HIGH EXCHANGE

Taranaki Daily News, 19 January 1933, Page 5

HIGH EXCHANGE

CRISIS IN GOVERNMENT OPPOSITION OF MR. STEWART CABINET’S MIND CHANGED? EFFECT UPON THE BUDGET “ASSISTANCE TO FARMERS” (By Wire.— Special to News.) Wellington, Last Night. Acute differences of opinion within the Ministry concerning the wisdom of increasing the exchange rates as proposed by a certain section of Cabinet have reached a climax within the past few days, the Minister of Finance (the Hdn. W. D. Stewart) having, it is stated, tendered his resignation to the Prime Minister. The Cabinet policy for presentation to Parliament when it resumes next Thursday is almost complete and it is understood reliably, in spite of complete absence of official information, that Mr. Stewart has decided to resign from Cabinet rather than subscribe to a programme of further emergency measures which are stated to hinge upon an increase in the exchange rate to 25 per cent. Cabinet’s policy, it is understood, will be far reaching, but in some respects not so all embracing as that involved in last year’s emergency measures. The exchange rate increase is one of the major issues which will be submitted to the Coalition caucus early next week, and although strenuous attempts have been made to induce Mr. Stewart to remain in the Ministry so that the Government could meet the House at full strength it is understood that he is adamant at the moment.

The position at the present time is serious and the Ministry is obviously perturbed over the latest development in spite of the silence which is being maintained by both leaders of the Coalition (the Rt. Hon. G. W. Forbes and .‘the Rt. Hon. J. G. Coates), neither of whom would make any comment when seen to-night. Even Mr. Stewart declined to say whether he had tendered his resignation or not and it is perfectly clear from the attitude which is being adopted that the relations are very strained and that there is little likelihood of the breach being filled. Rumours that open dissension had occurred were in circulation, in political circles some days ago and it is significant that since the first statements were made at the beginning of the week that all was not well in the Ministry Mr. Stewart has not attended meetings of Cabinet.. On the other hand, however, he has had conversations with the Ministers.

DIRECT QUESTION UNANSWERED.

Mr. Stewart was approached this afternoon with the direct question whether he had resigned or not. He said he would neither affirm nor deny the report that he had tendered his resignation. He said the question was one for the Prime Minister to discuss and any statement should be made by Mr. Forbes.

Asked whether - he would be prepared to contradict the statement that his resignation was in the hands of the Prime Minister Mr. Stewart said he would not do so, nor would he make any comment on the situation generally. It was represented to Mr. Forbes that the position was curious in that a Minister of the Crown was reported to have tendered his resignation, but that neither he nor the Prime Minister was prepared to deny that a breach had occurred. Mr. Forbes replied' that he would not go into the question in any shape or form at the moment, adding that something might be said later if it were warranted. As no official confirmation has been given of the fact that Mr. Stewart has tendered his resignation no information is available as to what attitude the Government will adopt if Mr. Stewart maintains his present attitude. However, ii is understood that the Coalition leaded, in an endeavour to maintain an unbroken front, have been attempting to induce Mr. Stewart to remain in the Cabinet. He has been approached by several Ministers during the past few days but it is understood he has remained fl,rm and that he is not prepared to take back his resignation. Mr. Stewart’s move was not altogether unexpected in Cabinet circles, especially in view of the renewal of the exchange rates controversy and the opinions which certain members of the Cabinet are known to hold on the question of exchange inflation. Naturally, as no official admission of, a cleavage can be obtained its cause must be a matter for conjecture. There can be little doubt, however, that it is due primarily to the latest efforts to secure an increase in exchange rates, although when Parliament adjourned six weeks ago the Prime Minister was insistent that the level of exchange rates was a question entirely for the banks. MOVE EXPECTED SHORTLY. It is now stated reliably that the Government does not regard an increase in the rates at all unfavourably, and there is reason to believe that the Government will shortly initiate a move to bring about a measure of exchange inflation. Mr. Stewart has been a consistent opponent of any increase. There are one or two members of the Cabinet who have urged that the rates should be raised ever since the formation of the Coalition 15 months ago. As the Prime Minister 'has said all along that the matter should rest with the banks, other measures were taken to strengthen the economic position. However, when the Cabinet settled down to formulate a plan of action after Parliament adjourned it is believed strong pressure was brought to bear within its ranks to secure the approval of a general plan whose keynote was the raising of the exchange rates to about 25 per cent. Added to this, it is understood that the committee of three economists which has been advising the Cabinet recently has repeated its assertions that the most' effective relief for the farming community could be secured through a higher exchange. In view of the attitude of the banks it is stated that if the Government brought about an increase it wbuld have to take the responsibility of redeeming London funds which might accumulate. Apart frcm this the Secretary to the Treasury, Mr. A. D. Park, estimated in his addendum to the Economic Committee’s report last February that the raising of the exchange rate to 25 per cent, would have an adverse effect on the Budget to the extent of about £3,500,000. This responsibility, it is understood, Mr. Stewart as Minister of Finance is not prepared to shoulder. The position at the moment is that he has defined his attitude clearly to the Cabinet with the statement that he cannot subscribe to the proposed policy. In view of the apparent determination of the Government to go ahead with its proposed programme Mr. Stewart is Stated to have tendered his resignation.