THE GOLD STANDARD

Southland Times, Issue 19540, 2 May 1925, Page 7

THE GOLD STANDARD

IMPORTANCE OF RESTORATION EFFECT ON EXCHANGE LOWER RATES CONFIDENTLY EXPECTED. (By Telegraph.—Pre® Assn.—Copyright J (Australian and N.Z. Cable Association.) SYDNEY, May 1. The Sydney Morning Herald, referring to the high exchange rates between Australia and New Zealand, says: “If gold is procurable in New Zealand, it will cost not less than two per cent, to transfer it to Australia. In such a case, a return to the rate of exchange approaching that between Sydney and West Australia would be probable.” The Herald gives as a reason for the high exchange between the Commonwealth and the Dominion the fact that goods taken to New Zealand from Australia far exceed those taken to Australia from New Zealand. Actually Australia sent twice as much as it received. The paper adds that some adjustment has been made through London, but insufficient to correct the exchange. FIXING THE RATE OF EXCHANGE. AUSTRALIAN CONFERENCE. SYDNEY, May 1. (Received May 2 1.5 a.m.) The Australian Bankers, conferring with the object of fixing a new exchange rate owing to the altered conditions caused by the return to the Gold Standard, failed to reach an agreement. It is understood that the chief difficulty is to arrive at a margin for buying and selling satisfactory to al parties. It is believed, however, that an agreement will shortly be reached.

BANKERS’ OPINIONS. EFFECT ON AUSTRALIAN EXCHANGE. LONDON, April 30. The probable effects of the return to the Gold Standard on the Australian Exchange is arousing considerable interest in banking circles. Several leading Australian bankers were interviewed. The general opinion seems to be that the exchange rate on Australia will get easier. Bankers consider that the easing of the exchange will not greatly influence Australian trade as its volume depends chiefly on the ability of the public to purchase goods, and the question of exchange does not arise, but the resumption of the Gold Standard and the reduction of the income tax are likely to improve world trade and increase the public spending power, and Australia will share in this way. THE EMBARGO REMOVED. OPERATIONS OF BANK OF ENGLAND. LONDON, May 1. (Received May 1 7.5 p.m.) Great interest was aroused in the first gold movements recorded by the Bank of England since 1916. Bullion purchased amounted to £297,000 plus sovereigns (£100,000). The destinations were Switzerland, Holland, India and Egypt.

The first mentioned took £291,000 in bars and coins for the purpose of strengthening the gold reserve of the Swiss National Bank. India took 87,000 sovereigns.

BANKER’S VIEW.

EFFECT ON NEW ZEALAND. A DIVERGENCE OF OPINION. (Per United Press Association.) WELLINGTON, April 30. The Chairman of the Association of the Banks of New Zealand, Mr P. H. Cox, when interviewed in regard to the announcement by the Chancellor of the Exchequer, of the re-institution of the gold standard, emphasised at the outset that he spoke merely as an individual banker and not excathedra, as the chief executive officer of the bankers.

Mr Cox explained that the bankers were really divided on the question of the efficacy of the return to the gold standard. “The gold shipment of coin from London to Australia and New Zealand and throughout the British Empire, and the free movement and export of gold by Australia and New Zealand, would enable settlement between banks in Australia and New Zealand to be made in the near future in gold, rather than by voucher, which process made for accumulations in London that were rather difficult to overcome. It will have the effect if nothing else could, of gradually levelling the exchanges between London and Australia and between London and New Zealand, and also between Australia and New Zealand until the old limit of exchange charges between London and Australia will again obtain, namely as at no time after a sufficiency of gold is held, should the bank exchange ever exceed twelve. ISSUE UNLIKELY. The actual cost of shipping gold from Australia or New Zealand to London, no matter how great the differences in value of exports to London and the imports from London may be, a sufficiency of gold holding is arrived at by adding together onesixth of the total average bank liabilities to the public bearing interest, and one third of the liabilities not bearing interest, including note circulation and bills payable. “It will be unlikely,” continued Mr Cox “that gold will again be issued to the public in lieu of notes, which are now definitely and conveniently in use as legal tender. It may be expected that notes will continue as such for some time after gold shipments throughout the Empire obtain for the purpose of setlement.” Mr Cox emphasised the opinion expressed by other financial authorities, that gold would not be issued as sovereigns, at least for some time to come. One of the dangers of the gold currency, he remarked, was the fondness of the Eastern peoples for gold, and the difficulty of preventing hoarding. The banks could not keep track of the gold in the East. TIME OPPORTUNE. A pleasing feature of the announceregarding the return to the gold standard was, said Mr Cox, that it came at a time when prices were good. In that connection, the choice of time was particularly opportune, as commerce and industry were in a position comparatively speaking for the transition to the trade level and balance, that will gradually come about. “The banks are pleased about the announcement,” he added, “for the reason that they do not like high rates. Moderate rates of exchange make for activity in business.”

He agreed that the position in New Zealand x was governed to a great extent by development in Australia, or at least that New Zealand would follow the action of Australia in the matter. Up to the present there had been a high exchange rate against Australia in New Zealand owing to the Australian exports to New Zealand being far in excess of those from the Dominion to the Commonwealth. The reversion to the gold standard of settlement between the two countries would stabilise this position.

Mr Cox, who forecasted the present announcement some months ago in an interview, expressed the opinion that the perid of currency of notes as legal tender would be extended.

The people should not, he added, expect rapid and arbitrary changes as a result of the change to the gold standard. All its effects would come about gradually, but would have the effect of stimulating and stabilising industry and commerce generally, especially in relation to producers and ex porters in New Zealand,