EXCHANGE QUESTION

Manawatu Standard, Volume LIII, Issue 52, 28 January 1933, Page 7

EXCHANGE QUESTION

BUSINESS MEN’S YIEWS

PUBLIC MEETING TO BE CALLED

Called at short notice to consider the exchange question, a combined public meeting of the Palmerston North Chamber of Commerce and business men, this morning, drew an attendi- ance of between 50 and 60. Mr M. H. Oram, president of the | Chamber, presided, and after a discussion of a preliminary nature, it was decided that a full public meeting should be held on Monday evening.

FRANK DISCUSSION SOUGHT.

and when Mr Downie Stewart is prepared to sacrifice his political career, and the overseas finance experts say it is wrong, then I say definitely that the action of the Government in doing what it did, and by the method it did, is not in the best interests of the country. Replying to Mr Hodgens, Mr Nathan said the farmer should be able to produce at a return of less than Is a lb of butterfat, depending always upon the price paid for his land. “BLOW TO CONFIDENCE.” Mr Jas. Wallace said he agreed that the action of .the Government had dealt a great blow to the confidence of the investing public. It had to take steps to dissolve the frozen capital into the rivers of trade. Instead, the Government had steadily been undermining confidence. The threads of finance should have been left to the wide knoivledge of Mr Downie Stewart. The people of this country would not bo receiving £8,000,000 extra, but actually only £5,500,000, against which all expenses created by the raising of the exchange had to be set. The costs of all imported materials would go up in relation to the increased exchange of 15 per cent, plus the merchants’ margin. ! Mr J. Hodgens said the cost of living had been raised to the consumers l at a time when they had less spending power. He wanted to know just where the position was going to end. •Chorus of voices: So do we.

Intimating the purpose, for which the meeting had been convened, the chairman advanced .the suggestion that the discussion should be a free and frank one, but that it should be of a preliminary nature to a major meeting to be called later, when the question had had mature consideration from all angles in the light of the Various opinions expressed. He added that it had been the policy of the Chamber of Commerce not to particiEate in matters of a political nature, ut that the exchange issue had been considered of such pressing importance by some members as to warrant the calling of a meeting. Mr H. B. Free agreed that there should be a free discussion in order that the elements of the question could be clearly crystallised. The chairman asked for an expression of opinion as to whether the meeting should be open to the Press. Messrs L. H. Collinson, AV. H. Brown and F. J. Nathan considered that the discussion should be reported in the Press. The latter said he knew there were divergent views on the matter, but one section of the community had used its power to force action by the Government, and the widest publicity, should be given to | all aspects of the question. | It was unanimously agreed that the j'- discussion should be open to the i; Press. | NATIONAL ASPECT FIRST. if'; 1 The chairman said that lie would p leave a free and frank discussion to those present, but he made the appeal ffi; that it should be entirely from a national aspect. No action could be || taken at present which did not detriP mentally affect some section of _ the community, and it had to be viewed H|from the point of advantage or disifeadvantage of the Dominion as a whole. fjjiThe chairman said he had consistently |p advocated a high exchange, but only ffas part of a comprehensive plan, intjfVolving all ’the attendant ramifications !j||of a high exchange. New Zealand had made itself a country of exporters and had really one market only, which pro--11 vided substantially the Dominion’s H!-Bource of income. Money for circula||s tion in the country had to come through Ipthe channel of the primary producers. p|;The effect of a rise in exchange was Rimmediately to increase the money in circulation in the country, which was illsuffering from a discrepancy as be|fftween the prices for products and the Pjicosts of production. There seemed to gjfbe no prospect of an immediate rise in >ji|prices. The position could be adjusted P'By currency reform or adjusted temporarily by a high exchange, but the latSgter could be of no use unless there was a rise in prices. Levels could then be | stabilised by a reduction of exchange as prices rose. The public could say p that they were going to leave things | to their natural laws, or cancel all reijf; strictions, or say interference had proiCvceeded far enough. The chief difiivficulty was that the Government had Ifegiven no definite lead, laid down no ffidefinite plan, and confidence had been Ifildestroyed. It did not matter much |s?Vhich plan was adopted, as long as Mthey stuck to it and could see dayIjliight ahead. Manipulation of exchange iftwas only justifiable if it effected its purBpose and was part of a comprehensive rat' plan. Before adopting a policy of inllpreased exchange, the question of its ifeffect on importers, on Customs reilfvenue, and the meeting of overseas f j!? debt obligations had to be determined. ilVague references only had been made to those aspects. The chairman held jpthe opinion that had the®. exchange Ip;, been raised 18 months ago it would have been a good thing for the prop ducers, but the position was different I- now. The debt commitments could p liave been met by a bold conversion loan scheme, as 50 per cent, of the If debts was held internally. That was a pi point to be considered as part of a ®;’ comprehensive plan. The adjustment of ! interest rates on internal debts by a conversion loan -would go a long way towards meeting increased commitments i overseas by reason of a higher exf change. Though he had advocated a !■ higher exchange he deplored the action ; ’ of the Government in arriving at its i decision without mature consideration of the attendant ramifications. THE IMPORTERS’ SIDE.

