MEANS INFLATION.

Star (Christchurch), Volume XLIV, Issue 494, 1 July 1932, Page 7

MEANS INFLATION.

Higher Exchange Rate Not Wanted. FROZEN" MEAT SHIPMENTS. A large quantity of frozen mutton and lamb is, it is understood, still held in New Zealand by freezing companies, and will be exported this month. It is stated that, while the possibility of a rise in the exchange rate, New Zealand on London, may have constituted a temptation to exporters to hold back their meat loadings towards the end o£ the month, the shipping returns give no indication that there has been any general movement in this direction. It is believed, however, that a fair proportion of the mutton and lamb sold by farmers in the last few weeks of falling prices has been held for shipment later than usual. Produce on the Water. A meat exporter stated to-day that a good deal of mutton and lamb had been held in some of the freezing works some months ago until the Government had finally decided the date on which the Exchange Pool restrictions would be lifted. On that occasion it was expected that the restrictions might have been lifted straight away. Exporter's whose produce is on the way to London when any rise in the rate is announced will benefit only if the shippers have not already sold their documents to a bank and drawn against the goods. The feeling is fairly general in business circles that any rise in the exchange rate will not be great, and that it will be difficult for a higher rate to be maintained. It is stated that considerable funds have recently been remitted to London by importers who fear a rise in the rate. Bonus to Australia. That a higher rate is simply another form of inflation, and would react against the farmers as well as the rest of the community, is the opinion of a financial authority. He stated to-day that the question of the exchange level revolved round the threat of the Bank of New South Wales to break away from the arrangements of the New Zealand banks for the purpose of making a very large profit out of the considerable balances held in London. If the exchange were manipulated by the Bank of New South Wales, there was every likelihood that the New Zealand people w’ould have to pay a handsome bonus to the Australian people as a consequence. It was understood in business circles that Professor Copland’s view was that 9 per cent was the maximum rate which would be justified by New Zealand trade conditions at the time of the professor’s visit to the Dominion. Since that time our overseas trade balance had improved, and it was quite a possibility that the exchange rate, if allowed to go free, would take a lower level. “ React Against Farmers.” “ A lower rate would be to the advantage of the farming community,” declared this authority, “ though the farmers seem to prefer the possibilities of a spectacular rise. A high exchange rate is only another form of inflation and would react against the farmers as well as other sections of the community. In other words, a high exchange rate resembles the position which would arise if an insolvent man obtained more credit, as the crash would be all the greater when it came. “ All persons in receipt of salaries and wages are already suffering from inflation, for the pound note which they receive as wages used to buy 20s worth of goods, and now buys only 16s worth. This, however, is not a class question at all. “ One cannot emphasise too strongly that inflation has affected adversely the whole community and any further inflation will create a false sense of security.” State Bank not Favoured. Questioned whether the high rate in Australia had harmed that country, this informant stated that the position in Australia was different from ours. The Commonwealth had had an overseas deficit of something like £60,000,000, while the New Zealand deficit had been met by surplus exports and by borrowing. He declared that a State bank would not remedy the situation, but would present dangerous possibilities as a vehicle for political interference with the banking business, which the bankers were the best qualified to control, not only in its own interests, but in the interests also of the country in which its profits were made. (An earlier reference to the exchange pool appears on Page 12.)