THE EXCHANGE POSITION

New Zealand Herald, Volume LXIX, Issue 21345, 21 November 1932, Page 8

THE EXCHANGE POSITION

The present demand for an increased rate of overseas exchange is not based on any claim that the balance of payments calls for an upward movement of the order suggested, or, indeed, for any increase at all. In the controversy over the pool, established in order that the requirements of the Government and local authorities, responsible for overseas debt service, might be met, the burden of protest was that the market should be free, so that exchange might reach its natural level. Now the demand is for a rate which its advocates do not pretend would be anything but artificial. It is urged on the ground that the primary producer needs the assistance of the exchange premium. His difficulties cannot be denied. The latest quotations for butter in London emphasise the seriousness of his plight. Admitting it does not involve endorsing the soundness of using'the exchange rate to aid him. To question it is no evidence of lack of sympathy for the farmer. The artificiality of a rise in exchange is well illustrated by the available figures for overseas trade and the most recent banking statistics. The trade returns for the nine months of the calendar year ended September 30 show an apparent surplus ,of exports over imports amounting to £11,621,000 in round figures. This does not represent the position exactly, because in the official statistics exports are valued in New Zealand currency and imports in sterling, the present level of exchange thus affecting the comparison. An adjustment shows a surplus of exports of approximately £9,000,000 in London. Thus the trend of-the year's trade, in spite of calamitously low export prices, is wholly against a rise in exchange on the balance of payments. There should be no such scarcity of London money as to warrant its appreciation in terms of New Zealand currency. The banking figures bear this out. Both the June and September returns showed a relationship between advances and deposits indicating that the demands on London funds had been -light. This is understandable in view of the extremely low level of imports for the year. The campaign for high exchange is frankly regardless of the market level, and the evidence attests the artificiality of the rate proposed.