Mr Hodgens said lie questioned the posisbilities of the coming winter, when merchants, knowing there was depleted purchasing power, had to increase the 'costs of their goods and make them more difficult to move from their shelves. The Government had introduced a measure of inflation after pursuing a policy of deflation. How could those two things be reconciled? Subsequently, on the motion of Mr Brown, seconded by Mr Nathan, a resolution was passed to the effect that the Chamber of Commerce should call a public meeting in the Opera House on Monday evening to consider the ratification of the legislation at present before the House of Representatives, in so far as it concerned the raising of the rate of exchange, and that Mr J. A. Nash, M.P., should be asked to be present. Apologies for absence from the meeting were received from Messrs A. E. Mansford, A. J. Graham, E. R. Holben H. E. Townsliend, W. E. Winks, C. G. Hayward and S. Bayliss. Mr J. A. Nash, M.P., was present for a brief period, but had to leave to fulfil a prior engagement. However, he stated that he would be present.at the meeting on Monday evening.

DISCUSSION IN PARLIAMENT. INTENSE INTEREST SHOWN. BILL BEFOIIETHE HOUSE. (By Telegraph—Special to Standard.) WELLINGTON, Jan. 27.

The intense interest in the exchange question was well evidenced by the constant interruption of Mr Coates when moving the second reading of the Banks Indemnity Bill in the House of Representatives. Mr Speaker found it necessary to advise members that he would be obliged to stop all interjection after there had been a series of highly controversial asides. Mr Coates, after strongly stressing the necessity for adjusting internal costs, met with tho comment from Mr H. T. Armstrong: “This will be at the expense of one section of the community.” “That would not occur,” retorted the Minister of Finance. AVholesaie prices had fallen while retail prices had lagged, but he confidently expected competition to restore the position “for,” he said, “unless the primary industry, the source of our national wealth, is restored, as sure as night follows day, grass will grow in the streets of your cities.” “Nonsense,” interjected Mr R. A. AAL-ight (A\ r ellington Suburbs) from behind the Ministerial benches.

“I hope the hon. member will not get into the habit of interjecting ‘nonsense’ when I am talking,” said Mr Coates. “I know he has more sense than to join in the cry of the gentlemen opposite.” (Laughter). Then the Minister gave attention to the commercial critics, having in mind references at the Wellington meeting. “I don’t propose to descend to the level adopted by some business men we are entitled to respect,” he said, “and it lies in argument not vilification. If it descends to that level, it makes our case all the stronger.” Labour members reminded the Minister that prices had been already marked up 15 per cent. Mr Coates retorted that the force of competition would soon settle that. He advised members to wait only a little time and the indentors would soon take advantage of the falling wholesale prices. The Government was carefully watching the trend of business. It had taken reasonable steps with the banks for the purpose of creating stability so that confidence might be given to the importers. There would be an increase in the circulation of New Zealand money, leading to increased trade and employment. The Government had taken the trouble to ascertain the effect of its decision on its securities in the United Kingdom. There had been absolutely no effect at all.

