HIGH EXCHANGE: THEN AND NOW.

Timaru Herald, Volume CXLIV, Issue 20983, 11 March 1938, Page 8

HIGH EXCHANGE: THEN AND NOW.

Something like thirty-six months ago—months before the Labour Government reached the Treasury benches in the New Zealand Parliament—the accepted authority within that Party wrote in a pamphlet which was given Dominion-wide circulation that “the net effect of the exchange policy is an internal tax on consumers in New Zealand for the benefits of the financial interests behind the exporters.” The same expert in Labour finance, speaking with the authority of the Minister of Finance in the Government of New Zealand, declared in the House of Representatives the other day that he knew nothing of any investigations being made in relation to the reduction of the exchange rate. By way of defence, the Minister characterised such rumours as misleading and obviously designed to create disturbing effects. It does not seem to have dawned on the Minister that he is pledged along with the Prime Minister and other members of Cabinet and the Party to abolish the exchange rate because of his disapproval of the methods taken by the former Government to help the rural industries in their difficulties. The Minister’s pronouncement in his pre-election pamphlet is significant, particularly to the reference to the exchange policy taxing the consumers in New Zealand for the benefit of the financial interests behind the exporters; because the Government itself is now a very large exporter of Dominion products, and is particularly interested to a substantial degree in the proceeds of the high exchange rate. But against this the Minister of Finance in his quest for the votes of the farmers warned the country in 1935 that the exchange policy of the former Government increased external costs on Government and local body debts by 25 per cent., at a net cost estimated by the Labour financial experts at something between two and three million pounds per annum for debt charges alone. Three years ago, the Minister of Finance who is now very largely interested in the financial returns from New Zealand products sold in London, set out to catch the farmer by insinuating that the man on the land was not receiving the benefits of the high exchange while consumers were penalised by the operations of the exchange policy of the former Government. To quote the official pronouncement of the New Zealand Labour Party, endorsed in a foreword by the Party Leader, who is now Prime Minister: "'The arbitrary fixing of the rate of exchange at 25 per cent, over par of sterling,” wrote Mr Nash in 1935, “increased the prices of imports, retarded trade with Britain and reduced the demand for our farming products overseas, with the result the lower the price fell, the less benefit the farmer received from the exchange premium. It neither stopped nor retarded the fall of prices.” What has the exchange policy of the Government succeeded in doing? (1) It has helped the farmers to meet their liabilities for mortgages and overdrafts at the expense of other sections of the community. (2) It has most beneficially affected: (a) The wealthier land owners who have either no mortgages or very small charges to meet in connections with overdrafts and mortgages; (b) The mortgagees, banks, and stock and station agents who have collected interest and payments that they would not have done without the policy. The whole of the extra money paid to the banks, mortgagees, stock and station agents has been collected by a tax levied on imports and paid by the people of New Zealand. Ingeniously baiting election hooks with exchange disabilities, to catch both consumer and producer, the financial expert of the Labour Party had no word to say in support of high exchange, not even from the rural point of view, and from hundreds of electioneering platforms that policy was sentenced to death with execution promised “as soon as Labour takes office”; but to-day, three years later, the. parliamentarian who condemned high exchange from every angle, now with the responsibilities of Minister of Finance pressing more heavily each day upon his shoulders, has not only retained the high exchange rate, but regards mere rumours of the likelihood of investigations relating to the possibility of a reduction of exchange, as efforts to create disturbing effects, which he most indignantly condemns.