SATURDAY, NOVEMBER 23, 1935 Why Invite Disaster?

Manawatu Times, Volume 60, Issue 277, 23 November 1935, Page 6

SATURDAY, NOVEMBER 23, 1935 Why Invite Disaster?

Throe years ago, on January IS next, the exchange rate on London vvas raised ironi 110 per cent, to 120 per cent. The Dominion’s finances, both private and public, are now in adjustment with that rate.

To-day, on countless platforms Parliamentary candidates of certain colours are inviting support and urging that they merit support, as they will restore our exchange rate to parity. In the heat of an election, much confusion of thought can arise owing to the diverse statements put forward by various interested parties. The exchange rate has become, unfortunately, a major political question and confusion of thought has been created as to its effects. It is important that the issue should be clearly understood.

To illustrate the effect of the exchange rate, consider the return on ouc cwt. of butter sold in London. On to-day’s marleet this would sell at 100 sin London. According to the official “dairy-table” that would return the dairy-farmer, the actual producer, t) ; |d/per pound of butter-fat, were the exchange at par. At the present rate -of exchange, £1231 New Zealand pounds are received for £IOO sterling. At this rate, the dairyfarmer is receiving 12d per pound of butter-fat. lie has gained 2Jd per pound. Approximately 30 per cent.

A dairy-farmer with 60 cows producing 2401b5. of butterfat each, stands to lose £165 this season if the exchange is reduced to par. He would lose £2 15s per cow, per pound of fat. (

Centring on Palmerston North are four counties wherein dairying is a major industry. These are Kairanga, Oroua, Manawatu and Horowhenua. Official returns show that on January 31 last there were ,100,855 cows in milk in these four countries. A reduction of the exchange rate to par would rob the dairy-farmers therein of £250,000 on a season’s output. Sheep-farmers and stock-fatteners stand to be equally affected, but the total effect in their case would amount to a still larger sum—probably to as much as £350,000 or more.

How would the prosperity of Palmerston North and the towns in this district benefit from a reduction of £600,000 in the farmer’s income? An average of £50,000 per month less purchasing power. ,

In Denmark, in recent months, the farmers have been bringing heavy pressure, as yet unsuccessfully, upon the Socialist Government of that country to raise the Danish exchange rate. The rate at present is 125 per cent.

It has been stated that, were New Zealand to restore the exchange to par, free entry into Britain for our produce in unlimited quantities could be obtained. To anyone with the least knowledge of Britain’s agricultural policy, such an assertion is known to be quite ridiculous. To accept and act upon that assertion would be to throw away the substance for the shadow. To bring in any policy of subsidised or guaranteed prices would mean running a grave risk of inviting more stringent restrictions than are likely under the present unsubsidised production.

To reduce the exchange rate to par, on the present price levels of primary products, would bring major disaster upon this Dominion. It is no exaggeration to say that the whole country would be thrown into chaos. Overnight, 30,000,000 sheep would, lose 5s a head in value—£7,soo,ooo loss. Forty million acres of farming lands would at once lose a quarter or more of their value. Primary incomes would be reduced by a quarter and the towns would early feel the effects. Trade would fall off and unemployment would mount by thousands upon thousands.

The exchange rate should never have been made a political issue. Until such time as the prices of primary products regain higher levels, there can be no question of reducing our exchange rate. That time has not yet come.