SALES TAX AND EXCHANGE

Otago Daily Times, Issue 22743, 2 December 1935, Page 10

SALES TAX AND EXCHANGE

LABOUR PARTY’S POLICY GRADUAL ELIMINATION NO DRASTIC REDUCTIONS ANNOUNCEMENT BY MR SAVAGE (Pee United Peess Association) AUCKLAND, November 30. Both the. sales tax and the 25 per cent, rate of exchange will be reduced gradually by the Labour Government. Mr Savage made this clear to-day in an interview. “ I want the people of New Zealand to understand that we are builders,” said Mr Savage. “We are not out to smash things. Both the exchange rate and the sales tax must be dispensed with—there can be no question about that. But I realise as well as anyone in this country that their sudden removal would be ruinous. Business people can feel assured on that point.” Mr Savage was asked whether he would consider giving public notice of the policy to be followed/ His reply was

that he was in full sympathy with that idea. It was possible there was some- ' thing in the way of adopting this course, but apart from that consideration, which would have to be looked into at the appropriate time, he could not see why the public should not be taken into the full confidence of the Government concerning the procedure to be adopted in gradually reducing the rate of exchange. " Mr Savage said the reductions would be effected as gradually as possible. At the moment he was of the opinion that periodic reductions of 5 per cent, would be too drastic. It might be that even 2J per cent, reductions might be too severe.

That question, he added, would have to be considered by the experts. Perhaps reductions of 2J per cent, would be the most suitable, all things taken into consideration; but nothing would be done without a careful survey of all the factors. v IMPLICATIONS REALISED WIDELY-SPACED REDUCTIONS EXPORT TRADERS REASSURED (Per United Press Association) AUCKLAND, December 1. The policy of the Labour Government in lowering the rate of exchange on London, according to a statement made to-day by Mr Savage, will be to limit the reductions to 2i per cent, at a time, made at well-spaced intervals. It is fairly certain that no action will be taken before March. The announcement that a gradual reduction of the exchange rate would be commenced as soon as possible , by the future Government has caused some uneasiness in business circles owing to overseas buying commitments, while a change in the current rate also has an important bearing on the prices paid for wool and fat stock during the export season now in progress. Mr Savage, discussing the position today, said it was fully realised what disturbance a sudden and drastic reduction in the current exchange rate would mean. “A gradual lowering of the rate is in- ' tended, 5 ’ Mr Savage said. “On no account will it be more than 2£ per cent, at a time, and it may possibly be less. The policy will not be hurried and the intervals between the reductions will be well spaced, some months elapsing between each step. “I think that the export buyers will be perfectly safe in their operations this season,” said Mr Savage. “It is impossible to say when the first reduction will be made, but it is not likely to be a substantial one. Parliament will have ' to be'consulted, and I do not think there will be any move before March at least.” Mr Savage said the Labour Party believed it understood the principle involved in the exchange policy. He did -not think that any Government should be responsible for wrecking any deals by drastic interference. “We want ■ all such traders as are affected to feel that they are dealing with friends and not with enemies,” Mr Savage added. “They will not be sacrificed, as the future Government will act with a full regard to the interests of the community.” • “NOT RUSHING OUR FENCES” RESPONSIBILITIES RECOGNISED FARMERS TO BE SAFEGUARDED (Per United Press Association) AUCKLAND, December 1. New Zealand’s next Prime Minister, Mr Savage, received a rousing farewell when he left Auckland for Wellington to-night. Crowds thronged the station platform and Mr Savage had to acknowledge loud cheers and music from the band as the train left. Mr Savage will have an interview with the retiring Prime Minister, Mr Forbes, in Wellington to-morrow, and on Tuesday all the Labour members elected last week will meet at Parliament Buildings to begin the task of Cabinet construction and to decide the details of the future policy of the Government.

An assurance that in reducing the exchange to parity with sterling the Labour Government would do nothing which would prove detrimental to the interests of either the farming community or business circles was given yesterday by Mr Savage. He said it had been reported to him that in some districts the farmers were apprehensive regarding the proposed reduction in the exchange. The view apparently entertained was that they would lose the exchange benefits on exports; “ Every statement I have made on the subject,”" Mr Savage continued, “is to the effect that the exchange will be brought back to par by a series of gradual reductions. , We recognise our responsibilities in full and know we could not reduce the exchange to par at one step without inflicting considerable hardships on many sections of the community. We are not going to rush our fences. Small and gradual reductions will be made so that importers and traders generally will be able to adjust their businesses accordingly. “ So far as the farmers are affected,” Mr Savage continued, “their interests will also be safeguarded. As the exchange is lowered the system of guaranteed prices will be introduced piecemeal, *o that when the barrier between ourselves and Great Britain is finally re*

moved the farmers will be receiving the full guaranteed price for their products. Full details have still to be worked out, but that is our general line of policy, and we shall adhere to it strictly.” Mr Savage said he had received a call on the previous day from Lord Barnby, head of one of the largest British woolbuying firms, and a leading figure in United Kingdom business circles. He had endeavoured to show Lord Barnby that Labour’s policy would open the way for a more vigorous export trade from Britain to the Dominion.