RATES OF EXCHANGE

Otago Witness, Issue 4066, 16 February 1932, Page 21

RATES OF EXCHANGE

INTERESTED PARTIES MEET CONFERENCE LASTS ATT DAY. WELLINGTON, February 11. To enable those most directly affected by the exchange situation to place their views before representatives of the banking institutions a conference of the several interested parties was held in the Cabinet room this morning and afternoon. The conference commenced at 1.30 a.m., and went on until 1 p.m., when an adjournment was taken, resuming again at 2.30 p.m., and the discussions continued until nearly 4 p.m. The Farmers’ Exchange Committee was represented at the conference by Messrs D. Jones (chairman of the New Zealand Meat Board), W. D. Hunt (Wellington), H. D. Acland (Christchurch), W. A. lorns (chairman of the Dairy Board), and T. C. Brash (secretary of the Dairy Board). The representatives of the Associated Chambers of Commerce were Messrs W. Machin (president), Stronach Paterson (Wellington), J. B. Al’Gren (Wellington). The New Zealand Municipal Association was represented bj’ Mr T. C. A.-Hislop (Mayor of Wellington), and others at the conference were the several representatives of the Associated Banks of New Zealand, and Mr A. C. Davidson (general manager of the Bank of New South Wales, Sydney), Mr A. D. Park (secretary of the Treasury), and members of the Cabinet.

Mr Forbes stated to-night that the conference had had a general discussion on the exchange problem. A Cabinet meeting was held immediately after the conference concluded. DISCUSSION IN CHRISTCHURCH NO ACTION TAKEN AT PRESENT. CHRISTCHURCH, February 11. The Finance Committee of the Christchurch City Council has decided not to join at present in the protest that is being made by municipalities against a possible increase in the exchange rate. If, however, the rate were to increase to 25 per cent, the effect on the council’s finances would be serious.

The Mayor stated to-day that the council had to make payments in London before March, 1933, totalling £95,936. The present rate of exchange of approximately 10 per cent, would mean an increase of £9593, but if the rate increased to 25 per cent, the extra cost would be £23,984. This, said Mr Sullivan, would involve a heavy increase in the city rates, which neither the council nor the ratepayers cared to contemplate at present. The chairman of the Finance Committee (Mr J. M'Combs, M.P.) holds the opinion that at 10 per cent, the rate is pegged up and not down at present. He says that the New Zealand banks hold heavy balances overseas, and that if the Dominion were to take the same measures as Australia by imposing a surcharge on Customs duties and placing an embargo on certain imports and allow the exchange rate to go free the present 10 per cent, would disappear. THE FARMERS’ VIEW EXCHANGE SHOULD OPERATE FREELY". HAMILTON, February 11. By “ pegging the exchange ” the Government was depriving the producer of money he was rightly entitled to, and at a time when he needed every possible assistance, said Mr Dynes Fulton, a member of the Dairy Produce Control Board at Matamata yesterday. It was obvious that the producer, and particularly the dairy farmer, unable to secure financial assistance, would not be in a position to purchase manures to keep up production if the present state of affairs was permitted to continue. The following resolution was carried: —“ This meeting emphatically protests against the Government’s action in commandeering export credit, and urges upon the Government to remove this grave injustice, so that exchange rates be allowed to operate freely, according to supply and demand.”

POSITION IN DUNEDIN CITY CORPORATION AND HARBOUR BOARD. EXCHANGE QUESTION NOT SERIOUS. That Dunedin at least is not to be numbered among the large cities mentioned by the Mayor of Wellington (Mr T. C; A. Hislop) in his remarks on the exchange rate as it affects borrowers on the London market is supported by a staetment made to our representative last week by the Town clerk (Mr G. A. Lewin). Mis Hislop quoted the case of the municipality of Wellington, which this year has to send to London by way of sinking fund and interest about £500,000, ■ the cost of which at

an exchange rate of 125 would be £120,000.

Mr Lewin pointed out that the Dunedin City Corporation is not seriously concerned with the London financial position, as the great bulk of the city’s borrowing has been done on the local market to a much greater extent than has been the case with any other of the chief cities of the Dominion. The corporation will, for the 12 months ending March, 1933, remit to London the sum of £32,500 on account of London borrowing. With the exception of a loan of £lOO,OOO on behalf of the Electric Power and Lighting Department which was raised in London last year, the city has indulged in no London borrowing for many years. As proof of this it might be mentioned that the total interest bill of the City Council and Drainage Board combined is round about £226,000 a year, of which only some £32,500 is payable iu London. The position is that at the ruling rate of exchange in London to-day, the cost of remitting this money means a charge to the City Council and Drainage Board of £3250, which sum would, of course, be proportionately increased by any rise in the rate of exchange. Personally, Mr Lewin stated, he thought there should be no artificial control of the exchange rate. He was oi the opinion that it should be allowed to take its own legitimate course, apart from any artificial interference in the direction either of increasing or decreasing it. The position of the Otago Harbour Board, in so far as its indebtedness to London is concerned, is very similar to that of the City Council, the annual remittance to London on account of interest being about £30,000. In this year’s estimate the budgeting on this account has been figured on a 10 per cent, exchange rate, and the result would be that, should the rate rise to 130, as has been predicted in some quarters, the board will be compelled to find another £6OOO. MEETING AT OAMARU A representative gathering of farmers and business men, with delegates from the local bodies, attended a meeting iu the County Council Chambers on Friday afternoon, convened by the North Otago Farmers’ Union to discuss the question of the exchange credits pool. Mr R. Walker was voted to the chair. Mr Walker, in opening the discussion, voiced the opinion that the farmers should receive everp penny possible at the present time. It was a question as to whether the banks were to dictate to the Government or the Government dictate its own policy. If the exchange were not pegged, then it was said the country would have to find' another £2,000,000 to meet commitments in London. But was it fair for the farmers to lose £8,000.000? Who was going to get the rest? He thought the banks. Mr J. B. Chapman stated if the exchange were not pegged it would go up to 30 per cent., and the farmer would receive £l3O for his £lOO worth of produce in London, but the Government would have to find additional money to meet commitments in London. He thought the Government and banks, in fixing the exchange at 10 per cent., had not considered the farmers’ point of view, and it was very desirable that the meeting should put forward the farmers' point of view.

