HIGH EXCHANGE RATE

Southland Times, Issue 22474, 9 November 1934, Page 7

HIGH EXCHANGE RATE

SIR FRANCIS BELL’S CRITICISM. REPLY BY MR COATES. A reply to the remarks made by Sir Francis Bell in the Legislative Council on the high exchange rate was made by the Minister for Finance (the Rt. Hon. J. G. Coates). “In 1931,” said Mr Coates, the exchange rate was raised by the banxs to 110, and in January, 1933, it was further raised by the Government to 120. Every aspect of the question lias been thrashed out and I am now surprised to find that there has been a revival of the extravagant language which used to be employed by those opposed to the high exchange rate. Sir Francis Bell’s remarks in the Legislative Council are amazing, not only’ for their appeal to prejudice, but also for their absolute incorrect statement of the facts. He even stated that our national debt had increased by £25,000,000, mainly because of the high exchange rate, and that if this were continued for three years it would be well past the £70,000,000 mark. The simple truth is that the addition to the long-term debt last year was £1,277,394. This sum was mentioned by Sir Francis Bell in the same breath as his_ question whether our debt was to be increased by nearly £26,000,000 annually. “It seems that we cannot too often emphasize that the high exchange rate is now costing the Government nothing beyond the increased charges on our external commitments, which charges are more than, balanced by the increased revenue accruing from the higher national income. Our shortterm debt has been wiped off by the sale of sterling to the Reserve Bank, which gave the Government £25,0UU,000 in New Zealand currency m exchange for £20,000,000 sterling. The greatest loss that could be incurred on this sum —to use the extremely unlikely supposition of a returni to the old parity—would be £5,000,000 “Attention should, however, be drawn to the fact that sterling is now being used up by importers. It should be noted that Australia is contemplating raising loans for funding part of her huge short-term debt into long-term de “Sir Francis Bell has not kept up with the situation. I hope it is the last time that I must repeat that high exchange internally cost us last year only the interest on Treasury bills; that these Treasury bills are now entirely paid off; that this year no debt, short-term or long-term, will be incurred in respect of the high exchange rate; and that while that rate remains no debt or loss can be incurred by the Government. Statements to the contrary are merely absurd figments of the imagination. A glance at the Reserve Bank balance-sheet will show that there are no Treasurv bills outstanding. On the contrary, the Government is in credit to more than £5,000,000. Sir Francis asked how much was being added to the* public debt this year qn account vf high exchange. The answer is, nothing at all.”