THE OTAGO DAILY TIMES WEDNESDAY, August 9, 1939. CONTROL OF IMPORTS

Otago Daily Times, Issue 23882, 9 August 1939, Page 8

THE OTAGO DAILY TIMES WEDNESDAY, August 9, 1939. CONTROL OF IMPORTS

The position that has revealed itself in Auckland, with regard to the inability of importers to secure exchange for the payment «of goods landed under licence, may be said to obtain in all the main centres of business activity. Many importers, not alone in Auckland, are finding themselves confronted with the problem that goods may arrive in the near future from abroad for which they are required to make payment on sight drafts. Their difficulty may not merely be that they have no knowledge of the Reserve Bank's intentions in the matter of making funds available, but also that it will probably be some time yet before the bank is in a position to relax the stringency of control on the issue of permits. That such uncertainty constitutes a grave embarrassment for traders must be sufficiently obvious. Yet it is difficult to see, in existing circumstances, how the position can be eased with the rapidity which is desirable. A glance at the Dominion's trade figures for the year ended June suffices to explain, in large measure, the reluctance —amounting almost to inability—of the Reserve Bank to take any liberties with the exchange situation. Import values for the month of June were £1,615,000 higher than for June last year, and as a result there was an actual excess of imports over exports for the month of £53,000. It is significant thai, despite the fact that the June month represents the end of the export season, this year's was the only adverse balance for the period in the last seven years. For the twelve months ended June the value of commodity exports was £4,069,000 lower than for the year ended June, 1938. Exports for the period were valued at £57,851,000, and imports at £56,500,000. The latter, at that figure, were £1,043,000 lower in value than for the July-June period, 1937-38, but with that exception were the highest to be recorded for a decade. It will be seen, therefore, that the year ended on June 30 closed with a favourable commodity balance of only £1,351,000 in New Zealand currency. Moreover, the favourable balance for the first six months of this calendar year, at £8,595,000, was £1,603,000 lower than for the corresponding period last year and the lowest recorded since 1933. The Reserve Bank, consequently, is unable to find any warrant in the trade position for the relaxation of rigid exchange control, although its wishes and those of the Government must naturally be that the legitimate needs of traders should be met to the fullest possible extent. It is perhaps fortunate, as has been indicated, that the hold-up of funds by the Reserve Bank coincides with a period of usually low importations. And, while it is apparent that so far control has substantially failed to achieve its central purpose of checking importations, it is at least encouraging to learn that some tapering off in the volume of incoming cargoes is now expected, that conclusion being drawn from the fact that fewer applications for import licences are being made. The present position, however, is sufficiently serious, in the handicaps which it is imposing on importers, to justify the conclusion that the Government should pay some heed to the advice tendered to it from the most authoritative quarters—not least of these being the Reserve Bank Board itself —that mistakes of the recent past shall not be repeated. That advice was amplified in logical terms in the August bulletin of the Canterbury Chamber of Commerce, prepared in consultation with the Department of Economics of Canterbury University College. It is stressed that the normal economic activities of the country cannot be carried on effectively unless exchange and overseas trade are free from the type of rigid control at present imposed, and that overseas funds, which constitute the working capital essential for the operation of overseas trade, should be safeguarded against the extraordinary claims " which are the direct and inevitable result of internal inflation." The bulletin concludes:

Such inflation must therefore at all costs be avoided. To avoid inflation the Government must avoid the creation of new money for any purpose, and must leave genuine production to create its own finance, as it always has done and always will do under a system of banking and currency managed with ordinary prudence. To this end the Government, like the people, must live within its income and must spend no more than it can get in ordinary revenue and in loans of real money saved from the proceeds of production, either at home or abroad. The adoption of this rule alone, which is the essence of all sound finance, will ensure freedom from inflation and from exchange difficulties such as are now being experienced. If this rule is not adopted and rigorously adhered to, the present difficulties, which are the direct consequence of inflation, must be expected to recur.