Concern Can Be Explained Away Says Hon. J. G. Coates

Manawatu Times, Volume LVI, Issue 7067, 28 January 1933, Page 7

Concern Can Be Explained Away Says Hon. J. G. Coates

EXCHANGE BILL COMES BEFORE PARLIAMENT

Complete Overhaul ©t Tariffs

Promised

Labour Moves am Amendment and

Criticises

Per Press Association.

WELLINGTON, Last Night.

The Banks Indemnity (Exchange) Bill was introduced by the Governor-General’s message when the House resumed at 2.30, and was read a first time. In moving the second reading, Hon. J. G. Coates said the Government accepted full responsibility for the action which had been taken in respect of the exchange rate. “I wish to associate myself with the Government’s action,” he said. “I believe it is the right one and the only one in view of our economic circumstances.” The Government had made an exhaustive inquiry into the country’s economic position and every avenue had been explored before the decision was reached.

Hon. Coates said he believed the concern expressed by business men and others could be explained away. They would find after a while the benefits which would accrue from the Government’s action. Mr. J. McCombs: It will create more unemployment. Mr.. Coates: It will prevent further unemployment. Two Courses Says Minister. The Minister said there were two courses open to the Government. The first was to let matters tako their course and allow further depletion. That might be tho right policy but he did not think so. The country at the present time was facing tremendous difficulties and the economic structure had been endangered. Mr. J. A. Lee: By the. Government. Mr. Coates said world conditions had placed a strain on tho economic structure. In his opinion if the Governmdn.t had been content to stand by and watch the policy of deflation continue, it would have meant wrecking the primary industries and the poople of the country and would havo resulted in incalculable distress.

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 tho course of tho next five .or six years, conditions would improve and he based this hope on the determination of the British Lmpire and the world generally to raise the wholesale prices of commodities on the prospect of a settlement of tho debt und 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 bo more rapid. That had been tho case with former depressions. He therefore considered the Government justified at this stage m taking the steps it had taken to prevent a further fall in tho national income by increasing the prices to producers. Effect on Cost of Living. He declared the raising of the exjhange rate would not have the effect on the cost of living that had been predicted. He did not propose to descend to tho 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 tho opponents of its action. Continuing, tho 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 tho gold standard. There might be a momentary pause in tho fall of tho cost of living. He had seen statements that it was proposed to raise prices of goods 16 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 had been lagging behind. The people could expect a continued fall in retail prices and the commercial community would he fully justified in looking forward to improved business in the future as the result of the increase in the national income. . The increase in tho exchange rate would not bridge the whole gap between commodity prices and producers’ costs and provision would havo to bo mado for a further reduction in costs. The Ottawa Agreement. Mr. Coates said it was incorrect to state that the Ottawa agreement had been broken. Ho was fully in favour of working on parity with the sterling hut not if it meant disaster, bankruptcy and misery to the pebple of this country. The Ottawa agreement did not make any reference to currency. There would be some causo for anxiety and criticism if the Government, in addition to raising the exchange Tate, were to place an embargo on imports from Britain. The Government, however, had decided 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 a 3 soon as conditions settled down, . workers would find their purchasing power would be greater than formerly.Koferfing briefly • to - other steps the Government, hadrin .mind-.for adjusting the financial conditions, Mr. Coates pre-

dieted members of tho Opposition would find themselves 100 per cent in support. An Amendment. The following amendment to the second reading was moved by tho leader of tho 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 country. 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 tho Dominion.’’ Moving the amendment, Mr. H. E. Holland said that while criticising the Government’s failure, the Labour party presented its own alternative proposals. Tho party recognised the first steps to be taken must bo towards restoration and stabilisation of the purchasing power (which involved the raising of incomes of both farmers and workers) and also towards tho restoration to economic employment, those who were now classed as relief workors. This could only bo achieved on the well planned basis of production and distribution with an effective organisation and utilisation of the country’s credit and currency and with guaranteed prices to the primary producers and a standard wages for workers. It was clear any benefits accruing from the artificial increased rate of exchange could only be of a temporary character. Practically every speaker at tho recent farmers’ gathering had made this clear.

As he saw it, only fanners whose properties were mortgage-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 fanners could only benefit if the exchange remained high over a long period. It was somewhat remarkable that it had never occurred to tho Prime Minister and his colleagues to peg up tk» exchange as an alternative to wage reductions. The London Financial Times had declared tho increase to be a moral breach of the Ottawa agreements and it had to be remembered an agreement had beea reached at Ottawa to hold over the question of exchango until the London Conference. Furthermore, it was legitimate to remind Mr. Forbes that at one stage he himself had suggested that to lift tho rate of exchango might be tantamount to a violation or the Ottawa agreement. It had been said that at Ottawa Now 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. The banks having refused to accept responsibility for the surpluses which would accrue in London as a result of tho shrinkage of imports, the Government would now havo to find money to buy up these surpluses and the money raised would have to bo met our of taxation. In the end it would mean additional imposts on tho farmers and others. Tho cost of living would be substantially forced up and there must be an increase in wages to catch up with the increased prices. The Government’s policy had reduced and was still reducing the general income of the workers in all fields, while at the same time tho 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 dome with a guaranteed market for his goods and that market wa3 only possible when the incomes of consumers were raised to a point that would enable them to purchase the farmers’ goods. As trade unionists tho Labour party said there should be a minimum below which no wage earner should be 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 had stated on other occasions that he did not think it necessary to creato any largo 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 thoy were producing the goods. The State Bank would have to como but even without waiting to establish the State Bank, they eould issue under existing banking legislation all legal-tender paper money that might be required and in a state of emergency tho Government could (under the Public Safety Conservation Act, 1932) take control of the banks and mako them do the work of the Stato.

Mr. Holland then entered upon an explanation of the differences between credit and currency, stressing the greater importance of tho former and insisting that values created in tho form of goods and services constituted a background against which credits eould safely be created. Ho declared the national capacity to produce was tho only possible foundation for the issue of financial credit. Support for Hon. Coates. Hon. J. A. Young supported tho view expressed by Mr. Coates, that instead of increasing unemployment, tho raising of the exchange rate would reduce unemployment because it would in* crease tho national income. It would, in particular, bring relief to unemployed in the country towns. He did not agree that the Government’s action would promote antagonism between town and country because tho cities would eventually realise the value of the step to tho Dominion as a whole. The debate was adjourned and the House rose at 5.30 till 2.30 on Tuesday afternoon.