EXCHANGE CREDITS

Otago Daily Times, Issue 21542, 14 January 1932, Page 8

EXCHANGE CREDITS

■EFFECT ON PRIMARY INDUSTRIES PRODUCERS EXPRESS CONCERN PROTEST TO THE GOVERNMENT (Special to Daily Times.) WELLINGTON, January 13. An assurance that the Government had the complete support of all sections of the primary producers in its efforts to meet the present economic depression was given to the Prime Minister to-day by Mr D. Jones, ex-Minister of Agriculture, when a deputation waited upon the Cabinet to seek the removal 'of the restrictions upon the exchange rates. Mr Jones said that a conference representative of the primary producing interests, which had been held in Wellington that day, desired him to convey to the Prime Minister its congratulations upon being returned to office with the endorsement of the country to carry out its proposals made at the time of the general election. It was felt when the Government went to the country that it was essential that costs should he reduced to A level at which the Dominion could compete with her products on the open market of the world. The Government Statistician showed that with the index figure as 1000 the costs were to-day at 1500, whereas the price of our products was onlv 787. These two figures showed clearly that until the two were brought fairly close together it would be impossible for the farmers of the Dominion to compete in the world’s markets. ' The conference was wholeheartedly with the Government in its determination to bring costs down and to bring them within reach of the primary producer’s capacity. _ It was not necessary to emphasise the serious position of the farmer, and the Government was fully familiar- with the situation. However, the position was more serious than it was last year, because a number of farmers who had been operating on reserves did not have them to call upon this year. They were unanimously of the opinion that unless something were done to assist the farmer, the primary producing section of the country was not far from a serious collapse. One hesitated to make such remarks, for _ they were drastic. However, the position had been made clear around the conference table that day, and he had been asked to put the position before the Government with a request for immediate action. MR JONES STATES THE POSITION. Mr D. Jones, ex-Minister of Agriculture and a member of the Meat Board, who had presided at the conference earlier in the day, and who put the case in its broad outline to members of the Cabinet, emphasised that everything at the moment depended upon the financial position of the primary producers, and the Government had' to look to their rehabilitation as the first step in righting the country s problems. At the root of the trouole was the low price for the primary products exported. It was estimated that there were over ten million sheep in New Zealand to-day being farmed at a loss to the owners. This statement could he proved by the Government for it had the necessary figures to survey the position. Dealing directly with the Government’s plan to pool exchange credits. Mr Jones said that one of the most important facts made clear at that day’s conference was that, if the country were to come through, production would have to be maintained and even increased. This was essential to the Dominion generally and particularly to the Government. Any policy that would tend to decrease production would be directly against «be interests of the farming community, and the whole of New Zealand. The Government was aware of this, and its desire was undoubtedly to deal effectively with the problem. The representatives of the bodies placing their case before Cabinet were prepared to do everything in their power to co-operate with the. Government in its work. It was common knowledge that the State finances were in a difficult position. The establishment of an exchange credits pool was indicative of the problem being faced. It had been arranged that the Government should laid sufficient money in London to meet its own obligations and those of local bodies, and the Government’s determination to meet its commitments was fully endorsed by the producers, for default was a word they could not think of using. The consequences of the formation of the pool, however, would he far-reaching, and ■ producers feared that thev would suiter out of all proportion. They suggested that the effect of the Order-in-Council establishing the pool would be to stop the competition for export exchange, and so hinder it from finding its own pvoper level The Government and the banks virtually controlled all the credit in Lew Zealand, for the competition with which they were met was inconsequent. Witn out restricting the influence of the Order-in-Council there would have been a substahtial increase in the rate of exchang > and that would have been of direct benefit to the farmers for the reason that the return on the produce sold overseas would have gone up correspondingly. it was. the only relief the farmer could look for at present was to obtain a greater return through an increased exchange. Other countries had higher rates of exchange and the result was that they could sell inferior goods at a higher price to the producer than the producers or New Zealand were able to get on the open market. This state of affairs tended to decrease New Zealand s exports, and this created a very real danger. It was quite clear that the Dominion could not continue to produce at the same rate as at present in the existing circum stances. Australia was in a more dimcult position than New Zealand, and she had decided to leave her exchange market free from restrictions. She had to find very large sums of money to meet her payments in England, but as a reslult of her policy of free exchange the Australian producers were to-day in a better position than those in New Zealand. Australian politicians were strongly in favour of higher exchange rates, as also were the leading economists and bankers, thor opinion being that the rehabilitation of the Commonwealth could not be brought about in any other way. U was admitted that the higher exchange rate resulted in the Government having to find more money in order to meet its obligations in London, but the advantages oi the system far out-weighed the disadvantages. If the farmer received full value for his exchange on an open market a large amount of money would be set free in New Zealand for providing more employment in production, and the i> ea ’ surv would also receive large sums that could not be paid at the present time. The action of the Government could possibly be justified if the short view were taken, hut it could not he justified i a long view were taken, the opinion ot the conference was that the exchange embargo should he lifted. New Zealand was the only country in the world that had followed such a method, and the countries which were consolidating their position to-day were those which had freedom so far as the exchange was concerned. Ihey believed that if the distressing fall in prices were spread over the whole community, as it would he if the producers suggestion were adopted, the present burden of depression could be carried; but it was quite impossible for the farmer to carry the whole of the burden. lue question was one that required immediate attention, for the Dominion was at the height of the export season, and the exports would total about £3,000,000 or £4,000,000 a month. Every week the farmers were losing large sums through not getting full value for their exchange, and the position was exceedingly serious from their point of view OTHER SPEAKERS. Mr W. A. lorns, chairman of the Dairy Board, said that that body was fully in accord with the statements made by the conference chairman. The economic distress of the dairy farmer to-day was resulting in the average production per cow being reduced. The farmers were finding it exceedingly hard to keep up production and it would be found that the use of fertilisers was dropping off at an alarming pace. If only they could get the returns that their competitors were getting it would make all the difference between the dairy farmer failing completely or carrying on. They considered

