FARM INCOMES AND COSTS

New Zealand Herald, Volume LXXIII, Issue 22518, 8 September 1936, Page 13

FARM INCOMES AND COSTS

gj Fj ,J. Hislop has been putting statements into my mouth which I have never made, and then proceeding to knock them down. His statement that imported goods now cost the farmer a greater quantity or lamb or other farm produce than with a lower exchange rate is definitely , incorrect. Imported goods, the cost of which has been materially increased in Is ew Zealand money by th o widening of exchange, enter only to a comparatively smalf extent into farmers' costs. Ihe largest item in most farmers costs is interest, which has not been increased in New Zealand money by exchange. The bulk of his other costs are in connection with local goods and services, which have either not been increased, or only to a small extent, by exchange. Probably not more than lo per cent of a farmer's total costs are connected with imported goods, which have been materially increased in cost through exchange, and even with these items the cost in pounds of wool lamb or butter has not been increased. Obviously Mr. Hislop objects to the JNew Zealand pound being; worth 20 per cent less than sterling, but he neither says what he considers the correct relationship between the two currencies should be nor how his objective should ba reached and maintained Since 1914 every country in the world, with the exception of Holland and Switzerland, has left its old currency base and adopted a new standard of value, but no currency is now tied to another. Every countrv is now endeavouring to keep the value of currency at a level that will permit its export industries to live. While in pie-war days the relative values of world currencies kept stable, to-day no one can tell what they will be in a year, three months or even in one month's time. Britain is keeping the value of the pound sterling at a level to suit herself, and the weapons used to accomplish this purpose are the secret use of an exchange fund of Originally £370,000,000 sterling, plus the stoppage of all British foreign investments of new monev without the consent of the Treasury. The Treasury Control Committee, in deciding its objective-, considers only British conditions, and not those of "New Zealand, or any other country, except in so far as they influence British conditions. In relation to gold, the value of the British pound sterling to-day has depreciated 39 per cent since 1914, but in relation to commodities it is now worth about the same as in 1914. The British commodity index, however, is comprised largely of imported raw materials and foodstuffs. British exports of manufactured goods sell for considerably more in sterling than in 1914. The value of the New Zealand pound to-day is depreciated by 51 per cent in relation to gold as compared with 1914, but the average price level of New Zealand exports to-day is only about 8 per cent above 1914 in New Zealand money. There are a number of countries "to-dav, including New Zealand, in what is known as the sterling block. These countries tie to sterling because London is the world's financial centre, but none of them adopt par with sterling. They all keep in their own hands the right to determine the exchange or distance between their own currencies and sterling, and change that distance to suit their own conditions. If Mr. Hislop advocates New Zealand currency being par with sterling, then he wants New Zealand to do what no other country in the world is doing, which is to hand over the maintenance of the value of its currency to the British Treasury Committee, which neither considers New Zealand conditions in the slightest nor wants the job. He would, further, be suggesting that the New Zealand Government should part with one of the chief, if not the chief, function of any Government, viz., the control of its own currency. Possibly Mr. Hislop does not mean that New Zealand currency should be par with sterling, but its value should he left to the free play of supply and demand. No country in the world is doing this. The Government of every country is taking a hand to-dav in controlling the value of its own currency. W. D. Hunt.