POOLING OF EXCHANGE

Taranaki Daily News, 14 January 1932, Page 9

POOLING OF EXCHANGE

PRIMARY PRODUCERS’ OBJECTION BENEFIT OF HIGHER RATE SOUGHT DEPUTATION TO THE GOVERNMENT • ■ ’ . , ■ . ' ■’ ■ By Telegraph.—Preee Association. ■Wellington, Last Night. JJEMOVAL of the restrictions upon exchange rates which, it was contended, were being hampered with disastrous results to the farmers of New Zealand, was sought by a large deputation, fully representative of New Zealand’s primary producing industries, which waited on the'Prime Minister and all members of the Cabinet to-day.' It was contended that the exchange rates should be allowed to find their own level without the restrictions which were said to exist under the Government’s exchange credits pool recently esta lished. All the speakers made particular reference to the plight of the primary producers, and it was urged that if the exchange rate were freed it would rise from 10 per cent to about 30 per cent., thus giving the farmers a return for them produce comparable to that being received by competitors overseas operating on high exchange ratee 1 e argument was. advanced that New Zealand could set about economic rehabilitation Australia had done with high rates of exchange, and it was asserted that this was the only way out of the present difficulties. _ Full consideration to the whole question had been given earlier in the day y representatives of the New Zealand Meat Producers’ Board, the Dairy Producers’ Export Board, the Fruit Control Board, the Sheepowners’ Federation and the Farmers Union, and the deputation waited upon the Cabinet at the conclusion of a lengthy conference. ... ~ , - „ In his reply the Prime Minister promised that full consideration would, be given to the question, although he pointed out that great difficulties would be presented by an increase in the exchange rate. He was favourable to the suggestion that a conference should be called between the Government, the banks and the primary pro: ducers, and it is likely that this course will be adopted.

dependence ON FARMERS ’ CHANCE OF REHABILITATION. TTDTfP TO MEET OOMiP®TITORS. Wellington, Laat Night. Mr. D. Jones, ex-Minister of Agriculture, and member of the Meat Board, who presided at the conference earlier in the day and who put the case in broad outline to members’ of the Cabinet, emphasised that everything at the mom pnit. depended, upon the financial position of the primary producers, and the Government had to look to their rehabilitation as the first stop in righting the country’s problems. At the root of the trouble was the low price for exports of primary products. It was estimated that there were over 10,000,000 sheep in Now Zealand to-day being farmed at a loss to the owners. Thi« statement could be proved by the Government, for it had the necessary figures to survey the position. Dealing directly with the Government’s plan to pool exchange credits, Mr. Jones said that one of the most important facts made clear at that day’s conference was that if the country to come through production would have to be maintained, and even increased. This was essential to the Dominion generally, and particularly to the Government. Any policy that would tend to decrease ;production would be directly against the interests of the farming community and the wholp of New Zealand. The Government was aware of this and its desire was undoubtedly to deal effectively with the problem. NEEDS OF STATE FINANCE. The representatives of the bodies placing their case before the Cabinet were prepared to do everything in their power to co-operate with the Government in its work, ft was common knowledge that the State finance was in a difficult position. The establishment of the exchange credits pool was indicative of the problem being faced. It had been arranged that the Government should find sufficient money in London to meet its own obligations and those of the local bodies, and the Government’s determination to meet its commitments was fully endorsed by the producers, for default was a word they could not think of using.

'The consequences of the formation of the pool, however, would be far-reach-ing, and the producers feared that they would suffer out of all proportion. They suggested that the effect of the Order-in-Council establishing the pool would be to stop competition for export exchange and so hinder it from finding its own proper level. The Government and the banka virtually controlled all credit in New Zealand for the competition with which they were met was inconsequent. Without the restricting influence of the Order-in-Council there would have been a substantial increase in the rate of exchange, and that would have been of direct benefit to the farmers for the reaeon that the return on produce sold overseas would have gone up correspondingly. As it was, the only relief the farmer could look for at present waa to obtain a greater return through increased exchange. Other countries had higher rates of exchange, and the result was that they could sell inferior goods at a higher price to the producer than the producers of New Zealand were able to get on the open market. This state of affairs tended to decrease New Zealand’s exports, and this created a very real danger. . . It was quite clear that the Dominion could not continue to produce at the came rate as at present under the existin'* circumstances. Australia was in a more difficult position than New Zeatend, and she had decided to leave her

