THE EXCHANGE RATE

Northern Advocate, 18 October 1935, Page 3

THE EXCHANGE RATE

i COST TO DOMINION | WHAT DEMOCRATS WOULD DO. £7,000,000 LOAN PROPOSED. One of the points on which Dr. G. J. Adams dealt for some time in 'his | Democrat party address at the Town , ! Hall last night, was the question of ' | the 25 per cent exchange rate, which, 1 i he said, cost the Dominion over : £13,000,000 to provide gross benefits ■ for the farmers of £9,000,000, which, ■ in reality was a net benefit of abou , £4,000,000. The £13,000,000 was made up as follows: —About £6,000,000 through increased import costs; about £4,000,000 through Government and public body extra commitments; nearly £2,500,000 through sales tax; and over £IOO,OOO through gold export tax and other incidentals. There was, therefore, he said, a dead loss to the Dominion of £4,000,000 annually, which would steadily increase; and it entailed indirect and direct taxation of £13,000,000 annually, which was equivalent to interest and sinking fund on £260,000,000, and all to provide a net bonus of £4,000,000. “This is iniquitous, and is a measure imposed on the people by Messrs Forbes and Goates and some of their Ministers, and not by Parliament which was in recess at the time,” he said. • “If the Government had shown a little generosity to the overburdened taxpayer it could have gone into the money market and borrowed £IBO,000,000 (£9,000,000 capitalised at 5 per cent) and would have saved the Dominion £4,000,000 annually, and, at the same time would have provided the farmers with the same £4,000,000 they are getting today for 45 years, as well as providing the Dominion money to gnvest in reproductive works in the meantime. It would have solved the unemployment problem 10 times over. “However the damage is done, and it remains for something to be done to retrieve the position. The removal of a manipulated exchange rate is much more difficult than its introduction.” Dr. Adams went on to show the position, “as it probably would be before the next export season commences”: — Between £6,000,000 and £7,000,000 would be required to remove the exchange rate then. > The Government commitments, he said, were annually about £4,000,000. A loan of £7,000,000 at 5 per cent to clear the Dominion of exchange would cost £350,000 annually, leaving an annual saving to the Treasury of £3,650,000. ’ That amount could be paid into a produce stabilisation fund to be used for the economic subsidisation of farmers now facing difficulties; but not those amply provided for. If more than £3,650,000 was required in the early years of the existence of the fund, and could not be met by the fund, a call on the Consolidated Fund would be justifiable. In addition such a measure would relieve the people of the Dominion of the 25 per cent increase bn the cost of imports, approximately, £6,000,000, and would increase the spending power of the people, and, consequently, imports, and, as a result would increase revenue from Customs and income taxes.