to bridge the gap between prices that were being received to-day and prices that would be obtained before many years had passed. He hoped that in the course of the next five or six years conditions would improve and he based this hope on the determination of the British Empire and the world generally to raise the wholesale prices- of commodities, on the prospect of a settlement of the debt and reparation questions, and on the fact that, in view of the rapidity with which the depression had fallen on the world, it was reasonable to expect the recovery would also he more rapid. That had been the case with former depressions. He, therefore, considered the Government justified at this stage in taking the steps it had taken to prevent a further fall in the national income by increasing the prices to producers.

He declared that tho raising of the exchange rate would not have the effect on the cost of living that had been predicted. He did not propose to descend to the level that some public men had descended to in criticising the Government’s action. The Government was entitled .to respect and it was entitled to expect argument and not vilification from the opponents of its action.

EXAMPLE OF OTHER COUNTRIES. Continuing, the Minister said that when the exchange rate was increased in Australia, the fall in retail prices had continued. A fall in retail prices had continued when Britain had departed from the gold standard. There might me a momentary pause in the fail of the cost of living. He had seen statements that it was proposed to raise prices of goods 15 per cent., but he pointed out that all these goods were open to competition and competition would soon dispose of any attempt to. effect such an increase Wholesale prices had been falling steadily, but retail “prices liad been lagging behind. The people could expect a continued fall in retail prices and the commercial community would be fully justified in looking forward to improved business in the future as the result of the increase in the national income. The increase in the exchange rate would not bridge the wlioie gap between commodity prices and producers’ costs and provision would have to be made for a further reduction in costs. Mr Coates said it was ’ incorrect to state that the Ottawa Agreement had been broken. He was fully in favour of working on parity with the sterling, but not if it meant disaster, bankruptcy and misery to the people of this country. The Ottawa Agreement did not make any reference to currency. There would be some cause for anxiety and criticism if the Government, in addition to raising the exchange ra.te, were to place an embargo on imports from Britain. EFFECTS OF TARIFFS.

The Government, however, had deckled to initiate an overhaul and complete investigation into tariffs and the effect of tariffs on industry. An endeavour would be made to get costs down to the lowest level possible and he believed that, as soon as conditions settled down, workers would find their purchasing power womd be greater than formerly. Referring briefly to other steps the Government had in mind for adjusting the financial conditions, Mr Coates predicted that members of the Opposition would find themselves 100 per cent, in support. OPPOSITION AMENDMENT.

The following amendment to the second reading was moved by the Leader of the Opposition and seconded by Mr M. J. Savage : —“This House •refuses to accord the second reading to the Bill, which fails to provide an adequate method of dealing with the serious economic distress of the coun-

try. The fixing of the rate of exchange at an artificially high level will raise the cost of living, intensify unemployment, foster unnecessary antagonism between town and country, and afford no permanent help to the farmer, while increasing the financial difficulties of the Dominion.”

In moving the amendment, Mr Id. E. Holland said tliat ; while criticising the Government’s failure, the Labour Party presented its own alternative proposals. The party recognised j that the first steps to be taken must j be towards restoration and stabilising :of the purchasing power (which involved the raising of the incomes of both farmers and workers) and also towards the restoration to economic employment those who were now classed as relief workers. This could only he achieved on a well planned basis jof production and distribution with lan effective organisation and utilisation of the country’s credit and cur- ■ rency and with guaranteed prices to j the primary producers and a standard wage for workers. It was clear any benefits accruing from the artificial increased rate of exchange coukl only he of a temporary characetr. Practically every speaker at the recent farmers’ gathering liad made this clear. As he saw it, only fanners whose properties were mort-gage-free would reap direct benefits and there were not many farmers without mortgages in New Zealand. The beneficiaries would be principally banks and other financial institutions and stock and station agents. In any case farmers could only benefit if the exchange remained high over a long period. It was somewhat remarkable that it had never occurred to tire Prime Minister and his colleagues to peg up the exchange as an alternative to wage reductions. The London Financial Times had declared the increase to lie a moral breach of the Ottawa agreements and it had to be remembered an agreement had been reached at Ottawa to hold over the question of exchange until the London Conference. Furthermore, it was legitimate to remind Forbes that at one stage ho himself had suggested that to lift the rate of exchange might be tantamount to a violation of the Ottawa agreement. It had been said that at Ottawa New Zealand had helped to pull down the barbed wire fence that stood in the Empire’s way. New Zealand was now erecting a doubly high stone wall capped, with broken glass.

LOSSES PREDICTED. The banks having refused to accept the responsibility for the surpluses which would accrue in London as a result of the shrinkage of imports, said Mr Holland, the Government would now have to find money to buy up these surpluses and the money raised would have to be met out of taxation. In the end it would mean additional imposts on the farmers and others. The cost of living would he substantially forced up and there must be an increase in wages to catch up with the increased prices. The Government’s policy liad reduced and was still reducing the general income of the workers in uil fields, while at the same time the price of almost every commodity was being increased. While the Government’s policy was being reflected in increased prices throughout the Dominion, it would not add one penny to the total income of the Dominion.

Exchange pegged at a high level would not increase the income of the Dominion. It would only transfer wealth from one section to. another. Mr Holland urged that the Labour Party’s proposal for a guaranteed price to the primary producers was a better method than the temporary expedient of increasing the exchange rate. Permanent help for the farmer could only come with a guaranteed market for his goods and that market was only possible when the incomes of consumers were raised to a point that would enable them to purchase the farmers’ goods. As trade unionists the Labour Party said there should be a minimum below which no wage earner should bo required to work—a guaranteed standard of living. They were prepared to carry that principle into all fields of industry, including farming. Mr Holland said he liad stated on other occasions that he did not think it necessary to create any large amount of additional legal tender currency, but if in the process of rehabilitation increased production should render additional money necessary, no difficulty' would be encountered in making it available. There was no difficulty about getting money if they were producing the goods. A State Bank would have to come, but even without waiting to establish a State Bank, they' could issue under existing banking legislation all legal-tender paper money that might be required and in a state of emergency the Government could (under the Public Safety Conservation Act, 1932) take control of the banks and make them do the work of the State.

Mr Holland then entered upon an explanation of the difference between credit and currency, stressing .the greater importance of the former and insisting that values created in the form of goods and services constituted a background against which credits could safely be created. He declared that the national capacity to produce was the only possible foundation for the issue of financial credit. HON. J. A. YOUNG’S VIEWS.

Hon. J. A. Young supported the view expressed by Mr Coates that, instead of increasing unemployment, the raising of tho exchange rate would reduce ;unemployment because it would increase the national income. It would, in particular, bring relief to the unemployed in the country towns. He did not agree that the Government’s action would promote antagonism between town and country because the cities would eventually realise the value of the step to the Dominion as a whole.

The debats was adjourned and the House rose at 5.30 till 2.30 on Tuesday afternoon.