FREE EXCHANGE

New Zealand Herald, Volume LXXVI, Issue 23356, 26 May 1939, Page 9

FREE EXCHANGE

EXTENSIVE DEALINGS PREMIUM OF 10* PER CENT NUMBER OF SOURCES USED [HT TELEGRAPH —OWN CORRESPONDENT] WELLINGTON, Thursday Fairly extensive dealings in free exchange, namely, in external funds that for various reasons are not subject to the Government's control of exchange through the Reserve Bank, are disclosed by inquiries made in commercial circles to-day. The interest of importers in this means of obtaining credits abroad to enable goods to be purchased for New Zealand without making a call on the controlled London funds has been greatly stimulated by the announcement by the Minister of Customs, tho Hon. W. Nash, that application for import licences by importers who could import goods without calling on sterling would receive favourable consideration, and now, by the recent judgment on tho import regulations as delivered in Auckland, an accelerated demand for these free funds is indicated ,by the steady increase in tho premiums charged. One transaction involving tho purchase of £40,000 of London money in January at a premium of 2J per cent is mentioned as one of the earliest dealings in this so-called " black market," but since then tho premium has risen sharply and another transaction involving £IO,OOO at a premium of 10J per cent is said to have taken place this week. This means that the importer has agreed to pay in New Zealand currency this high premium, together with exchange, or £135 10s for every £IOO worth of London money purchased. Other transactions reported have been at £l3O to £132, equal to £IOO in London. Sources ol Free Money Free exchange to supply this outside market has been made available from a number of sources, one of the principal of which is believed to be tho private sale of exported produce abroad before December 5, when exchange control became operative. Other free money has come into existence from interest on foreign investments, bequests under wills and through the willingness of New Zealanders who have funds abroad to sell the title to them in New Zealand. The premium charged is partly tho result of strong competition for tho limited credits available and partly the desire of sellers to receive some compensation for tho added risk they may feel they incur by transferring their money to tho Dominion. It will be obvious that New Zealand residents who regularly receive funds from abroad in the form of interest on investments or annuities have every inducement to operate through this outside market, which increases their remittances in terms of New Zealand currency by the amount of the premium charged. Proceeds from produce held in London up to December 5 must in time be exhausted and now be running low. Australian Shares Another and more simple method of obtaining free external credits is the purchase of Australian shares from New Zealand holders and then to have them disposed of on the Australian market. The Now Zealand money to pay for thoso- stocks was, of course, sent out of the country when the stock was originally purchased, in most cases long before exchange control was contemplated. That considerable dealing of tnis nature has been taking place is indicated by the higher price of some well-known Australian shares on the New Zealand stock market, compared with their current prices in Australia. The creator part of these dealings in free exchange is said to have taken place between merchants or as between importers and representatives of the owners of free credits abroad. Apart from dealings in Australian shares, the New Zealand Stock Exchange has not been affected by such transactions.

IRKSOME RESTRICTIONS TWO EXAMPLES QUOTED "MAN AND MONEY PRISONERS" [by telegraph—OWN correspondent] TAURANGA, Thursday "We have, arrived at a stage when we are neither shocked nor surprised bv anything the Government does," declared Mr. F. W. Doidge, M.P., when addressing a public meeting at Edgecumbe last night. ''Yet every day unbelievable things are happening. Let mo tell you of two recent incidents in Tauranga." The son of a business man won't to tho United States to undergo a tlireo months' course of instruction in motor salesmanship, said Mr. Doidge. Tho course was extended and the father sought permission to send his son £IOO. Tho Minister of Finance, the Hon. W. Nash, refused permission. The parent got over tho difficulty by obtaining £IOO in Australian notes from an Australian visitor, but he had to pay £IOO. The second case, said Mr. Doidge, was even more extraordinary. A young man in Tauranga went to Australia and put down a deposit on a new proposition in Sydney. He sold his business in Tauranga at a figure running into some thousands of pounds. He had to visit Wellington twice and plead for permission from the Government to be allowed to sell his business in Tauranga. Ultimately that permission waS grudgingly given. The next problem was to get his money to Australia by an interchange of credits. He made arrangements which seemed to be satisfactory, and, having sold up his homo and furniture in Tauranga, he actually boarded the W origan el la for Sydney, but just before sailing time he learned tliat his arrangements for a credit interchange bad fallen through. He and his family had to walk off tho ship. "The man and his money arc to-day prisoners in New Zealand," concluded Mr. Doidge. AUSTRALIAN BUTTER SMALLER SHIPMENTS ARRANGED ' SYDNEY, May 25 The Australian Dairy Produce Board has decided to reduce the weekly shipments of butter to the United Kingdom to 1500 tons. The present figure is 2500 tons a week, which includes 500 tons specially rolensed from Queensland, where there has been congestion in cold stores. The same course of regulating butter shipments to Britain has been followed several times previously this year by the board. The reduced quantities should assist later in clearing the present accumulation of stocks in London. MINING NEWS GREY RIVER SECURES 3240 Z. A return of 3240z. from 84,667 yards in 122 hours is reported by Grey River Dredging, Limited, West Coast, The Mossy Creek dredge, West Coast, reports a return of 2Soz. 3dwt. from 5495 yards in 130 hours.