RATE OF EXCHANGE

Northern Advocate, 15 June 1934, Page 7

RATE OF EXCHANGE

RESULTS SUMMARISED. l.vrrEOTMl-NT TO Tl« A DK. i .BANK CHAIRMAN'S \ fIAVS. (Special to “Northern Advocate.”) j WELLINGTON, This Day. • The chairman of directors of Mn; Bank of New Zealand, in the, course of j his address to the annual molding ot I shareholders today, referred to tin* Government's action in increasing the rate of exchange. •‘lt may be assumed, ’’ he said, ‘•that the Government and their advisers anticipated that importers and others having payments to make in London, would accept the position and continue to operate normally. Smdi, however, has not been the case, for the belief has been widely held that the j exchange rate must ha.ve some relation to Die balance, of trade, that the 125 I rate was unwarranted according to | this principle and therefore could not jbe maintained. This belief, based on i economic teaching which is now apparently old-fashioned, has persisted in i spite of -Ministerial assurances. Those desirous of remitting .funds from London to New Zealand have also apparently shared this view, and the net resuit has been that the surplus fund.taken over by Hie Government under the ‘•Banks’ indemnity (Exchange) Act,’’ notwithstanding the observance by the Banks of the Government's request that the transfer of capital moneys from Loudon should not be made, have attained a volume far beyond expectations. The uncertainty regarding maintenance of the rate, whether justified or not, has been most unset-ling, and has naturally given importers and others a good deal of anxiety in the conduct of their business. I am afraid that some of the trade which should rightly go to our best customer —Great Britain—is being diverted to Australia. The Government have given an assurance that the rate will remain at its present ligure until at least the end of the present produce season. The Reserve Bank will commence business on August 1, and as the determining of exchange rates is one of its functions, the continuance or otherwise of the present rate will be one of the difficult problems it will have to solve. On the one hand is the primary producer who has had the benefit of the high rate for eighteen months, whose need of assistance (with the exception of the wool-grower) is even greater now than formerly, and whoso competitors are still working on high exchange or depreciated currencies. On the other hand there is the strong opposition of a large portion of the community which considers the high exchange rate an additional burden placed on the general public for the benefit of a section of lire people. There is, further, a trade position and an accumulation of lamdon funds which not only do not justify a 125 rate, but which would in ordinary course call for a rate not worse than par.

It-, has been authoritatively stated that tlm adoption of high exchange rates by Australia, and New Zealand had no bearing on Britain’s decision to impose quotas, but it is diflicult to understand that the imposition of what was virtually a substantial additional tariff: on British goods passed unnoticed. It is a generally accepted principle that one can rarely have it both ways.