FARMERS AND EXCHANGE.

New Zealand Herald, Volume LXIX, Issue 21117, 26 February 1932, Page 8

FARMERS AND EXCHANGE.

The contention that the removal of restrictions would immediately raise the New Zealand exchange rate to 25 or 30 per cent, has been abandoned by the Farmers' Exchange Committee. All it says now, according to one of its recent manifestoes, is that "farmers think a free exchange will mean a rising exchange." To sustain that belief, inspired by missionaries of the Australian theory of exchange inflation and fostered. by the Farmers' Exchange Committee, a further manifesto has been issued as a reply to the recent statement by the chairman of the associated banks. The declaration by Mr, Grose that the pooling scheme does not rest upon fixation of the rate and his reasons for the banks' opinion that an increase is not justified are not mentioned. Instead, the committee enters upon soma crude speculations of its own. One of its points is that London funds were increased last year by Government borrowing, including the issue of £4,000,000 ol Treasury bills. Not much reliance can be placed upon the committee's conclusions if all its premises are as carelessly inaccurate as this. It is true that £4,000,000 of bills were issued last December, but they were in renewal of existing liabilities—-of which £2,650,000 had been created before March 31, 1030, that amount having been increased by last March to £3,550,000, so that the actual increase in the. Treasury bill debt in London during 1031 was certainly less than £1,'000,000. There need not be any fears, such as the committee seems to entertain, that the banks , have neglected to count the

effect of the changed situation in regard to public borrowing. In its efforts to prove that this year's balance of payments ought to be adverse, the committee objects to the rationing of imports by the banks. Its argument is that if traders were given a free run, they would increase the importations beyond the limit of the funds available to pay for them, and this disorder of the trade balance would be to the advantage of exporters. The argument is so palpably foolish that it is unworthy of a committee professing to speak for the farmers of New Zealand. Formerly, the committee contended that a higher rate was necessary to curtail imports and restore the balance; now that it has been told the balance is virtually assured, it proposes that hypothetical importers should be encouraged to upset it in order to force up the exchange rates. The committee has done an ill-service to the farmers by raising false hopes upon a basis of illinformed assumptions and reckless deductions. It would be wise now to close its activities by supplying to every farmer the full text of Professor Gregory's report so that they may study for themselves a really authoritative and exhaustive exposition of the subject.