Mr R. Dick quoted a considered opinion on the position as it affected the farmers, and said Sir Harold Beauchamp had let the cat out of the bag when he stated that they would be making a present of £8,000.000 to the farmers if they did not peg the exchange. It would not be making a present to the farmers, but would only be giving farmers a just price for their exports. Mr J. M. Wilson (Oamaru Chamber of Commerce) said the chamber welcomed the opportunity of assisting the farming community. Was the pegging of the exchange at 10 per cent, an injustice to one section of the community? Personally he thought it was a grave injustice to the farmers. If the exchange went up to 20 per cent., and Sir Harold Beauchamp thought it would, then a great loss would be made. The loss would be doubled, but it would be on the whole community, including the farmers. They had to look on the question as a national one. If the exchange went to 20 per cent., then they would stop importing, and it would give New Zealand a lesson on the rashness of borrowing. With a free exchange it would go back to normal quicker than if pegged. The Associated Chambers of Commerce had carried a resolution to the effect that the pegging of the exchange was wrong in principle, and urging that, there be a free market for exchange, that there be less Government in business and a drastic reduction in Government expenditure. Mr B. B. Walton said that when the leaders in financial matters were at variance it was. difficult for laymen to express their views. The unprecedented slump in the prices of primary products had placed such a burden on the farming community that they would welcome the opportunity of discussing the position. The interests of the farming community in this country were paramount, and he supported the object of the meeting. They could not continue farming with 1912 revenue and 1920 expenditure. Legislation would be necessary to reduce interest rates or alter the arbitration awards. Mr R. Milligan said the question was entirely a practical one. They were all up against serious conditions, and they had to consider what was the best to do under the circumstances; and whatever side they came down on they were sure to hurt some section of the community. If they let the exchange take its own course, then this might be caused to some serious extent, but they had no evidence, nor did he think the exchange would go up to 30 per cent. The paramount consideration was the farmers’ interests. If the exchange went up, then they were going to hurt the importer, and farmers would pay their share in the increase in import values. The farmers were up against it, and something must be done; if possible, to secure something more for the

farmers’ products as they were entitled to receive. The high rate in Australia was a policy that was a sound one. The country could do with less importing if th e country were to pay its way. The depreciation of produce values was greatly overdone. The right thing to do was to advocate a free market for exchange in London.

Mr D. J. Ross submitted that it would be necessary to reduce the rate of interest, and that the unemployed would H,? Ve be placed on farms on full time, lhe great difficulty facing farmers today was land values, and if they could assist farmers by using unemployed labour on farms, they would increase production, which would benefit evervotie in the country.

Mr M. Al. Cooper said the pegging of the exchange was depriving the farmers of something they were entitled to. If the exchange rate was allowed to take its own course the farming community would benefit, and if it stopped importing that would be a good thing, and would help New Zealand industries. Mr R. K. Ireland said their chief business to-day was to keep the producers on the land, and to keep them producing, they were going through worse times, and if they were not careful production would be reduced. The exchange would help the producers, and his view was that they should have the exchange pegged, but at a higher level, which could be worked out by financial experls. If imports decreased, it might be that the exchange would drop to 5 per cent., and they wanted to keep up their exports even at the expense of impoits. His idea was to balance it through an increased fixed exchange. Air J. A. Macpherson, M.P., said he was present to hear their views and their requirements, and to help them to the best of his ability. New Zealand differed entirely from other countries. The exports cover imports, but there were many phases of the question which were being discussed by experts. Air L. Kelcher supported the remarks of the previous speakers and Alp Al. Austin stated that there was little hope ot a reduction in interest, principal, or wages, but they should urge the Government to give free exchange.. A resolution was carried emphatically protesting against the Government's action in commandeering export credit, and urging upon the Government to remove this grave injustice so that exchange rates be allowed to operate freely according to supply and demand.

LABOUR MEMBER’S CRITICISM CHRISTCHURCH. February 13. The agitation taking place for an increase in the exchange rate between New Zealand and London was strongly criticised by Air J. APCombs, the member for Lyttelton. Air Al’Combs declared that the present position of the Dominion's cash balances in London did not warrant any increase on the existing exchange rate, and if normal conditions were ruling, and the Dominion funds in London were available solely on New’ Zealand account, there would be a tendency for the rate to fall below 10 per cent.

He also criticised Professor Copland's plan, which was adopted in Australia, and expressed strong opposition to the application of such a plan to New Zealand.

“ There is only one real wav to help all the producers, and that is by guaranteeing them a stabilised or steadied price for their produce, based on a five or seven-year moving average. Such a policy would add to the total purchasing power of the people.”