Mr Nash Explains Exchange Restrictions To 1,150 Importers

Northern Advocate, 25 January 1939, Page 8

Mr Nash Explains Exchange Restrictions To 1,150 Importers

[Per Press Association. Copyright .] WELLINGTON, This Day. rpnE ORIGIN OF THE GOVERNMENT’S EXCHANGE POLICY AND FACTORS INFLUENCING THE DECISION TO BRING IT INTO OPERATION, WERE SET OUT BY THE MINISTER OF CUSTOMS, THE HON. W. NASH, WHEN ADDRESSING THE SPECIAL IMPORTERS’ CONFERENCE IN THE WELLINGTON TOWN THIS MORNING.

The president of the Associated Chambers of Commerce, Mr M. S. Myers, of Dunedin, presided over an attendance of about 1150, which was fully representative of the business interests of the Dominion,

Mr Nash emphasised that since the introduction of exchange control, and from the study he had given to the question previously, he was satisfied it was .a commonsense, rational and reasonable procedure to follow, even with all the difficulties it would taring into being.

Mr Nash said he regarded it as a privilege to allow importers to know exactly what was in the Government’s mind regarding the regulations.

For the seven months from April 30'*-

to November 30 last year, there had been a decline in the Dominion’s sterling funds in London of slightly more than £20,000,000, and the Government had to find out the reason for such a marked decline in such a short period.

j £21,000,000 Needed in 1939. ' During the present year, local body loans maturing in the United Kingdom were £849.000, and on January 1 next £17,172,000 was due by the Dominion in London. 1 That implied that New Zealand had 'to find something more than £21,000,000 in New Zealand curre'ncy in London by the end of the present year.

No New Money Borrowed. A procedure had to be found to augment the sterling funds and to prevent their complete disappearance. Past Governments had usually borrowed to supplement the funds, and during 1923 to 1932 the national debt overseas increased by nearly £66,000,000, Since then, the Dominion had not borrowed any new money overseas. The previous Government had started to try to work out a way of preventing the continual increase in the national debt, and, during 1933 and 1938, the debt was reduced by £14,000,000, including local body debt, that automatically had some effect on sterling funds, Over-Importation Not Sole Cause. In 1935-36, funds, the Minister continued, were £46,000,000. The decline to the present level of £7,000,000 was not entirely due to over-importation.

That could be done in three ways. New Zealand could induce some of the people to whom the money was due

to renew their loan; more money could be borrowed for repayment purposes; or more of New Zealand’s own money could be found to meet the charges.

If New Zealand was to get fairly reasonable terms for renewal and repayment purposes, some steps had been taken to conserve the funds built up from the sale of exports.

The decline in export values last year was £7,500,000, but the decline in import values was slightly less than £2,000,000. .

If New Zealand had only enough last year and was £5,500,000 worse off again this year, obviously some curtailment was necessary.

Large sums had been taken out of New Zealand that had been left here In anticipation of the exchange going down.

Mr Nash said that during the year New Zealand had to find interest on debts amounting to £8,600.000, and everybody would agree that had to be paid first to maintain the country’s integrity.

Another reason was that persons who had made money in New Zealand had sent large sums overseas, with the object of getting higher interest rates.

Another prior charge of about ■ £1,000.000 was on private investments held by people domiciled overseas. Then there was another £1,000,000 required for salaries and commissions, insurance payments and so on overseas. Defence Needs First. ! Another special circumstance was j the present world situation, and New | Zealand had to play its part in Em- i pire and Commonwealth defence. The present Government had been \ spending at an accelerated rate on de- j fence during the past few years out of ; sheer necessity, and he believed the •expenditure would have to be still j further accelerated during the present j year, entailing a fairly heavy charge • on sterling funds. , Materials for defence would have to ■come in before other imports. All these factors meant a fairly dras- j tic cut in imports. It was common- j sense to select the imports it was de- | 'sirable to bring in. so that the new procedure would have Ihc least harm- j ful impact. ;

That was probably the major influence on the funds.

During the last 12 months exports exceeded imports by roughtly £3,800,000, when at least £12,000,000 excess of exports over imports was required for normal working. Old Bank Restriction. The old procedure, before the Reserve Bank came into being, was that, when the trading banks found their London funds tending to decline, they automatically started reducing overdrafts and increasing interest rates on Overdrafts.

Then their clients were advised to curtail expenditure, which automatically brought unemployment, reduced wages and spending power, bringing about a decline in imports, and so balancing exports and imports.

The present procedure, he continued, was nothing new so far as the world generally was concerned. Thirty or forty countries had adopted exchange control.

Hurried Ending. I I As the gathering was breaking up. a member of the audience rose to propose a vote oC thanks to Mr Nash, but already many of those present had left their seats, and no formal motion was put. j - I