HIGH EXCHANGE RATE

New Zealand Herald, Volume LXX, Issue 21471, 20 April 1933, Page 10

HIGH EXCHANGE RATE

DEFENCE OF POLICiY BENEFITS TO PRODUCERS MINISTER'S REPLY TO CRITICS [by telegraph—owx correspondent] PAPAROA, "Wednesday A vigorous defence of the action of the Government in raising the exchange rate was made »by the Minister of Finance, the lit. Hon. J. G. Coates, in an address at Paparoa yesterday. After a policy of deflation had been pursued for a period, ho said, it had been deemed wise to administer a small dos' 3 of inflation, so as to give the primary producer a chance to carry on. The* Government had practically been forced to do this or see the people go under. As an instance of the immediate benefits, he said the averago pay-out for butter-fat had been 7d per lb., some factories paying sd, 7d, 7sd, and a few Bd. The pay-out would have been 4d to-day had the exchange rate not. been raised. Thus a tremendous fall had been stopped. Wool and yieat exports had benefited to an estimated increase of £1,000,000, continued Mr. Coates. The Government had investigated other suggested meiins of helping the primary producer and this rise in the exchange rate was the most convenient, comprehensive and complete. The banks had suggested the borrowing of £5,000,000 at 4 per cent for two years as a subsidy to the farmers, but the question was ho'v to distribute it. Experts went into the matter and found it would not bo possible. It might havo been done in connection with dairy factories, but a pro rata distribution of a bonus an ong the other lines of farming would been unfair and impracticable an;l havo caused endless dissatisfaction.

Much opposition had been aroused by the Government's action, importers an! business liad been hit by it and also the press, but the Government had to walk past these grievances and arrive at the source of the problem, said tho Minister. Opponents should remember that if the farmer's purchasing poiver was depleted, the business community would suifer seriously also, the fall in prices affecting all sections. On thi} success of the primary producer all the community was dependent. Australia had been exporting on a high exchange. No criticism had come from the British Government on New Zealand's action, and the Dominion's rate of exchange was still lower than any other part of the Empire. Mr. Coates defended the policy as a clear-cut issue, which came" home to evijry individual in the country. He re.id a certified statement covering the operations of a firm controlling 14 farms in Ota go -which had been tided over by the exchange, a deficiency of £5611 being converted into a profit of £5:00. The speaker deprecated the general trejnd of criticism, which was to ur.dermine confidence in those responsible for running the country's affairs.

THE COST OF LIVING DOWNWARD TENDENCY SHOWN ANSWER TO OBJECTIONS [by telegraph—own'correspondent] DARG-AVILLE, Wednesday Efforts by the Government to bridge the gap between costs and prices of primary products were outlined by the Rv. Hon. J. G. Coates, Minister of Finance, in an address at Ruawai yesterday. When it became obvious that no solutioh could be found along the line of merely reducing expenses, lje said, receipts as measured in New Zealand currency had to be expanded, and this was justification for the adjustment in the exchange rate. When the exchange rate was raised, hti continued, fears were expressed lest the cost of living and retail prices would be iucreased. What was the result in the light of experience? Certainly it was true that wholesale prices luid increased. The latest figures issued by the Government statistician showed a rise of 3.3 per cent over the previous figures, but against this there was a fall of 1.1 per cent in retail prices (all groups). This fall followed the experience of England and of Australia. The figures gave a complete answer to objections that had been raised. In spite of the rise in the exchange rate, and in spite of the sales tax, the cost of living in New Zealand had continued to fall, as shown in the March oificial figures. Some critics, said Mr. Coates, had suggested that the raising of the exchange rate would excite prejudice in Great Britain. It had even been argued that this was responsible for the propasals involving regulation of butter imported into the United Kingdom. No suggestion could be moro unfounded or fantastic. There had been no representations from the British Government, and no word of objection to 'the adjustment of the exchange rate. Prior to the increase in the exchange rate British imports into New Zealand had declined sharply. This was clearly due to failure of pui-ihasing power in New Zealand and in the increased exchango rate, with its effect in raising the national income, \yas the course adopted to strengthen the purchasing power. The time would come, said Mr. Coates, when importers would appreciate that the adjustment which had keen made was in their interests as well as in the interests of the entiro community.