EXCHANGE RATE

Otago Daily Times, Issue 27390, 16 May 1950, Page 6

EXCHANGE RATE

Sir. —If I re3d your financial writer, “ Gregory,” correctly, he Is, by implication, of the opinion that the raising of the exchange rate with London would, in the long run, be a deflationary move. Since, when the exchange rate was originally raised in the early 1930’5, the purpose and subsequent effect was inflationary (or more correctly, reflationary), I am rather at a loss to see how its effect can be exactly the reverse on this occasion. After all, most of our primary produce is paid for in a fixed amount of sterling —irrespective of the exchange ratq—and the only result of raising it>at the present time would be to swell our already inflated primary income in terms of New Zealand currency. As far as discouraging imports is conconcerned, this power already lies in the Government’s hands through currency and import control, and it is not obvious to me what the advantage or necessity would be in manipulating the exchange rate at the present time for this purpose. There is the further factor that the cost of living in Great Britain at the present time is reputed to be as high or higher than in New Zealand. There are from time to time “ whispers in the air ’’ to the effect that a rise in the exchange rate is contemplated, although, of course, it would not •of Itself give 'us a penny more of London funds. For this reason, and because my smattering of economics may be unduly simplified or naive, I would appreciate correction where necessary either by “ Gregory" or someone else better informed than I.—l am, etc., Import Control. [He does not, says "Gregory,” see a raising of the exchange rate as other than an Inflationary move; but he is still .looking for a turning point on that notorious Shipper’s Road referred to in his column. —Ed., ODT.]