Review by Banker of Dominion’s Funds

Manawatu Times, Volume 64, Issue 172, 24 July 1939, Page 12

Review by Banker of Dominion’s Funds

RATIONING OF EXCHANGE LONDON, June 29. ”It is essential that if the exchange position is not alleviated in some way in the near future tho New Zealand Government should decide upon a list of priorities, and indicate clearly to the trading banks the lines upon which they must act in auy rationing of exchange which may be necessary,” said Lord Balfour of Burleigh, chairman of the National Bank of New Zealand, at tho annual meeting to-dav, “It seems to me that in an economy which is subject to the degree of Government control now being exercised in New Zealand, it is not possible for discrimination in the granting of sterling exchange made by trading banka as well as the Government and the Reserve Bank. “Putting on the Brake” “I regret, from an economic point of view, that the Government pursued so vigorous a policy of public works and general internal expansion during tho boom year of 1937, because it seems to me that if a Government is trying to insulate its country' from the effects of world trade cycles by the regulation of internal monetary conditions, it must be just as ready’ to put on the brake during times of rising world prices aa it is to press the accelerator when world prices are falling. “When the exchange control began it seemed a reasonable assumption that the granting of important licences by the Reserve Bank implied that sterling would be available as cover, and it ia regrettable now to find that licences and permits have been granted substantially in excess of the funds likely to bo available in the next few months. Facing Difficult Position “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 be financed if goods vital to New Zealand’s exporting industries arc not to be shut out. It does seem to me to bo of the first importance that means should be found to finance these imports. “The Government must at once sco that the volume of imports licences is kept within the limit of available sterling. In the absence of an assurance to that effect, not only will future essential requirements be held up, but also contracts which have already been entered into will become incapable of fulfilment, with obvious consequences of a far-reaching and undesirable kind. “New Zealand’s credit cannot be maintained if ordinary trading operations cannot be 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 is the best way to stop it going there.”