EXCHANGE RATE

Nelson Evening Mail, Volume LXVI, 18 June 1932, Page 11

EXCHANGE RATE

BANKER’S POINT OF VIEW ADDRESS BY MR .1, T. GROSE (lly Telegraph--Press Association) WELLINGTON, lGl.lt June. In the event of the present rate ol exchange between New /calami and London being artificially raised, the disadvantages thereby accruing will more that outweigh the advantages. This is the opinion of Mr J. T. Grose, general manager of the. National Batik ol New Zealand, and chairman ol (he Associated Banks, who spoke on tlk* present exchange situation tonight to the Victoria University College Commerce So eioty.

Bankers, said Mr Grose, had to carry out their work with the idea ol the whole community in view, and should not consider sectional or party interests. It would he unwise lo attempt any rebel lo any section of the eommunily by the expedient of an artificially high exchange rale. What he emphasised was that in a system of wise, control the volume of money in circulation could ho increased in such a way as to avoid the risk of inflation getting out of hand. It would even he possible! to achieve this without sacrificing New Zealand’s overseas credit and without erecting a vicious tariff harrier and so ensuring our already much reduced export trade. “I feel sure I hat New Zealand will never knowingly permit her fair name In lie sullied will) (lie stigma of repudiation,” lie said. “It is less certain, however, I hat she may not drift unawares into an unsound financial policy leading lo grave difficulties, or even repudiation if the claims of sectional interests are given disproportions! weight.” EFFECT ON OVERSEAS DEBT Mr Grose then discussed the effect of a high . exchange rate upon New Zealand’s overseas debt. Quito apart from any ethical considerations, lie said, it was a mailer of downright commonsense. for this country to preserve her credit with all her might. Lately they had had a practical demonstration of this-when a loan of £5,000,000 was floated successfully on the London mural. It was well known that the success of this loan was due to the confidence felt in London. This would have been shaken if an artificially high rale had been miotcd, as the, path of inflation generally look the form of a vicious spiral of increased currency expansion and exchange depreciation. It was almost certain that on the maturity of Ihe Dominion’s overseas loans it would find flint renewal would not be countenanced. “I may say that if the exchange rate were increased to £l3O, as has been recommended in certain, (piarlcrs, that would he equivalent to adding not less than £30,000,000 to (lie principal amount of our overseas public debt,” Mr Grose said. REPLY TO ADVOCATES OF HIGH RATE The main argument of those who advocated a high rate of exchange was that the benefits outweighed the disadvantages. “If this were the case,” he said, “I should doubtless consider it sound hanking policy to call an artificially high or an artificially low rate of exchange to benefit any section of the comm unity which might (.'bunco upon evil days. Although certain advantages to certain sections of the community result from an artificially high rale, yet the disadvantages Outweigh the advantages.”