OVERSEAS EXCHANGE.

New Zealand Herald, Volume LXIX, Issue 21098, 4 February 1932, Page 11

OVERSEAS EXCHANGE.

STABILISATION OF RATE.

BANKS' ATTITUDE WELCOMED. CLOSE CHECK ON IMPORTS. The announcement made by the chairman of the associated banks, Mr. J. T. Grose, that there was no reason for any alteration in the present rate of exchange between New Zealand and London was generally welcomed by Auckland importers and traders yesterday. It was gathered from conversations with a number of Auckland business men that the suggestions made in more than one quarter for an increase in the adverse exchange rate had created uncertainty and a tendency to hold back orders for overseas goods that might otherwise have been placed. "The statement by the chairman of the associated banks is undoubtedly welcome to importers as the whole position was in the air and needed clarifying," said one merchant who has large dealings with London. "The average business man has enough worries to-day without having these things hanging over his head indefinitely." Effect of Fluctuations. Discussing the effect of exchange fluctuations on imports this merchant said that if exchange Mas stabilised at 10 per cent, there should be no increases in the prices of imported goods neit season. There was no doubt that any increase in exchange wouli have to be passed on to the consumer by the importer.

As far as could be ascertained the rationing process introduced to ease the strain on the funds available in London had not caused any great hardship. One importer expressed the view that merchants had naturally restricted their limits for imports owing to the reduction in the spending power of the people, consequent on the prevalence of unemployment, and the imposition of wage reductions and wage taxes. All these factors had substantially reduced the spending power of the community with the result that the volume of business had shrunk possibly 45 per cent, and, in some cases, 50 per cent. This would naturally reduce the call for accommodation in London and make the task of those handling the exchange pool considerably lighter. This, to his mind, was borne out by the statement by the chairman of the associated banks that from present indications exports from New Zealand this year would provide for the service of the country's debt abroad as well as carrying the cost of imports. No Time for Speculation.

Just how far this position was created by the pressure exerted by the banks on their clients to limit their imports was not easy to ascertain, but it was evident from yesterday's inquiries that large firms likely to receive reasonably generous treatment from their bankers were confining their orders to their legitimate trade requirements. Discussing this point one importer said that the banks were in a position to know which firms could be permitted to import on any large scale and were using that knowledge to the best advantage of all concerned. So far ?s he could see importers should have no difficulty in having their requirements met, but if they were wise they would buy only for the reasonable demands of their prospective trade. In any case, this was no time for speculating in stocks or exchange even were that possible just now. Another business man said that although a 10 per cent, adverse exchange might be justified by the present circumstances of New Zealand it did not appear that the New Zealand situation in respect of her overseas balances warranted the 25 per cent, and 30 per cent, rate about which some people were talking so glibly. FARMERS' UNION ATTITUDE. FREE EXCHANGE DEMANDED. [BY TELEGRAPH. —PRESS ASSOCIATION.] WELLINGTON, Wednesday. Following an address by Mr. A. G. Davidson, general manager of the Bank of New South Wales, to the New /Zealand Farmers' L T nion executive to-day on the exchange question the executive adopted the following motion moved by the president, Mr. AY. J. Folson, M.P.:— That the executive supports and en dorses the action of the Farmers' Ex change Committee in demanding free exchange and places itself behind the organisation in anything it may do toward that end.