IMPORT CONTROL

Manawatu Standard, Volume LIX, Issue 48, 25 January 1939, Page 9

IMPORT CONTROL

CONSERVATION OF FUNDS.

EXPLANATION BY MINISTER

WELLINGTON CONFERENCE

Per Press Association

WELLINGTON, Jan. 25

The origin of (he Government's exchange control policy and the factors influencing the decision to bring it into operation were set out bv Hon. W. Nasli, Minister of Finance, when addressing the importers' conference in the Wellington Town Hall this morning.

The president of the Associated Chambers of Commerce (Air AI. S. Myers, Dunedin) presided over an attendance of about 1150, fully representative of the business interests of tho Dominion.

1 Air Nash emphasised that since the 1 introduction of exchange control, and from the study he hail given to lino 1 question previously, lie was satisfied ' chat it was a coimnousen.se, rational 1 and reasonable procedure to _ follow, even with all the diflifficuities it would bring into being. REDbCED DEBT. Tho Afinist-er said he regarded it as a privilege to allow the importers to know exactly what was in the Government's mind regarding the regulations. For the seven months from April 30 to November 30 last year there was a decline in the Dominion’s sterling lands in London of slightly more t-hau £20,000,000, and the Government laid - to find out the reason for such a . marked decline in such a short period. - A procedure had to be found to augu- - meat the sterling funds and prevent i their complete disappearance. Fast i Governments had usually borrowed to ’ supplement the funds, and during .192-3 ; to 1932 the National Debt overseas had 1 increased by nearly £66,000,000. Since i then the Dominion had not borrowed , any new money overseas. The previous Government had started to try to I work out a way of preventing a con- : tinual increase in the National Debt, i and during 1933-38 the debt was re- - duced by fourteen millions, including ; local body debt. That automatically 1 had sonic effect on the sterling funds. INFLUENCES ON FUNDS. ; In 1935-36 the funds were- £46.000,l 000. said the Alinister. The decline to . tho present level of £7.000,000 was not entirely due to over-importation. . Largo sums had l>een taken out of New Zealand that had been left here in an- , ticipation of the exchange going down. ■ Another reason was that persons who had made money in New Zealand had ' sent large sums overseas with the ob’j ject of getting higher interest rates. That was probably the major influence 1 on the funds. During the last twelve months exports had exceeded imports 5 by roughly £3,800,000, when at least ; £12.000,000 excess of exports over imports was required for normal working. : The old procedure before the Reserve Bank tame into bciug was that s when the trading banks saw tbeir Lou- • don funds were tending to decline they i automatically started reducing their 1 overdrafts and increasing the interest ! rates on overdrafts. Then their clients r were advised to curtail expenditure, > which automatically brought unemployi ment, reduced wages, and spending power, bringing about a decline in imports and so balancing exports and imports. LABOUR’S POLICY. Tho Labour Government decided not to adopt that method. Taking into account the type of country New Zealand was. it had decided not to reduce living standards or to borrow in London to meet current commitments, said Air Nash. It could have adopted several other courses than that adopted, namely .increased tariffs or let ex--1 change find its normal level, but it had ' decided that it did not want that to happen. , Had either of those two courses been followed there would still have been restriction of imports, said Air Nash. There was no way he could see in which the uccesnsry funds in London could be built, up to the desired point except by the restriction of imports. LOAN COAIMJTAIENTS. The present procedure was nothing new so far as the work generally was concerned. Thirty or forty countries Mliad adopted exchange control. Duri ing the present year local body loans - maturing in the United Kingdom were £849,000, and on January 1 next £17.172,000 was due by tho Dominion in London. That implied that New Zealand had to find something more than twenty-one millions in New Zealand currency in London by the end of the present year. That could be done in three ways —New Zealand could induce some of the people to whom money was due to renew their loans; more money could he borrowed for repayment purposes, or more of 1 New Zealand’s own money could be found to meet the charges. If New Zealand was to get fairly reasonable terms for renewal and repayment purposes some steps had to he taken to ' conserve the funds built up from the | sale of exports. The decline in export values was slightly less than two millions. Tf New Zealand had only enough last year, and was five and a half millions worse olf again this year, obviously some curtailment was necessary.