FARMERS’ COSTS

Otago Daily Times, Issue 23859, 13 July 1939, Page 7

FARMERS’ COSTS

REDUCTION ESSENTIAL HIGHER EXCHANGE AS AN ALTERNATIVE CORRESPONDING ADJUSTMENTS (Per United Press Association) WELLINGTON, July 12. In order to bring farmers’ costs and prices into line the New Zealand Farmers’ Union considers that the Government should either bring costs down or else, through the Reserve Bank raise the exchange rate of the New Zealand pound to the pound sterling to a point which will reflect the difference in the' price level of the two countries, at the same time reducing the tariffs proportionately. This, u slates, would necessitate a corresponding adjustment of the guaranteed prices of products for export. A motion to this effect was carried by the l)o----minion Conference of the union in Wellington to-day. The discussion was opened on a Southland remit Th a t in the opinion of the conference the freeing of the exchange is the most practicable way to bring prices and costs into line.” Reserve Bank Credit The following amendment was then put:-—" That while we believe that a long-term policy should be directed to a reduction of costs to a point that enables profitable primary production, as an emergency measure to meet the present crisis in sheep farming, we advocate the issue of a special Reserve Bank credit non-repavable and non-interest-bearing. for the payment of a compensated, price on meat and wool, such a price to be paid through the freezing works and wodlbrokers without a'commandeer of the produce, and to be sufficient to satisfy the following conditions: —(1) To allow the farmer to pay competitive rates of wages; (2) to allow him interest on the capital invested in land and stock: (3) to enable him to meet the increased costs imposed by legislation, including tariffs; (4) to allow him a remuneration commensurate with the service he renders, and with that obtained by other members of the community who render equal service. Concurrently, we recommend the immediate setting up of a Royal Commission to investigate the economies of the industry and its place in the economics of New Zealand ’’

.Alteration in Rate Undesirable The president (Mr W. W. Muiholland) said that any alteration in the exchange rate would be undesirable. He assured the conference that the committee recommended a free exchange because it considered this the least harmful of all the possible methods.

It was true, he said, that the whole effect of free exchange could be turned against the farmers by Government action. It had done this with the fixed exchange. The committee had to choose something containing- as little ill and as much good as possible. The correct method would be to bring costs back into line with export prices, A delegate:, You won’t do that with a free exchange. . Continuing: Mr Mulholiand said the experience of the League of Nations Committee on Exchange Control, which reported last year, was that where exchange rates were fixed Governments were reluctant to revalue the exchange to the normal value. The Government had taken advantage of the fixed exchange to alter the. normal value of the currency. A free exchange tended to correct itself, and prevented an increase of costs by Government action because it stood as an indication to the public of what was happening.

Evils of Free Exchange

It had been agreed by some delegates, Mr Mulholiand said, that a free exchange would bring certain evils in its train. It would; but it was safer in the respect that no Government action overseas could bring ix down. It would not be safer in the respect that internal action of the Government could wipe out the benefit of a free exchange, as had been done with the fixed exchange. The farmer would- only have to. look through his accounts to see that small increases would be brought'about in costs and big increases in returns. So long as the value of the external pound was kept in line with the New Zealand pound, they should not have much quaiTel as to how it was done. What the committee had in mind was a free exchange controlled by the Reserve Bank. A delegate: The Government controls the Reserve Bank, A second delegate: And who controls the Government? The amendment was defeated by 40 votes to 23. The movers of the remit then accepted, in lieu of their motion, the one which was eventually earned.