EXCHANGE POSITION.

New Zealand Herald, Volume LXVII, Issue 20596, 21 June 1930, Page 14

EXCHANGE POSITION.

DIFFICULT FOR SOME TIME. ADVANTAGE TO EXPORTERS. LOCAL AND LONDON BANK RATES [BT TELEGRAPH- —OWN CORRESPONDENT.] WELLINGTON, Friday. Tho position in regard to Ixmdon exchange was reviewed by Sir George Elliot at some longth in his speech at the aryiual meeting of tho Bank of New Zealand. Regarding Australian conditions, ho said that, although the official rate for telegraphic transfers stands at 6| per cont., as much as per cent, has been paid to private sellers. Until the practically prohibitive increase in customs duties has taken effect and prices of produce materially improve, the oxchange position is unlikely to ease. Ho considered there was much in favour of the contention by certain Australian bankers that there was no need for such drastic action on tho part of the Government, since tho banks were controlling tho position by regulating exchange rates so that equilibrium would in time have been attained. By that means exporters of primary products would have materially benefited .by tho greater premium on exchange. A factor in the New Zealand position that was not apparent from the trade returns was that whereas the latter disclosed almost a parity between exports and imports in the 12 months ended March 31, it was certain that the amount actually realised for exports had been very much less than tho value declared at time of shipment. It must also be remembered that interest amounting to something like £8,200,000 on Government and local body loans, raised in London, has annually to be paid there. Under such conditions, the exchange position will bo difficult for some time to come. Tho bank had been able to supply all its own customers' exchauge requirements, and anticipates being able to continue doing so, though its resources in London havo been considerably depleted, due largely to exceptional transactions on account of the Government. In recording the alterations in interest rates during tho year, Sir George Elliot remarked that so far as primary producers are concerned, tho high premium being paid by the banks for London exchange will more than compensate them for the increase in the overdraft rate. Comparison is sometimes made between the Bank of England discount rate and advance rates ruling in New Zealand, but, as conditions are entirely different, no comparison or inference can fairly be drawn. During the war period, and for some time after, tho minimum overdraft rate in New Zealand was 5), per cent. For a portion of that time tho Bank of England rate was 7 per cent., and British Treasury bills yielded 6£ per cent. As a matter of fact, a low bank rata in London is not conducivo to a low rate here, for New Zealand and Australian bank profits are adversely affected by a low rate obtainable on their accumulated funds in London.