EXCHANGE RATE

New Zealand Herald, Volume LXXIV, Issue 22722, 7 May 1937, Page 12

EXCHANGE RATE

AUSTRALIA AND LONDON ALTERATION UNLIKELY OFFICIAL STATEMENT .BEPORT FROM CANBERRA By Telegraph—Press Association —Copyright (Received May 6, 5.5 p.m.) i SYDNEY, May 0 It is officially stated at Canberra that there is no possibility of the Commonwealth Government considering . the alteration of the exchanges rate on London as a result of the improvement of the Australian oversea trade balance, which has accumulated to slightly over £30,000,000 sterling.

An earlier message said that as the result of the excellent export season this year, which was expected to increase the Australian reserve funds in London by about £10.000,000, the possibility of a reduction in the prevailing rate of exchange on London was being informally reviewed in official quarters. "The possibility of a reduction in the Australian exchange rate on account of an increase in the exchange funds in London of about £10,000,000 seems to be remote," stated Mr. H. R. Rodwell, lecturer in economics at Auckland ifniversitv College, last evening in commenting upon the earlier cablegram from Canberra. Ji. considerable margin of funds, JNlr. Rodwell said, must always be held on behalf of countries whose exports were subject to considerable price fluctuations. The possibility of their exhaustion and, therefore, of difficulty in meeting overseas interest commitments must always engage attention. No similar accumulation of funds had taken place in the case of New Zealand; iu fact the reverse had occurred and there had been a reduction of some £10,000.000 on the maximum amount of £39,000,000/ It would, therefore, be impossible, in the of this very marked reduction, for New Zealand to reduce its exchange rate below the 120 now ruling. The present policy of the Government' in spending freely had the effect of increasing purchasing power, some of which was spent on imports. This tendency was already marked and, m spite of the rise in the prices of exports, a reduction in exchange funds had occurred. If this policy of spending were continued it would be quite impossible to lower the exchange rate or 1 even to prevent its rising further without introducing at the same time extended exchange rationing or control of imports, or both.