exchange market free from restrictions. She had to find very large sums of money to meet payments in England, but as a result of her policy of free exchange Australian producers were today in a better position than those in New Zealand. Australian politicians were strongly in favour of higher exchange rates, as also were leading economists and bankers, their opinion being that the rehabilitation of the Commonwealth could not be brought about in any other way. It was admitted that higher exchange rates resulted in the Government having to find more money in order to meet obligations in London, but the advantages of the system far outweighed the disadvantages. If the farmer received full value for his exchange on an open market a large amount of money would be set free in New Zealand for providing more employment in production, and the Treasury would also receive large sums that could not be paid at present. The action of the Government could possibly be justified if the shot t view were taken, but it could not be justified if the long view were taken. SHOULD LIFT EMBARGO. The opinion of the conference was that the exchange embargo should be lifted. New Zealand was the only country in the world that had followed such a method, and the countries which were consolidating their position to-day were those which had freedom as far as exchange was concerned. They believed that if the distressing fall in prices were spread over the whole community, as it would be if producers suggestion were adopted, the present burden of depression could be carried, but it was quite impossible for the farmer to carry the whole of the burden. The question was one that required immediate attention, for the Dominion was at the height of the export season and the exports would total about £3,000,000 or £4,000,000 a month. Every week farmers were losing large sums through not getting full value for their exchange, and the position was exceedingly serious from their point of view. Mr. W. A. lorns, chairman of the Dairy Board, said that body was fully in accord with the statements made by the conference chairman. The economic distress of the dairy farmer today was resulting in the average production per cow being reduced. Farmers were finding it exceedingly hard to keep up production, and it would be found that the use of fertilisers was dropping off at an alarming pace. If only they could get the returns that their competitors were getting it would make all the difference between the dairy farmer failing completely or carrying on. They considered the problem of unemployment would not be so acute if the dairy farmer could get a little more money. Many farmers were faced with ruin unless conditions improved. _ Had the dairy farmers received a similar rate of exchange as was operating in Australia last year they would have been able to distribute an additional £3,500,000 among them, and that would have made a great’ difference to their financial -position. EFFECT OF BORROWING. Mr. H. D. Acland, president of the iSheepowners’ Federation, said that the primary producers found about 98 per cent, of the money with which the Government would meet overseas obligations. It was felt that public borrowing in London during the past few years had been detrimental to the farmers of the Dominion, and had there been no public borrowing they felt, that exchange would have followed its natural course and that very much the same thing would have occurred as happened in Australia. If the farmers did not get the real value of their exchange there would be wholesale bankruptcies and default by primary producers. Mr. T. C. Brash, a member of the Fruit Board, said the fruitgrowers were vitally concerned, although the value of fruit exports was small when compared with the exports of other industries. However, the fruitgrowers employed more men per acre than other primary producers. * As the proportion of the net return compared with the expenses was small the exchange question was of considerable importance, and the fruitgrowers naturally supported the requests of the deputation. Mr. W. Grounds, a member of the

Dairy Board, said the position of. the farmer was not generally-■ appreciated, and he urged jbhat the. Government should give earnest attention to the representations made, as they were of vital importance to .the welfare of the community as a whole. < i Mr. W. D. Hunt; Commercial representative on both the Dairy and Meat Boards, said the effect of the command; eering of credit was that the. Goveinment was taking from t'he farmer his produce at less than its market value. The Government was taking London funds at less than they were worth, and he was sure that the' exchange ratq would go up if it were left to itself. In effect the Government was placing the whole burden on the farmers illstead of spreading it over the whole community. PRIME MINISTER’S REPLY. In reply to the Minister of Public Works, Mr. Coates, Mr. Hunt said that if complete freedom were allowed to exchange he believed it would go up to 30 per cent, as compared with the present 10 per cent. With free exchange last year the Government borrowed several million pounds and this had the same effect on exchange as if more wool and butter had been exported. Now the Government was temporarily forced to cease borrowing in London. He was certain that if there were no Order-in-Council there would be complete freedom of exchange. The Prime Minister said that when it was found necessary for the Government to find money at this end and not in London the banks had to be approached to provide certain exchange to enable the obligations to 'be met. The banks met in conference and intimated to the Government that they would be able to meet requirements provided the exchange were put through the banks; otherwise they would not be able to give any guarantee. That was the reason for the Order-in-Council. It was still open for the banks to fix the rate of exchange as in the past. Government interference in business had been freely criticised, and it was considered the less the Government interfered the better. The question of allowing exchange to go free had been discussed with the banks and the opinion had been expressed to the Government that it would not be in the interests' of the Dominion to allow exchange to rise to such a level as occurred in Australia. The banks considered that 10 per cent, was the correct rate. No one was able to say definitely whether an increase in the rate would benefit the country as a whole. That it would give immediate benefit to the primary producer could proba’bly be admitted. If exchange went to 30 per cent, the transmission of £12,000,000 which the Government had to find this year for payments in London would cost another £2,400,000. The question of .providing for falling revenue at the present time was giving the Government great concern and it could not see how this extra amount could be provided. However, the Government would go thoroughly into the whole question and give full consideration to the representations made. Mr. Jones suggested that representatives of the primary producers should be given an opportunity of discussing the question with the Government and the banks. It had been, suggested that a committee should go into the question and try to find a way out. Mr. Forbes said the Government would welcome any move to right tne question by mutual agreement. It did not wish to interfere unnecessarily in business. The Government had asked for the cooperation of the country in a difficult time and' he thought it had a right to expect it. (Hear! Hear!) He would see whether a conference would be able to do any good. It was announced later that Messrs Jones, lorns, Acland and Hunt had been appointed to represent the producers on any committee set up to investigate the question.