The Daily News THURSDAY, JANUARY 19, 1933. HELPING THE FARMER.

Taranaki Daily News, 19 January 1933, Page 4

The Daily News

THURSDAY, JANUARY 19, 1933. HELPING THE FARMER.

OFFICES: NEW PLYMOUTH, Currie Street. STRATFQHD, Broadway. HAWERA, High Street.

Of all the suggestions made at the meeting in Wellington convened by the New Zealand Farmers’ Union on Tuesday the proposal to “peg” exchange at a point at least equal to that of Australia and Argentina was the most important. Unfortunately the discussion did not produce a single argument which showed the proposal to be less dangerous than it was nearly a year ago when the farming community was pleading for exchange rates to be free of all artificial control. Even the sponsors of the proposal were obliged to admit that to artificially raise exchange rates is inflation. They maintained, however, that it was a form of inflation which could be controlled, and seemed to view with little concern that if exchange Vere lifted to a high rate the trading banks would require a State guarantee against loss. The plain fact.is that however attractive the high exchange may appear its cost will have to be found by the community, and the farmers must share that responsibility. At best it might raise the price of butterfat a few pence, but as it will increase the cost of many farm requirements it is doubtful if the benefit will be real. On the other hand, when the day comes to get back to the normal operation of the law of supply and demand, which, in the long run controls exchange just as it does every other commodity which is bought and sold, the country may find itself confronting a liability far greater than the supporters of the higher rate conceive. The meeting recognised that whatever palliatives the Government may consider can only apply to internal conditions. With that limitation admitted the danger of interference with exchange rates is more apparent than ever. Much has been said of the advantage Australia has gained from high exchange. The fact remains that the floating debts of the Commonwealth and States total something like £80,000,000, and sooner or later that liability will have to be met. s . Increased production of dairy produce and a rise in prices of wool are the real improvements shown in Australian conditions, and this, coupled with the severe restriction of private and public expenditure has done something towards making recovery possible. It seems a pity the Farmers’ Union put no alternative to a high exchange rate before the Government. In its action over wheat the Ministry had really, given the union a lead. If bread prices are to be controlled in the interests of wheat farmers, why not butter and cheese for the sake of the dairy farmer? In principle the form of relief is unsound, but it would at least spread the burden over tlie whole community, and as an immediate palliative might be worth consideration. It would affect about 20 per cent, of the dairy output, and would be far preferable to an artificial rate of exchange. This might be supplemented by a subsidy on the lines suggested by the Associated Banks. They offered to find

£2,000,000 as a special loan for this purpose at a “reasonable rate” of interest. Much would depend upon what the term “reasonable” meant, but the proposition has the merit of being within local control and of being prompt in effect. For the loan’s repayment a small tax on tea or sugar has been suggested, one sufficient to wipe out the loan within a few years, the proceeds of the tax to be ear-marked for the purpose. The method of raising the repayment funds is, of course, one for the Ministry to decide. Cabinet alone knows just what the Budgetary position is and what taxation is necessary and feasible. Whether it is a direct tax to repay a subsidy or the costs of an artificial exchange rate the public must pay, and the tax would at least have the merit of being a determinable liability. The further suggestions of'the meeting, namely, that tariffs should be lowered, interest rates reduced, taxation lowered, and Government expenditure very drastically cut down were all excellent opinions in regard to which, with the one exception of tariffs, there is unanimity of opinion as to the'ir desirability. What the meeting lacked, however, was some indication of how these changes can be brought about. ®