EXCHANGE ISSUE

New Zealand Herald, Volume LXIX, Issue 21346, 22 November 1932, Page 11

EXCHANGE ISSUE

NO GOVERNMENT MOVE

THE central bank bill

STATEMENT *BY MR. COATES

-WE ARE GOING AHEAD"

[by telegraph —special, reporter] "WELLINGTON, Monday The expectation that the Government tfould be consulted before tho banks took any action regarding the exchange rate was expressed by the Prime Minister, Bt. Hon. G. W. Forbes, in an interview

this evening. There has been a slight slackening in the tension caused by tho revival of tho question last week. That has probably been duo firstly to the fact that the Bank of New Zealand directorate has postponed its meeting to consider the subject untikFriday, and secondly, to the fact that those most actively associated with the higher exchange movement in Parliament have been absent from Wellington during tho week-end. , However, interest in the subject will bo rekindled with the reassembly of members to-mor-row and the return of the Minister of Finance, lion. W. Downie Stewart, from England on Wednesday. In the meanwhile, an emphatic statement made to-night by the Et. Hon. J. G. (..Gates would seem to cancel any suggestion that the Central Reserve Bank Bill may be dropped as a result of the development in the exchange rate controversy. Shortly after his return from the Ottawa Conference over two months ago, Mr. 'Contes announced that a measure to establish the bank would bo promoted, and although no bill has yet appeared, that is believed to be duo to the fact that the drafting of a suitable measure has been a matter of exceptional difficulty and has required the most careful drafting. "There Can Be No Bargain"

"We are going ahead with the Central Reserve Rank Bill, and there need be no doubt about that," said Mr. Coates when the possibility was mentioned to him that the measure might bo sacrificed if tho banks were agreeable to raising the exchange rate. ''There can be no bargain of that description," said Mr. Coates. "Tlio idea is to have a chain of central banks throughout the Empire and New Zealand is, going to supply its link." 'The Cabinet sat for nearly four hours this afternoon, but according to a statement made bv Mr. Forbes at the conclusion, the exchange question was not discussed. When asked whether the Government would continue to adopt an entirely noncommittal attitude in spite of the fact that there was a strong opinion that the exchange question was one of national importance, Mr. Forbes said the Cabinet had no intention of interfering. The banks had a. definite responsibility in the matter, and the Government was content to believe that they would recognise that the welfare of the country should be their first consideration. Power of Government Discussing the question whether the Government had power to exert its influence as it wished, Mr. Forbes said it could not be denied that the Government possessed all the power it required to take any action it might deem necessarv. By passing legislation it could definitely assume control over issues which ordinarily were in the hands of private concerns. However, in this instance, the Government did not consider it would be justified, at least at the moment, in stepping in. In spite of the fact that the Government was directly represented on the directorate of the Bank of New Zealand the attitude had always been maintained that it would be entirely unwise to endeavour to dictate upon questions of

banking policy. He had stated upon assuming the portfolio of Finance in 1930 1 that this policy would be adhered to and there was certainly no intention of deviating from it at present. 'Mr. Forbes added that his own opinion was that nothing would bo done by the banks until after the return to New Zealand on Wednesday of Mr. Stewart. In any event, he said", in spite of the fact that the Government would make no overtures to the banks it was fully expected that any decision that might be made concerning the exchange rate would be referred to the Government for consideration and opinion. The view of the Government would then, no doubt, be considered by the banks before they took action.

Bounty Scheme Not Favoured Asked whether the Government had a completely open mind on the whole question, and whether it had refused to consider the advisability of adopting the various alternatives, Mr. Forbes said that the only preference the Cabinet had was to do what would be best for the welfare of the country. He declined to be drawn when asked whether an increase in the exchange rate would not make it more difficult to balance the Budget, merely saying that the Government would adopt whatever course the banks considered Mr. Forbes was emphatic that although it was reported the banks were considering the bounty on exports scheme as an alternative to the raising of the exchange rate, that was not in his opinion the right way to meet the position. . He:said it was estimated that at least £5,000,000 a year would he needed to subsidise exporters'of primary produce, but as far as he could see that would merely be asking posteritv to pay for temporary assistance of farmers. Such a scheme would result in dead-weight being added to the national debt, for the money would have to be borrowed by the Government, and the present time was far from opportune for doing that. The possibility of the exchange rate being discussed by the House was mentioned to Mr. Forbes, who was asked what his attitude would be if an attemp were made to force the question to a division with the object of ascertaining exactly where members stood. He infeiied that the prospect of any Government member moving an adjournment of ie House to enable the question to be discussed was not likely. , , Mr Forbes' conjecture is strengthened by the fact that when such a move was mooted recently those agitating or higher exchange adopted the alternative Suggestion of waiting as a deputation on the Cabinet to avoid the possibility of embarrassing the Government by pi moting an open debate on the question.

t A COMBINED PROTEST

Resolution in Wellington

Many interests . represented

[BY TELEGRAPH —PRESS ASSOCIATION] WELLINGTON. Monday The Wellington Chamber and the Associated Chambers of Commerce, the JNew Zealand Harbours Association anc Wellington Harbour Board, the Unitea Kingdom Manufacturers' New Zealand Representatives' Association, the , Zealand and the Canadian Manufacturers Associations, the Master Drapers Association, the New Zealand Federation ot Master Drapers, the Commercial Iravel and Warehousemen's, Association, Electrical Federation, and the Moto * Trades. Association were represented at a meeting this morning which carried a le lution similar to that of the ImpOl el Association, protesting against the a - tempt to force the banks to increase tne exchange rate. • „ a , The motion was moved by Mr. ii. d " mond, president of the Importers r ederation, and seconded by the Mayor o (Wellington, Mr. T. C. A. Hislop.,