Some Risks To Be Faced

Northern Advocate, 21 August 1948, Page 4

Some Risks To Be Faced

LONDON, Fri. (11 a.m.).—Although the prices of many New Zealand and Australian stocks and shares were raised as a result of the New Zealand currency decision, the actual turnover was small, says Reuters financial correspondent. The absence of sußorttng orders meant that the advances were not always held

In an editorial today The Times says there is perhaps some cause for slight uneasiness over New Zealand's currency appreciation when it is remembered how first Sweden and then Canada were encouraged by big, favourable trade balances- to check rising internal prices by revaluing their currencies upward.

Within a short time they found themselves in difficulties with their trade balances. The dangers which ultimately revealed themselves to Sweden and Canada are naturally not altogether absent in New Zealand. The Times adds, but New Zealand is less vulnerable. Her economy rests more exclusively on agricultural production and she is not at the moment in danger of incurring a dangerous dollar deficit. Indeed, the preponderant part of her imports comes from the sterling area. NEVER RECONCILED A big upward revaluation of a currency is always risky, but it may well be within New Zealand's capacity to carry it off without ill effects. Neither New Zealand nor Australia has ever been quite reconciled to the idea of her pound standing at a discount against the pound sterling, when fundamentally the respective pounds should mean one and the same thing, the paper says. Accordingly, it would take a great deal to induce New Zealand to retrace the step she took yesterday, and equally it may take a great deal to prevent her example from spreading. The financial editor of The Times says the intimacy of financial links between Australia and New Zealand convinces most people in London that there is more than a fair chance of Australia eventually taking the same step. HARDER FOR AUSTRALIA Neither Dominion wholeheartedly accepted the discount against sterling as a permanent institution. Because Australia is a member of the International Monetary Fund, which limits easy upward revaluation to 10 per cent, Australia’s procedure to restore parity would not be so simple. Mr Chifley’s assurance that Australia does not intend to appreciate her currency is firmly credited here, says the financial editor of the Manchester Guardian. Australian woolgrowers, who would object on the same grounds as New Zealand woolgrowers. are politically a much stronger group. There is nothing like the same need to bring down the price of imported goods in Australia. NEW YORK COMMENT

Morning newspapers in New York gave prominence to the New Zealand currency revaluation with two leading papers devoting almost a column to Mr Nash's statement.

The New York Times says New Zealand's return to parity with the British pound had little effect in New York yesterday.

The banks here have only small balances in New Zealand, it adds. When there is need to settle accounts the business is conducted through the banks’ correspondents in London. The exchange rate on the New Zealand pound, which had been about $3.24. was adjusted yesterday to $4.03. New Zealand’s action in appreciating her currency was among the subjects discussed at the regular meeting of the executive directors of the International Monetary Fund in Washington today. However, no formal comment by the fund was forthcoming. It was pointed out that New Zealand was not a member of the fund and therefore was not bound either to consult with or inform the fund of its action.