THE TRADE BALANCE

Otago Daily Times, Issue 23687, 20 December 1938, Page 8

THE TRADE BALANCE

TO THE EDITOR Sir, —The large amount borrowed abroad by both the Government and local public bodies means there is a large interest bill to be met annually. The extent to which that interest bill is paid reduces the amount which is available to enable necessary imports to come into the Dominion. Though our export prices may fall the interest bill is a fixed thing, which was increased by the Coalitionists by 25 per cent, of an exchange rate. Neither the interest bill nor the exchange rate were imposed by the Labour Government, but were legacies from previous Governments. While that interest debt must be paid annually, it is utter nonsense to say that New Zealand mu-jt buy goods from Great Britain to the exact value that Great Britain buys them from New Zealand. That can only be possible if there were no money borrowed from Great Britain and there were no interest commitments to meet annually. Interest bills must be met in British currency That means that 25 per cent, more must be paid on them than would be the case had the debt been domiciled in New Zealand. British money does not circulate in New Zealand, and New Zealand money does not circulate in Britain. Therefore, the biggest factor

in the trade balance is the price which our exported primary products fetch abroad. If, during the present recession in world prices, the trade balance is not to be exhausted, then it is up to New Zealanders to purchase local manufactured goods in preference to similar imported goods, so as to enable any trade balance there may be in our favour to be more wisely expended in purchasing any essential things which cannot be manufactured in New Zealand. Mr Hamilton, in referring to the present regulated currency, said that one of the alternatives to it was an increased exchange rate. It is therefore, up to those who objected either to the present exchange rale or to any further increase in it, such as one of Mr Hamilton's alternatives suggests, to purchase locallymade goods. When the price of primary products falls the purchasing power of the world's people is reduced. As manufacturers abroad do not adjust their prices to the world's price for primary products if they can dump their goods where there is a country with purchasing power, such as New Zealand has. then it is obvious there had to be Government regulation of the exchange rate to protect the credit balance in the interest of the Dominion's actual needs. It would be absurd to allow the surplus goods of foreign countries to be dumped in New Zealand if we ourselves could manufacture those goods, as such dumping would reduce the favourable balance that may be needed to purchase actual requirements.—l am, etc., J. E. MacManus.