NO INCREASE

Poverty Bay Herald, Volume LIX, Issue 17947, 26 November 1932, Page 5

NO INCREASE

; RATES OF EXCHANGE

BANK OF N.Z. DECISION AN ALTERNATIVE OXTER £2,000,000 FOR FARMERS (Parliamentary Reporter.) ' WELLINGTON, this day. The anticipated decision of the directorate of the Bank of New Zealand not to increase rates of exchange in response to political pressure was announced last evening, following a meeting of the board. In reiterating its view that an adjustment of rates to meet variations in, produce, prices is not the function o the banks, the board submitted an alternative proposal for assistance to the primary producer—an offer to provido a loan of £2,000,000 to cover the payment of farmers’ local rates and the remission of their land tax. TT The letter, signed by Sir Henry Buckleton, general manager of the bank, conveyed the decision to the Rt. lion. G. W. Forbes at about 5.30 p.m., hut there "was also a personal interview by Mr. Oliver Nicholson, chairman of directors, who conferred with Mr.. Forbes and the Hon. W. Downie Stewart in the Cabinet room. When seen by newspaper representatives, the Prime Minister smilingly announced that the Government had no comment to make on the decision of the bank at the moment. A meeting of the Cabinet was to be held in the morning, when the question would be fully discussed. THE BANK’S LETTER The communication setting out the decision Qf the bank was couched in the following terms:— “I beg to acquaint you with the following resolution passed by my board at its meeting to-day: ‘The hoard, having given consideration to the request of a number of members of Parliament that to assist farmers to surmount their difficulties through the present- low prices for farming produce, the rate of exchange on London should be raised ,to a parity with the rate ’ruling in Australia, reaffirms the views expressed by the chairman at the annual meeting ©fr the bank, held on June*l7 last.’

“Briefly these views are that it is not the business of the banks to adjust exchange rates to meet variations in the price of produce, nor should the banks be influenced by the rates prevailing in other countries, but by the supply and demand of money between London and New Zealand. “The board fullv realises the difficulties confronting the primary producers at the present time, but it is satisfied that a raising of the rate of exchange under existing conditions, while it might be a palliative, would not be in the best interests of the Dominion, and the board is, therefore, not prepared to depart from sound banking principles for the sake of expediency TAX AND RATE RELIEF “The other alternative to affording material assistance to primary producers appears to bo that of granting a subsidy, but as the Government has indicated its objection to such a course, the board does not seo the necessity of elaborating its views thereon. If, however, the Government reconsiders its objection to a subsidy, the board will be pleased to collaborate with it with a view ..of granting financial assistance to the full limit of its resources. “As another alternative to either of the above methods, the board suggests that the Government should consider the question of paying all farmers’ rates to local bodies for the current year and at the same time waive its claim for land tax. It is estimated that this ■would cost the country £2,000, OCX), against which must )>e set the cost it would incur on Government operations if the rate of exchange were raised as desired. Such n remission would have a two-fold benefit. Not only would it be a means of assisting a majority of the farmers to carry on, but such a payment to local bodies by the Government ■would enable them to carry out their overseas commitments in connection with their interest on loans, without the increased costs which would be entailed by a raising of the exchange rate.

“Should the Government favorably consider this method the board will be prepared to provide the amount required on reasonable terms.”

NOTHING TO SAY ASSOCIATED BANKS CHAIRMAN (Per Pres* Association.) WELLINGTON, this day. Mr. J. T. Grose, chairman of the Associated Banks, said he had nothing to communicate in reference to the meeting of the banks yesterday when seen by a reporter to-day. EFFECT OF HIGH RATE OPINION OF EMINENT JUDGE Doubt as to the of the proposal to increase the exchange rate was expressed on Thursday by the Rt. Hon. Lord Salvesen, P.C., K.C., formerly of the Scottish Bench, who reached Wellington on the Rangitaue from London. He is on a holiday visit to New Zealand. Lord Salvesen said that when he left England the financial and trade outlook uppeared to be hopeful. He realised, however, that the recent fall in produce prices would act still further to the detriment of New Zealand producers.

“I should think, however, that it Would be injudicious for New Zealand to raise the rate of exchange in an effort to assist exporters,” he continued, ■“if carried into effect it means that New Zealand will have to pay what amounts to an extra tax on imports.

“I do not suppose that this would affect New Zealand’s preferences for British products, but to an extent it would injure imports from all countries. Also as long as it lasted if would affect the cost of living.”