OVERSEAS EXCHANGE.

New Zealand Herald, Volume LXIX, Issue 21086, 21 January 1932, Page 10

OVERSEAS EXCHANGE.

\ {HIGHER RATES AGITATION. » "A DANGEROUS REMEDY." VIEWS OF,SIR GEORGE ELLIOT ' SERIOUS EFFECTS INEVITABLE. ''There is a fundamental and insuperable objection to the proposal," said Sir George Elliot, in commenting yesterday upon tlie proposal that exchange rates should bo increased. "The question of exchanges is essentially very simple," said Sir George. "Shorn of all the complicated arguments / l;pon theoretical aspects, the proposition that has been put before the Government is that . New Zealand exchange rates should be placed upon the same level as Australian rates—2s instead of 10 per cent. The effect would be, according to the advocates of this measure, th\t the returns to exporters would bo increased by £4,500,000 —assuming the sterling value of our exports is £30,000,000. "This is not extra money. The £4,500,000 would have to be collected from the whole community—a considerable amount of it by the Government through extra taxation; the greater part from importers. To suggest that the taxpayers generally and the commercial community especially can bear an additional burden of £4,500,000 is ridiculous. I am perfectly aware of the difficulties of farmers and have the utmost sympathy with them. But it would only aggravate their difficulties if the country embarked upon an experiment of which the results would bp eo serious. " How is the general community going to pay tlie £4,500,000? Can our merchants and shopkeepers pay the extra exchange costs themselves or add them to their prices? " Business is possible under present .conditions, only when prices are cut to the lowest possible level. The inevitable increase in the cost of all imports would consequently curtail business still further and the commercial community would be involved in such difficulties that they would also have a right to appeal for assistance by a similar scheme of taxing the whole community to subsidise a section of it. " Any interference with exchange rates is a dangerous experiment. The present proposal is merely an indirect means of inflating the currency. Its adoption would inevitably be injurious to the Dominion and its ultimate effect would be to harip'er the / process" of reducing costs of production that is; _ so important to the permanent relief of primary production. Exchange rates cannot be manipulated for tho oencfit of some of ilio people without doing a great deal of harm to the whole community, including the intended beneficiaries of the experiment. Tho present rates have been determined to a largo extent by the operation of supply and demand. Tho same forced will continue to regulate them and there is neither need nor justification for arbitrary interference with them. The Government's requirements create a new demand, but the adjustment of our 0%-erseas trade has already increased the supply of funds to New Zealand's credit overseas. During a long period in which our trade balance has fluctuated widely, the banks of the Dominion have so managed its exchange transactions that disturbing effects have been avoided, ard the public may confidently rely upon them, with their knowledge nnd experience, to deal with the new situation in a manner that/will safeguard the.interests of the whole Dominion."