HIGH EXCHANGE.

Manawatu Standard, Volume LVI, Issue 261, 2 October 1936, Page 6

HIGH EXCHANGE.

The policy or objective of the agreement between England, France and the United States is to have exchange control and quotas relaxed progressively, and it is within their power to enforce this by various methods. The invitation to relax exchange control applies to us as well as to Australia. Raising the exchange from 10 per cent, to 25 per cent, was a blunder of the previous Government. Five of the six members of the Associated Banks were opposed to it, and instead of taking the advice of experienced bankers, men who were in the best position to tender sound advice, the Government accepted the advice of theorists and bookworms, and clapped on the exchange in the interests of the agricultural seclion of the community. That was in January, 1934. The rate of exchange should be governed by the balance of payments, and at the time the exchange was raised the balance was in our favour. Not so with Australia, which had a very large adverse balance, and raising the exchange was justified. However, in the two and three-quarter years of the high exchange, industry, commerce, and agriculture have adjusted themselves to the changed conditions. To local industries if has meant increased protection against foreign goods.

Now New Zealand must fall into line with other countries and relax progressively exchange control. That is, this extra protection enjoyed by local manufacturers for nearly three years is to be taken from them, and their position becomes perilous. The exchange must be reduced, for it is a plank in the election platform of the Labour Government. Now consider the position of our local industries. The Minister of Labour has compelled them to increase their costs by legislating for a rise in wages and shorter hours. An immediate effort was made to adjust prices of goods to cover costs, but before industry had realised whether it had made adequate adjustment to cover costs the Minister of Finance saddles industry with increased taxation, thus adding to the costs of production, and adjustments to cover this have yet to be made. Now the protection industry has enjoyed through the high exchange is to be cut away. The prices of locally produced goods are above the import level, and, notwithstanding the high exchange, imports are flowing into the country. What will be the position of our industries when tlitexchange is reduced? They will be unable to lower prices because of the fixed high costs, and therefore imports will expand at a greater rate than ever before. Imported articles will undersell locally made goods, and unless the volume of goods sold at profit increases, local industries will be in a very bad way. In this parlous state of our industries, the effort to regulate, control and discipline them by the proposed Government bureau cannot possibly result in the attainment of the efficiency promised by the Minister. It cannot be done and the suggested legislation will only add to the misfortunes of industrialists.