MONEY MAY COME BACK

Taranaki Daily News, 27 January 1933, Page 9

MONEY MAY COME BACK

SURPLUSES HELD ABROAD. EFFECT OF EXCHANGE RATE. It seems probable that the recent action of the Government in fixing the exchange rate at 25 per cent, above par may result in a good deal of extra money being released in the Dominion, apart from any direct advantages that may be reaped by the exporting section of the community, says the Christchurch Press. It is understood that considerable sums of money; were being held in Australia by both private firms and individuals, and this will probably now be brought back to New Zealand. Before the exchange rate was raised, £llO in New Zealand currency was worth £124 10s in Australia and, as a result, many firms doing business in both countries preferred to hold profits made in the Commonwealth in their Australian branches, even though they might have no immediate use for the money. Had they transferred it back to New Zealand they would have received only £llO here for every £124 10s they sent from Australia.

The same position applied, to individuals, many of whom preferred to in-, vest their holdings in Australian currency in Australian stocks, and to let the interest accumulate on fixed deposit rather than to incur the loss of bringing it immediately to New Zealand. It is believed that considerable sums were held in this way in Australia, either on fixed deposit for shorter or longer periods, or else in some form of investment security. RETURN OF FUNDS. „ Now, however, much of this more or less idle money will probably be returned to New Zealand, since the exchange between the two countries has been brought to par by the Government’s action. New Zealand firms which have held operating accounts in Sydney or Melbourne, as the case may be, will find it more profitable to have that money at their immediate command in New Zealand, and to transfer money to Australia/when necessary at no greater cost than the ordinary bank charges. A reporter was told by banking firms that already there had been a certain number of private' transfers of cash from Australia to the Dominion. From another source he learned that several business men, who had acquired capital in the Commonwealth and left it there on fixed deposit on account of the adverse exchange, would transfer those funds to. New Zealand as soon as the period of the deposit had elapsed. It is difficult to form any estimate of the exact amount involved, but the Australian exchange has been unfavourable to the transmission of money to New Zealand for so long that it seems probable that there may. be a considerable total involved. The amount brought back to New Zealand by both private firms and individuals may- turn out to be fairly large and to result in a good deal more pioney being put into circulation in the Dominion.

To a very much lesser extent the same thing will apply to m<shey held in England. The. New Zealand exchange on Great Britain had been favourable for some time, £lOO worth of New Zealand currency having been worth £lO9 12s 6d in Great Britain for many months. Now, however, £lOO worth of New Zealand currency is worth £125 in Great Britain, and this added inducement to transfer funds from Londorf to New Zealand may result in more money being released in this country.