EXCHANGE RATE CHANGE

Te Awamutu Courier, Volume 77, Issue 6565, 13 September 1948, Page 6

EXCHANGE RATE CHANGE

“SAVINGS GROSSLY EXAGGERATED EXAMPLES GIVEN Ramifications of New Zealand’s return to exchange parity with sterling were discussed by Mr E. T. Beaven, president of the Canterbury Chamber of Commerce, at a council meeting last week. The Associated Chambers of Commerce had asked the Government to discuss with trade organisations the procedure for altering price orders affected and import licensing questions, he said. In the meantime “various grossly exaggerated statements made in the House, of Representatives and elsewhere on savings likely to accrue from the change should be rebutted. “Press statements about price reductions are giving the buying public a wrong impression. Expecting reductions of 20 per cent, in prices, the public are delaying their buying and retarding trade. Cases actually quoted in the papers can be refuted quite easily,” Mr Bcaven said. A newspaper report showed that baths would be reduced from £2O 15s to £l6 17s 6d. Reputable firms give these actual figures:—Old retail price, £22 3s; new retail price, £l9 Ils; price reduction, £2 12s. For another grade, the old retail price was £2O, and the new £l7 8s 6d. The price reduction from exchange was £2 Ils 6d, not almost £4 as mentioned by the Minister. “This shows a reduction of nearer 12 per cent, than the. 20 per cent, publicised,” Mr Beaven added. Tobacco Prices “The Minister suggested similar reductions in tobacco. As cigarettes and tobacco generally contain a small percentage of imported leaf, the heaviest loading charge being duty and labour, does he suggest that reduction in duty and wages are pending?” he asked. “For a packet of cigarettes selling at Is (made entirely from imported leaf) the cost is 4.35 d. The entire difference between this and the wholesale, price is in duty. How can any exchange reduction which would affect only manufactured cost be noticeable in a packet of cigarettes ?

“The Customs Department has had specific instructions to cut all licenses presented from August 23rd by 20 per cent.; but in cases where bills were discounted in the United Kingdom before August 20th they are disregarding the difference in exchange values, and writing off the actual value at parity. In other words, the consignee will not lose in license value,” Mr Beaven continued. For example,, a license for £lOO (N.Z.) before August 20th is now written down to £80; but if the bill is discounted before August 20th, and £125 (N.Z.) is paid on presentation of the draft after August 20th in New Zealand, the license value of £lOO only is written off and the license is cancelled. No £25 difference is carried ■over into 1949.

“Banks have had specific instructions to cut all exchange authorities by 20 per cent, as from August 20th; but in cases of discounted bills, the banks here would remit the full amount paid in New Zealand. There will be a difference of 1% between license value and exchange authority. The latter will have a lag of 1%.

“Uncertainty exists amongst the trade community with regard _to drafts arriving now, and to arrive, still carrying exchange. The position is perfectly clear. Negotiated drafts will carry exchange. It is possible that they will arrive for many weeks to come, particularly those negotiated drafts arriving by surface mail. The collection drafts, on the other hand, as from August 20th are free of exchange and are covered only by the 1% at the present United Kingdom rate.

“The chamber suggests that importers who are uncertain about the fate of their drafts should consult with the bankers and ascertain the distinguishing feature of negotiation and collection drafts,” Mr Beaven said.

“All this indicates the impossibility of expecting wholesale reductions in prices at once, except in the cases of goods in over-supply, where supply and demand control prices at all times.”