"TOO RIDICULOUS"

Otago Daily Times, Issue 22718, 2 November 1935, Page 9

"TOO RIDICULOUS"

CRITICS OF EXCHANGE RATE REPLY BY MR COATES (Per United Press Association) HELENSVILLE, November L A reply to critics of the high exchange rate figured largely in the speeches today by the Minister of Finance -'(Mr J. G. Coates) in the course of his election tour in the Kaipara electorate. "When the Government took office in 1931," said Mr Coates, "there had been a drop of 43 per cent, in export prices, but very little reduction in costs. It would have been impossible to bridge that gap by reductions in costs alone. The reductions we made, although absolutely necessary, were serious enough, but to have applied a 40 per cent, reduction in wages and salaries and other costs would have been manifestly disastrous. The gap had to be bridged, and the raising of the exchange reduced it to manageable proportions. I have been asked to show that one penny additional wealth has accrued to New Zealanfi as the result of the raising of the exchange. The answer is clear. By sustaining the farmers' income it sustained production in farming. The farmer could buy more goods from the trader and _ the manufacturer, and the national income was thereby increased. The value of production, which increased from £83,600,000 in 1931-32 to £98,800,000 in 1933-34, is proof of this, and the figure is still rising. In addition wages and salaries have increased from £59,000,000 in 1933 to £65,000,000 in 1935, and are still rising. There has been no extra cost to the Budget through the benefit to the farmer alone. The national income is £14,000,000 higher than it would have been at par. and on the present basis of taxation this means at least £3,500,000 more revenue. The added cost of exchange is £1,600,000, so that there is a clear gain to the Budget of about £2,000,000.'* Mr Coates also criticised the advocacy by Labour and the Democrats of an export subsidy as an alternative to the exchange. If all the producers were to derive the same advantage from the subsidy as from the exchange, the cost to the Budget would rise from £1,600,000 to £13,500,000. Apparently there was a suggestion that the subsidy should be given direct only to those who needed it. Such a scheme would require an army of prying inspectors before it could be put into effect. The proposal was too ridiculous for words.