EXCHANGE TOO HIGH

Southland Times, Issue 19346, 11 September 1924, Page 7

EXCHANGE TOO HIGH

AMELIORATION DESIRED ACTION BY THE GOVERNMENT IMPORTANT CONFERENCE ARRANGED (Per United Press Association.) WELLINGTON, September 10. In the House of Representatives this afternoon, Mr W. D. Lysnar (Gisborne) put the following question to the Prime Minister on the subject of exchange: “Seeing that the official report of the Imperial Economic Conference, held in 1923, discloses the fact that it was admitted on all sides, including the Committee set up by the Conference, that a return to the gold standard would be a solution to the exchange difficulty, and the Committee also recommended that exchange difficulties could be ameliorated if the note issuing authorities were to accumulate sterling assets and to undertake to exchange their local currencies for sterling assets, and vice versa, and, as the exchange difficulties have obviously become more aggravated since the date of the Conference, can the Prime Minister inform the House whether anything is being done or any proposal is being put forward which' is likely to lighten the unfortunate difficulty with regard to the question of exchanges?” MR MASSEY IN REPLY. The Prime Minister replied: “The exchange position, instead of improving, is becoming increasingly difficult. The disparity is too great. Producers and exporters are at a disadvantage. It has been suggested that the difficulty might be overcome by means of an Imperial short-dated currency bills, conjointly guaranteed by Great Britain and the Overseas Dominions. Such scheme was very fully investigated by experts in the Conference, ’ also by the financial advisers to the British Government. These experts, however, considered the financial and constitutional difficulties to be overcome too great, especially in regard to what is known as the ‘purchasing power parity,’ in the respective countries, and control of credit and currencies administered by each country independently. CENTRAL BANK OF CREDIT. “The Committee considered that it was possible to achieve the same, or, at le Q st, similar results by utilising and extending the existing machinery of banking and credit wnthout having recourse to the creation of a new instrument of Imperial credit, with various constitutional and financial difficulties to which that might give rise. The investigation led to the consideration of another method of overcoming the obstacles of balanced exchange with restricted gold movement. Their recommendation, which has been endorsed by the Imperial Economic Conference, was that the best means of affording relief was through the operations of a Central Bank, with ample power to effect and control exchange operations as between its own country and the countries with which it principally trades. Under this scheme, provision for the closest co-operation of the Central Bank and the note-issuing authorities would require to be made. IMPORTANT NEW ZEALAND CONFERENCE. “I have been in constant communication with bankers and other financial experts regarding the best solution of this worldwide problem, and this week a conference with the principal bankers has been arranged, with the object of considering the application of the recommendations of the Imperial Economic Conference to the exchange system of New Zealand. The resolution agreed to by the Committee at their meeting on November 6, 1923, was as follows:—

“The Committee having considered their terms ofference, and having unanimously resolved that where difficulties have arisen in regard to exchange between certain parts of the Empire, and between such parts and the United Kingdom : (a) The position could be ameliorated if the note-issuing authorities were to accumulate sterling assets and to undertake to exchange their local currencies for sterling and vice versa. (b) This measure might be further developed and assisted by the creation of central banks, and by mutual cooperation as recommended byi the Genoa Conference. (c) In some cases, the bank charges for buying and selling sterling appear to be unduly high, and should be callable of reduction,” THE NOTE ISSUE. Hon. J. A. Hanan (Invercargill): Are they suggesting that the note issue should be increased? Mr Massey: There is no such suggestion here, but it follows naturally, as a matter of course. Mr Hanan: It means expansion of credit. The Prime Minister: Yes. Mr Massey added that he had arranged for representatives of the different banks of Wellington to meet him on Saturday morning, when he hoped some good would result, because it was necessary to get rid of the difficulties of the present pos' % m, or have them ameliorated.