EXCHANGE FUNDS.

Manawatu Standard, Volume LIX, Issue 195, 19 July 1939, Page 16

EXCHANGE FUNDS.

NEED, FOR ACTION. BANKER’S VIEW. “It is essential that if the exchange position is not alleviated in tome way in the near future the New- Zealand Government should decide upon n list of priorities, and indicate clearly to the trading banks the lines upon which they must act in any rationing of exchungo which may bo necessary,’’ said Lord Balfour of Burleigh, chairman of the National Bn.nk of New Zealand, at the annual meeting to-day. “It seems to mo that in an economy which is subject to the degreo of Government control now being exorcised in New Zealand, it is not possible for discrimination in the granting of sterling exchange made by trading banks ns well as the Government and the Reserve Bank. “I regret, from an economic point of view, that the Government pursued so vigorous a policy of public works and general internal expansion during the boom year of 1937, because,it seems to mo that if a Government is trying to insulate its country from the effects of world trade cvclos by the regulation of internal monetary conditions, it must bo just as ready to put on tho brake during times of rising world prices as it is to press the accelerator when world prices are falling. “AA’hen tho exchange control began it seemed a reasonable assumption that tho granting of import, licenses by the Customs or of transfer permits by the Reserve Bank implied that sterling would he available as cover, and it is regret table now to find that, licenses and permits have been granted substantially in excess of the funds likely to he available in the next few months. DIFFICULT POSITRON. “A very difficult trade position must be faced for the next six months at least. A surplus of imports and debt services over exports must somehow he financed if goods vital to Now Zealand’s exporting industries are not to be shut out. It does seem to me to bo of the first importance tlint means should be found to finance these imports. “The Government must at once see that the volume of import licenses is kept within tho limit of available sterling. In the absence of an assurance to that effect, not only will future essential requirements be hold up, but also contracts which have already been entered into will become incapable of fulfilment, with obvious conser"i»"cos of a far-reaching and undesirable kind. ~ow Zealand’s credit cannot be maintained if ordinary trading operations cannot bo engaged in with confidence. Confidence and capital are alike elusive, and the experience of the past six months has demonstrated to perfection that to prevent, capital from leaving a country 13 the best wav to stop it going there. ’’