CURRENCY QUESTION

Otago Daily Times, Issue 21918, 1 April 1933, Page 16

CURRENCY QUESTION

LONDON COMMENT. (From Our Own Correspondent.) LONDON, February 16. Now that both Houses of Parliament in New Zealand have given their sanction to the policy of depreciating the Dominion currency The Times has devoted a, leading article to a review of the matter. “ Thu decision was taken,” the writer states, “ with many qualms and after great reluctance. In fact, the most, distinguished member of the Cabinet, Mr Downie Stewart, who was Minister for Finance and Customs as well as Attorney-general, resigned sooner than share the responsibility for it. The change of Government policy was brought about by the insistent demand of the farmers and graziers, on whose prosperity, of course, depends that of the whole country, and who felt that they, could no longer carry on without this relief —unless indeed they were to be' assisted by direct subsidies or by a further drastic reduction of costs, including' wages and interest charges, to which there were grave political and social objections. The demand was opposed by the majority of the hanks —t;he Bank of New South Wales, which does a large business in the Dominion, was the outstanding exception—by the commercial communities in the towns, by the bulk of the press, and by the Labour Party, who believed that ii: must result in a, rise in the cost of living and a. reduction in the real value of wages. From* the Government point of view, and from that of the taxpayer, there was the further serious considaration that the new exchange rate, making it necessary to provide 12S instead of-110 New Zealand pounds, for every 4100 . payable in Lofifioii/. would increase the charge bn the Budget by some £3,800,000. Mr Downie Stewart pointed out that Gris extra burden was ‘direct, immediate, enormous, and inescapable,’ while any relief from increased revenue resulting from the anticipated increases in the national income was ‘ distant, doubtful, and speculative.’ The difficulty of his position was that he could suggest no alternative. Indeed, it was only out of loyalty to his colleagues that he had consented to some of the measures, such as the enforced' reduction of rent and interest charges as well as of wages and salaries, to which the Government had already been driven. RISE IN PRICES.' “ Their endeavour, of course, had been to,secure by equitable sacrifice® all round a reduction of costs to meet the fall in prices, a fall which now amounts to 49 per cent, in the last four years,' bringing the national income down from £150,000,000 to £98,000,000 in spite of a great increase in production and in the volume of exports. Mr Stewart had frequently expressed the conviction that relief could only be obtained through a rise in prices,*.and before the Ottawa Conference he hoped that the problem of the price level would be considered from an Imperial point of view, and that it might be found possible by com- . bined action to raise the general sterling price level of primary products—thus lightening the real burden of both the external and the internal debts, and, among other things, enabling the dominions to resume their purchases of British manufactured goods. BLOW TO THE'GOVERNMENT. “ This hope was unfortunately disappointed. Measures such as the depreciation of the Dominion currency, favoured by other Ministers, he believed to be unsound and certain to lead, to disillusionment and to further difficulties. His resignation was a great blow to the Government, for he enjoys the highest reputation among all classes and parties in the Dominion and indeed throughout the Empire. But the Prime Minister, Mr Forbes, and hia chief lieutenant, Mr. Coates, reluctant as they were to consent to an artificial depreciation of the currency and fully conscious of the dangers and difficulties attending it,, were driven to realise that it was the only way that remained opened to bring about the needed reduction in, costs and to give some relief to the sorely tried' agricultural population. It will, of course, at any rate at first, impose a further handicap on the sale of British goods in the Dominion. But if, as is hoped, it helps the New Zealand farmer to make both ends meet, then the British trader and manufacturer may also hope to reap some share of its benefits.”