Protests were voiced by Mr Brown at the arbitrary interference by the Government “almost overnight” with the exchange rate. Goods tor Christmas trade had been imported in October bn ninety days’ terms, he said, and they had been costed and sold on the assumption that exchange would not be altered. Now, importers were called upon to face an additional 15 per cent, in their costs, for which they had made no provision and had no redress. Furthermore, the vague references of the Government to a possible sales tax were most unfair in their indeterminate nature. Mr W. Archer voiced his protest at the Government’s action. He said the advantage of exchange to the farmer would be completely wiped out by his increased costs. Internal trade was being killed. , Mr Nathan said he disagreed with some statements made, but agreed with others. The action of the Prime Minister and Government could only tend to destroy confidence, and that, in turn, destroyed credit, the foundation of the nation. The rise in exchange in Australia had been to the benefit ot the people and manufacturers, but lie. objected to the methods of the JNew Zealand Government. Had it taken action 18 months ago to increase the exchange, he agreed it would nave done some good. , „ , Mr J. Hodgens: Instead of reducing wages. „ , .. c Mr Nathan: Surely. Reduction of the spending power does not benefit the community. Some 98 per cent, o the butter and cheese is sold on consignment in London. The increased exchange will benefit the farmers indirectly, and the mercantile houses balulling his produce. The reduction ot his debts will benefit the farmer. Butterfat production at a retilrn of id pe lb leads to insolvency. The man o the street cannot intelligently ente upon farming. Whether the Pf, 1 gets the benefit of the _exc i g through a reduction of his indebtedness or through increased fun , will benefit. However, I ob l ect J° r Yl 0 method by which the exchange rate was increased. It is fust a more interference in business .I’ Government. Exchange is 4jv . a ‘ matter for experts. I say without fear of contradiction that Messrs and Coates are not experts m finance,

Mr J. McCombs: Because the interest is paid in sterling, not New Zealand currency. Mr Coates: We know that perfectly well. The hon. genltemen is not talking to a child. He prides himself on his superiority, but he has a lot to learn, including respect for other people’s opinions. Continuing, Mr Coates said that inquiries had led the Government to conclude that its action had no appreciable effect on its securities or that confidence had been destroyed. The result of its action would be exactly the opposite. Mr H. E. Holland, the Leader of the Opposition, had tabled a motion of noconfidence in formal terms, but the Government’s urgent action on the banking measure changed his plans somewhat as he substituted a longer motion as an amendment to the second reading which Mr Coates had moved, and made his intention plain. “I am quarrelling,” he said, “with the Prime Minister for saying that any division on this Bill will be on party lines and, so far as this motion is concerned, it is a motion of no-confidence

in the Coalition. The Prime Minister stands like Nelson on the deck and declares that he expects every man on Ins side to do his duty.” (Laughter). Mr Forbes: What do you expect your men to do? Give them a free hand. Mr Holland: They have a free hand and there will be a good punch in it. “Do you like your chances?” queried Mr Coates. Mr Holland’s reply was that, if the most intelligent and fearless men on the Government benches had their way, there would bo a satisfactory result to the amendment. Hon. J. A. Young, Minister of Health, discussed the advantage in the greater spending power which must follow the high exchange. Mr J. O’Brien (Westland) asked him if the Government was making provision that the greatest advantage be secured by the poor farmer. The Minister retorted that, with wool, which cost 9d per pound to produce and realised 6d, butterfat costing 9d and realising 7id to Bd, every fanner was poor. No man engaged in the primary industry except the gold miner was capable of being described as anything but poor. The Minister completed his remarks when the adjournment time arrived. The debate will bo resumed immediately on resumption on Tuesday afternoon, Mr M. J. Savage, tile Deputy-Leader of the Labour Party, being the first speaker. Mr AV. Downie Stewart, ex-Mmister of Finance, is ready to take part in the debate and is expected to secure an opportunity on Tuesday.