that the problem of unemployment would not be so acute if the dairy farmer could get a little more money. Many farmers were faced with ruin unless conditions improved. Had the dairy farmers received a similar rate of exchange as was operating in Australia last year they would have been able to distribute an additional £3,500,000 among them, and this would have made a great difference to iheir financial position. Mr H. D. Acland, president of the Sheep owners’ Federation, said that the primary producers found about 98 per cent, of the money with which the Government would meet its overseas obligations It was felt that public borrowing in London during the past few years had been detrimental to the farmers of the Dominion, and had there been no public borrowing they felt that the exchange would have followed its natural course, and that very much the same thing would have occurred as had happened in Australia If the farmers did not get the real value of their exchange there would be wholesale bankruptcies and default by primary producers. Mr T. C. Brash, a member of the Fruit Board, said that the fruitgrowers were vitally concerned, although the value of the fruit exports was small when compared with the exports of other industries. However, the fruitgrowers employed more men per acre than other primary producers. As the proportion of net return compared with expenses was small, the exchange question was of considerable importance, and fruitgrowers naturally supported the requests of the deputation. Mr W. Gi’ounds, of the Dairy Board, said that the position of the farmer was not generally appreciated, and he urged that the Government should give earnest attention to the representations made, as they were of vital importance to the welfare of the community as a whole.

Mr W. D. Hunt, commercial representative on both the Dairy and Meat Boards, said that the effect of the commandeering of credit was that the Government was taking from the farmer his produce at less than its market value. The Government was taking London funds at less than they were worth, and he was sure that the exchange rate would go up if it were left to itself. In effect, the Government was placing the whole burden on the farmers instead of spreading it over the whole community. In reply to the Minister of Public Works (Mr J. G. Coates), Mr Hunt said that if complete freedom were allowed to exchange, he believed it would go up to 30 per cent, as compared with the present 10 per cent, with free exchange. Last year the Government borrowed several million pounds, and this had the same effect on the exchange as if more wool and butter had been exported. Now that the Government was temporarily forced to cease borrowing in London, he was certain that if there were no Order-in-Coun-cil there would be complete freedom of exchange. PRIME MINISTER’S REPLY. The Prime Minister (Mr G. ,W. Forbes) said that when it was found necessary for the Government to find money at this end and not in London the banks had to be approached to provide a certain exchange to enable obligations to be met. The banks met in conference and intimated to the Government that they would be able to meet the requirements, provided the exchange were put through the banks, otherwise they would not be able to give any guarantee. That was the reason for the Order-in-Council. It was still open for the banks to fix the rate of exchange as in the past. Government interference in business had been freely criticised, and it was considered that the less the Government interfered the better. The question of allowing the exchange to go free had been discussed with the banks, and the opinion had been expressed to the Government that it would not be in the interests of the Dominion to allow the exchange to rise to such a level as occurred in Australia. The banks considered that 10 per cent, was the correct rate. No one wag able to say definitely whether the increase in the rate would benefit the country as a whole. That it would give immediate benefit to the primary producer could probably be admitted. If the exchange went to 30 per cent, the transmission of £12,000,000, which the Government had to find this year for payments in London, would cost another £2,400,000, making a total of £3,600,000. The question of providing for the falling revenue at the present time was giving the Government great concern, and it could not see how this extra amount could be provided. However, the Government would go thoroughly into the whole question, and give full consideration to the representations made. A CONFERENCE SUGGESTED. Mr Jones suggested that the representatives of the primary producers should be given an opportunity of discussing the question with the Government and the banks. It had been suggested that a committee should go into the question and try to find a way out. Mr Forbeg said that the Government would welcome any move to right the question by mutual agreement. It did not wish to interfere unnecessarily in business. The Government had asked for the co-operation of the country in a difficult time, and he thought it had a right to expect it.— (“Hear, hear.”) He would see whether a conference would be able to do any good. It was announced later that Messrs Jones, lorns, Acland and Hunt had been appointed to represent the producers on any committee set up to investigate the question.