The Southland Times. Luceo Non Uro.PUBLISHED EVERY MORNING. WEDNESDAY, JANUARY 20, 1932. INCOME AND EXCHANGE RATES.

Southland Times, Issue 21607, 20 January 1932, Page 4

The Southland Times. Luceo Non Uro. PUBLISHED EVERY MORNING. WEDNESDAY, JANUARY 20, 1932. INCOME AND EXCHANGE RATES.

An unavoidable result of the economic situation is the depreciation in value of land, both rural and urban. This is being felt particularly by the farmers who, through no fault of their own, find to-day that their holdings are worth very much less than two years ago. It is scarcely an exaggeration to state that on the present values the. majority of farmers experience the greatest difficulty in balancing their budgets. Nor does there seem a likelihood of an early return to high prices for primary produce. To enable fanners —and manufacturers, too, for that matter —to carry on successfully it seems that some process of writing down land values is essential. Any such writing down would have to be done on a national scale, with all sections of the community bearing a share in the burden. But how is this desideratum to be accomplished? So many panaceas are suggested, only to be pronounced chimerical, that one hesitates to add to the list. Yet if a suggestion is provocative of useful discussion it is worth while, which will serve as our excuse for submitting that an effective way of achieving this writing down of values without bringing undue hardship to bear on any particular class would be a substantial rise in the exchange rate between New Zealand and London. This would not merely represent a. bonus to the primary producers of the Dominion (and therefore to all sections of the community) but would have far-reaching effects in determining the nominal value of all capital holdings. If the rate of exchange between New Zealand and London is 10 per cent., the New Zealand pound is worth 18/- of the British pound. If the exchange rate is raised to 30 per cent., the value of the New Zealand pound falls to 14/-. In other words, so long as the rate remains at 30 per cent. British investors who have lent money in the Dominion have to be content to regard each pound they have invested as worth only 14/- in British currency so long as it remains in New Zealand. The capital of the banks which is invested in New Zealand securities is similarly affected. Would not the value of land by this means be reduced to a reasonable level without disastrous results to the primary producer or any other section of the community? To ensure stability of value the Government would require to take upon itself the duty of fixing the exchange rate in accordance with the value of the exports. Let us assume that the exports for the present year will amount to £30,000,000, and that the rate of exchange is fixed at 30 per cent. Should the'exports next year bring in £35,000,000 the Government would lower the rate of exchange to,

say, 221 per cent. The sliding scale of exchange rates could be based on par being equivalent to a revenue of £50,000,000 from exports.

One obvious objection to a rise in the exchange rate is the increased burden to the Government and local bodies of interest payable abroad. But so far as local bodies are concerned a high exchange rate, which offers a substantial bonus to farmers, might prove a blessing in disguise. With primary producers so hard hit by the slump local bodies are sure to encounter serious difficulty in collecting the rates this year. An additional £7,000,000 for distribution among the farmers would make the prospect of getting in the rates much brighter. Local bodies might well consider the matter from this angle. Higher interest payments are less to be feared than inability to collect rates. It must not be overlooked, either, that all indebtedness within New Zealand will be paid in the depreciated currency, which would compensate to some extent for the increased cost of remitting interest abroad. To sum up, New Zealand would be an economic unit regulating the value of its currency by the value of its national income. Obviously the duty of fixing the exchange rate would rest with the Government, not with the banks, which arc only entitled to charge, on remittances received or sent abroad, that amount which represents interest on the remittance during transit plus freight and insurances.