INDEMNITY OF BANKS. EXPLANATION OF BILL. BUYING AND SELLING EXCHANGE. . i (By Telegraph—Special to Standard.) WELLINGTON, Jan. 27. The Banks Indemnity (Exchange) Bill is described in its title as “an Act to insure the several banks carrying on the business of banking in New Zealand against losses that they may sustain by the reason of the fixation, at the request of the Government, of the rates of exchange on London and arising from the purchase and sale of exchange.” There was an awkward moment for the Government when the measure was introduced by Governor-General’s Message in the afternoon following the few hours’ adjournment, because it was stated that the Government Printing Office had not completed the copies when the Governor-General’s Message came before the House. The Prime Minister, without objection, secured the adoption of a motion that the measure be regarded as urgent, and Mr Coates quickly reached the point of moving the second reading. AVhen members in a chorus reminded him that the Bill was not in their possession, Mr Coates waited a few minutes, standing silently at Iris desk.

“A bad omen,” remarked an Oppositionist. The Minister of Finance eventually decided to explain the measure clause by clause. It defines the standard exchange rate as that which' prevailed prior to January. 20 when the telegraphic rate was 10 per cent. The Bank of New Zealand is constituted as the agent for the Government for buying and selling exchange on London. It will be authorised to buy from the other banks, on behalf of the Government, any surplus exchange they have acquired at the fixed rate, namely 125. Mr Coates explained that it was estimated that approximately £4,000,000 might have to he taken over. The Government could use that amount for the purpose of meeting its overseas liabilities and the exchange was available for other purposes but if it was not all used, obviously there would be a loss. Payment would be made either in cash or Treasury bills issued at a rate mutually agreed on between the Government and the banks, but not exceeding the rate for the time being charged in respect of overdrafts on the best accounts. “We may desire,” said Mr Coates, “to keep our balance in London or bring it out.” n Clause 8 empowers the Bank o« New Zealand or the Government to invest the proceeds of the purchased exchange in securities, and to apply the receipts from their sale for tlie redemption of any securities charged on tlie public revenues. •_ The statutory limitation on the gross amount of Treasury bills issuable will not apply in respect to the exchange purchases, and the Bill provides that all payments required to be made by the Bank of New Zealand as the Government agent shall be made without further appropriation than this Act. The final clause gives the GovernorGeneral power to make regulations which may be found necessary for the effective working of tlie scheme. There is no time limit for the operation of the measure, but some reference was made to this aspect by Mr Coates. He pictured the great difference between tlie internal costs and the income from overseas exports, stressing the necessity for bridging this gap, otherwise we should have the wreck of our primary industries. Surely, lie argued, it was for us on our own initiative to endeavour to bridge this gap. “Our reasoning is that in the course of the next four or five years we may bridge the gap and look forward to better prices so far as our commodities are concerned.” His reason for hopefulness was the determination of f.»e British Empire to raise the wholesale prices of commodities, the improved conditions which would follow the settlement of the war debt and reparation questions, and the general understanding between all the countries on these points, and the distress in the whole world which created a strong desire to raise the wholesale prices.

BUSINESS MEN’S PROTEST.

INTERFERENCE WITH EXCHANGE.

WELLINGTON, Jan. 28.

A strong protest against “the action of the Government in interfering with the rate of exchange” was made at a meeting of the executive of the Associated. Chambers of Commerce yesterday. The following resolution was carried unanimously : —The Associated Chambers of Commerce, representing the commercial community as a whole, has always opposed, and still strenuously opposes, Government interference in commercial business. Disregarding the repeated protests of this association, the present Government has pursued a policy of progressive and increasing interference culminating in Government fixation of exchange rates. The association solemnly protests against this latest a.nd greatest act of interference, and especially against the breach of faith by the Prime Minister, who had but recently stated positively and definitely that the fixation of exchange rates was a matter with which the Government would not interfere. The Associated Chambers of Commerce, representing the commercial community,. is,' therefore, reluctantly compelled to state publicly that it has lost all confidence in the present Government. WAIPUKURAU RESOLUTION. Per Press Association. WAIPUKURAU, Jan. 28. The executive of the , Waipukurau Chamber of Commerce passed a reso-

lution whole-heartedly supporting the Associated Chambers in their stand in condemnation of Cabinet’s action in raising the exchange rate and the members for the district will be advised accordingly. The consensus of opinion was that it is an inequitable and ineffective means of aiding the most needful section of farmers and it was likened to “robbing Peter to pay Paul.”