INCREASING EXCHANGE

Manawatu Times, Volume LVI, Issue 7068, 30 January 1933, Page 8

INCREASING EXCHANGE

Anxiety of Local Business Men PUBLIC MEETING TO BE HELD TO-NIGHT To discuss the increase in tho exchange rate, a meeting' of business men, convened by the Chamber of Commerce, was held in Palmerston North on Saturday morning, tho upshot being a decision to call a public meeting for to-night so that the matter could bo gone into moro fully. Mr. M. H. Oram; president of tho chamber, ■was in the chair, and there was an attendance of between SO and 60. "It is only evidence of tho great interest taken in the question,” said Mr. Oram, in opening the discussion, "that so many have been able to como at short notice and at so awkward a time as Saturday morning. I make one appeal to you, gentlemen, that whatever discussion takes place this morning it is ontirely from a national viewpoint.” He had strongly advocated a high exchange, Mr. Oram continued, as part of a comprehensive plan for meeting the Dominion’s difficulties. It had to be remembered that we had made ourselves a nation of exporters and, in addition, had placed all our eggs in one basket. Tho Dominion was eLxporting almost solely to one market, Great Britain, and in the past that basket had been a good one. Very substantially tho whole of our national income came from that market, and that being so, the only channel through which that national incomo could course through the channels of industry and commerce of this country was that of the primary producers. The effect of a rise in the exchange was immediately to increase the amount of money in circulation in tho Dominion. The country was suffering from a discrepancy between tho prices received for primary products and the costs of production. Belief could be obtained in various ways —firstly, by an increase in the prices of primary products; but unfortunately there was no immediate prospect of that. The position could also be adjusted by a manipulation of the currency, or could be adjusted temporarily by an increase in the exchange rate. Another alternative was not to interfere with natural economic laws, but if that were done it would cause widespread suffering and loss. , However, it would have this advantage—everybody would know where he or she stood and would be able to plan accordingly. He did not think it mattered which plan was adopted, as long as a definite plan was adopted and stuck to. Not Part of Comprehensive Plan Manipulation of exchange was only justifiable if it effected its purpose and was part of a comprehensive plan, but it seemed that the present increase in the exchange rate was not part of a comprehensive plan. Before adopting a policy of increased exchange, the question of its effect on importers, on Customs revenue, and the meeting of overseas debt obligations had to be determined. Vague references only had been made to those aspects. If tho exchange had been put up IS months ago, it would have been a great thing for this country. Tho effect of putting the exchange up now, when a large part of the primary production for the current year had been sold—when the major portion of the dairy season was practically finished—was not to put money into circulation through the primary producers. The debt commitments could have been met by a bold conversion loan scheme, as 50 per cent, of the debts was held internally. That was a 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 overseas by reason of a higher exchange. Though he had advocated a higher exchange, he deplored tho action of the Government in arriving at its decision without mature consideration of the attendant ramifications. Importers’ Unexpected Burden A protest was voiced by Mr. W. H. Brown at the arbitrary interference by the Government “overnight at midnight” with the exchange rate. Goods for Christmas trade had been imported in October on ninety days’ terms, ho 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 said he objected to the increased exchange and was opposed to Government interference in business. What was wanted was an increase in the spending power of the people and not a decrease. Manner of Doing It Disliked "The action of the Government,” said Mr. F. J. Nathan, “or the Prime Minister, I should say, in doing what has been done, and tho way it has been done, can oply destroy confidence. : and if you destroy confidence, you destroy credit. (Hear, hear!) The Prime Minister had said that the matter of exchange was one for the bankers, and now he has acted against this view. I won’t say I am against a rise in the exchange, but I am against the way in which it was done.” Mr. Nathan said that the increased cxchango in Australia had been of benefit to the traders and the people. What he definitely disagreed with in regard to tho increase in New Zealand was the method under which it was done. Had the Government gradually increased the exchange, starting frors. 18 months ago Mr. J. Hodgens: And not reduced wages. Mr. Nathan: Surely. Had that course been followed, Mr. Nathan proceeded, there would have been no indignation meetings. Goods would be increased in cost as a result of the present action, but not to the extent that might be believed. Mr. Oram had said that this would not benefit the small farmer, because his butter and cheese had been sold. The «neaker wanted to correct that; 95 per

cent, of the butter was sold in London on consignment, and not f.o.b. in this country. The peoplo who were going to directly benefit were the large mercantile houses engaged in making advances to tho farmers, and if as a result of the increased exchange the farmer could reduce his indebtedness to these houses, it would bo of benefit to tho Dominion. What was the position of the farmer? Mr. Nathan asked. It cost him Sd or 9d to produce a pound of wool, and he was getting 4d. Definitely ho could not go on. If ho could pay off his indebtedness, it would benefit him. Less Government Interference Wanted "You arc not going to get this country back to an even keel by reducing wages, reducing everything, reducing creature comforts,” Mr. Nathan continued. He objected to Government interferenco in business. Since the statement “Less Government interference an business and more business in government,” had been made, the amount of Government interference had increased. The question of exehango was a matter for experts, not for armchair critics. Neither Mr. Coates nor the Prime Minister were experts in finance, and the present step should never have been taken when their financial advisers and the Minister of Finance said it was wrong. Mr. H. 81.B 1 . Free asked Mr. Nathan, in view of the fact that the Dominion had already tho benefit of a 10 per cent, pegged exchange, which some of the banks said was not justified, whether he would suggest that the Dominion should add another 15 per cent. What our nearest neighbours were doing had to be considered, replied Mr Nathan.

The dairy farmer said he could not produce at 7d a pound, and needed at least Is, said Mr. Hodgens. So how could Id to lid a lb extra meet the position? Butter could bo produced at less than Is a lb, replied Mr. Nathan, depending always on the amount paid for the land. The Dominion had to get down to a proper costing of land before it could arrive at a basis of production. Mr. Jas. Wallace said lie agreed with the chairman and Mr. Nathan that the Government’3 action constituted a great blow to confidence. He thought that the Government should endeavour to got frozen credit dissolved. The threads of finance should have been left to the wide knowledge of Mr. Downio Stewart. The people of this country would not be receiving £8,000,000 extra, but actually only £5,500,00Q, 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 at a time when they had less spending power. He w-anted to know just -where the position was going to end. He questioned the possibilities of the coming winter, when merchants, knowing there was depleted purchasing power, had to increase the costs of their goods and make them more diffi-. cult 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? The decision to call a public meeting for Monday and to ask Mr. J. A. Nash, M.P., to attend, concluded tho meeting. Opposition of Commercial Circles Per Press Association WAIPUKURAU, Jan. 28. The executive of the Waipukurau Chamber of Commerce passed a resolution whole-heartedly supporting tho Associated Chambers’ stand in condemnation of Cabinet’s action in raising tho exchange rate. It was decided that the member for the district be advised accordingly. The consensus of opinion was that the increase was an inequitable and ineffective means of aiding the most needful section —tho farmers—and it was likened to “robbing Peter to pay gauh’.?