EXCHANGE RISE

Stratford Evening Post, Volume II, Issue 237, 8 May 1933, Page 3

EXCHANGE RISE

Failure to Effect Improvement in Prices MR. COATES EXPLAINS WHY Press Association. —Conyrigh t Wellington, May 5. An explanation of the failure of the raising of the exchange rate to effect an improvement in prices for primary produce is contained in a memorandum on butter quotas issued by the Hon. J. G. Coates to-day.

“In glancing at some possible alterna- ! tives to the quota,” says Mr. Coates, i “the exchange rate must be mentioned. 'lt is doubtless true to suppose that a j mood of disappointment has resulted i since the London-New Zealand exchange irate was raised in January, 1933. The I promise of better prices, through the ! higher exchange rate, seems to some to I have failed to materialise, j “The explanation is, of course, that | prices at the other end of the world i happened to slide still lower just at the I time of our raising the exchange rate. ! This amounts to saying that the adi vantage of the exchange-rate has been j shown, not in raising New Zealand j New Zealand prices, but in preventing I them from falling even lower than they j have in fact fallen. If the pay-out for | hutterfat is now 7d, this figure without j the 25 per cent, premium would be j barely sid (and gold prices would be | under 4d). The point is that, in fairness 1 to the exchange rate, comparison should |be made between prices to-day and ! prices as they would have been if the I exchange rate had not been raised. That i iis not the comparison that is made in { popular controversy. The comparison is | made between actual prices to-day and i actual prices before the exchange rise, j and false conclusions are drawn accordingly.

“Tfio exchange rate is thus apt to suffer an injustice; but it is also fair to admit that, when Australia, New Zealand and Denmark have all raised their exchange rates, and when all must pour their butter into the over-supplied English market, the buyers there are able to set off one seller against the other and force down prices. It is a “buyer’s market,” and part of an expor* bounty in any form will tend to pass to buyers. In other words, the advantage from the exchange rise is being defeated, in part at least, by the over-supply on the market; .and this links the exchange ratcwith J.he quota, or with some other means of correcting the maladjustment between supply and consumption.”