THE EXCHANGE QUESTION

Otago Daily Times, Issue 21580, 27 February 1932, Page 12

THE EXCHANGE QUESTION

ALTERNATIVE TO POOL SCHEME ADOPTED AND THEN CANCELLED (Per United Press Association.) WELLINGTON, February 26. In connection with the exchange question it is disclosed that representatives of the Associated Chambers of Commerce, the banks, and the producers, after a full conference, unanimously recommended what is described as a practical alternative scheme by which the Government could secure the financial accommodation it required. It appeared that a way out of the present difficulty acceptable to the banks, the primary producers,' and the commercial and industrial community had been discovered. On the following day, however, the producers withdrew their support of the agreement, and the banks had therefore not given detailed consideration to the scheme. The Associatpd Chambers are desirous now of making public the exact nature of the recommendation of the joint committee, but this they are not permitted to do. ADVANTAGES OF "FREE” EXCHANGE REPLY TO PROFESSOR GREGORY. (Special to Daily Times.) CHRISTCHURCH, February 28. Reaffirming his opinion that the exchange should be allowed to go free, the president of the Associated Chambers of Commerce of New Zealand (Mr William Machin) has replied to the statement by Professor T. E. Gregory, the English economist, against a high rate. Professor Gregory’s opinion was furnished to the National Bank of New Zealand. “The opinion of Professor Gregory on the question of an advance in the rate of exchange New Zealand on London is most interesting, and is entitled to high respect,” said Mr Machin. “ I should like, however, to see the questions that were put to him, so as to understand his answers better.’ He does not express any opinion, on the question of the New Zealand Government having commandeered by Order-in-Council the whole of our New Zealand export funds in London since January 1 in order that the Government requirements may have first call on the exchange. It would be interesting to have his opinion whether this was necessary, and what will be the effect of it if it is continued on the exchange rates. “ The whole of Professor Gregory’s remarks seem to be based on the question of the desirability or otherwise of raising the premium on London money. He does not express an opinion- whether it our exchange market were left open without Government control and interference it would result in a higher exchange premium naturally following because of the demand. Professor Gregory says an increased premium would be an immediate benefit to the primary producer and does not directly deny that part of the increased receipts would be permanently retained by the farmer. He objects, however, because the influence on the Government, on wages generally, and on the credit of New Zealand would have to be taken into serious consideration These three factors are known, and after being weighed by responsible men they are not considered to outweigh the equity of giving the farmer any increased exchange that an open market would entitle him to or- the value of that advantage to him if he obtained it. “Professor Gregory fears the danger of a movement of this . kind being difficult to check once it is initiated. He assumes its initiation, presumably, as an active and arbitrary movement, which is a very different thing from, a natural movement of the market which is now Government controlled. “ Finally, Professor Gregory appears to suggest that sterling prices in England may rise and bring with them an increase in prices to the New Zealand primary producer if we await events, hut the trend over our present export season since Britain went off the gold standard last September has not been upward on the average of our export prices. The flight from gold to sterling in Britain occurred shortly before our wool prices hardened somewhat, but, curiously enough, the Continental and Asiatic competition for wool seems to have been the largest factor in sustaining the market since then. Meat prices have not benefited, nor butter, although perhaps on the whole Britain’s purchasing strength has increased. “As for the culminating argument of Professor Gregory and others that because we have so reduced our imports by £19,000,000 as to give us a favourable trade balance of £7,000,000 on our sadly diminished exports income .we should regard this favourably against serious over-valuation of the New Zealand pound, does it not actually mean that we shall be able to pay our debts with the little money we have if we do not try to spend this money in keeping the wheels of our national means of livelihood turning?”