THE EXCHANGE RATE

Star (Christchurch), Volume XLIV, Issue 494, 1 July 1932, Page 12

THE EXCHANGE RATE

Artificial Pegging Harmful

to Trade. REPLY TO MR ACLAND. Per Press Association. WELLINGTON, June 30. Commenting on statements made by Mr 11. D. Acland in his presidential address at the annual meeting of the New Zealand Sheep Owners and Farmers Federation on Wednesday, a leading banker stated to-day that it was absolutely essential in the interests of the whole country, the primary producers included, that the Government’s London commitments should be met, and the Order-in-Council was instituted to safeguard the country’s position by ensuring this. “It is obviously erroneous,” he said, “to suppose that the primary producers have been deprived of money to which they are entitled, since this could happen only if an artificially low rate of exchange were deliberately imposed for the especial benefit of the importing interests, just as the inporting interests and others would be unjustly mulcted if an artificially high rate were imposed. But the banks have given their assurance that the exchange rate has never been pegged artificially low under cover of the regulations. It was stated in December that the current rate was that which was justified by the trading position, and the banks have continued to preserve the rate in accordance with the supply of and demand for London funds. “For the twelve months ended April, 1931, and April, 1932, respectively, the trading figures were roundly as under:

"Thus the excess of exports over imports has in a year increased from under £2,000,000 to nearly £14,000,000,’’ concluded the banker. “An artificial increase in the exchange rate would accentuate the disparity and lead to dislocation of trade. Preferential assistance to any sectional interests should not be so conducted as to dislocate exchanges and the trading position, and, moreover, such assistance is a political and not a banking matter.”

1931. 1932. £ £ Exports . . 38,300,000 36,700,000 Imports . . 36,800,000 22,800,000 Excess of exports 1,500,000 13,900,000