THE Wairarapa Age MORNING DAILY. THURSDAY, JULY 19, 1934. THE EXCHANGE RATE.

Wairarapa Age, 19 July 1934, Page 4

THE Wairarapa Age MORNING DAILY. THURSDAY, JULY 19, 1934. THE EXCHANGE RATE.

New ground, so far as this country is concerned, is broken in the statement issued last evening by the Reserve Bank Board. This first pronouncement, dealing with the rate of exchange on London, offers some striking evidence that the Reserve Bank is capable of playing a useful part in the economic life of the Dominion. The statement is the most definite and most authoritative yet made on the exchange question, and it is better calculated than anything that has gone before to dispel uncertainty on the subject? The Reserve Bank states in plain terms that the present rate on London is expected to stand unchanged for st long period and that it is prepared to enter into forward exchange contracts with the trading banks. With the action it foreshadows and implies, the statement may be expected to contribute in an important degree to the establishment of more normal monetary conditions than those at present existing. It should do a good deal, for example, to discourage the further holding in this country, in the expectation of an alteration in the exchange rate, of funds which in normal course would before now have been converted into sterling. On the subject of credits held in London, the Reserve Bank makes, the significant observation:

"Sterling funds held in London by the Reserve Bank from time to time should be regarded as ultimate monetary reserves of the Dominion, for use in case of need.’’ The matter is thus put in a much happier light than by those Who have lately been inviting us to regard the mounting accumulation of credits in London as connoting something in the nature of financial disaster. Some very interesting possibilities in fact attach to these sterling credits of which more may be heard in the near future. The first public statement of the Reserve Bank Board should do a good deal to discredit the views of those who are endeavouring to .persuade New Zealanders that any departure from familiar and beaten ways in the control of money and credit must necessarily be abnormal and dangerous. Monetary problems are far from having been brought to a clear and final solution, but in a period when countries like Great Britain and the United States have deliberately devalued their currencies, it is, of course, merely preposterous to contend that New Zealand, in adopting the selfsame policy, is doing something detrimental and discreditable. SUBSIDIES ON DWELLINGS.

Approval is likely to be given on a number of grounds to the revival of the building subsidy. Since payments are now to be made only on the erection of dwellings, there will no longer bo any ground for the objection raised last year that wealthy companies were being assisted in undertakings they would have been bound in any ease to put in hand, then or a little later. The attempt of the Minister of Employment (Mr. Hamilton) to justify what was done in this way last year is not wholly convincing. At best, the subsidising of large-scale building operations is open to question. In existing conditions, however, there is a great deal to be said for the subsidising of dwellings under the limits proposed. General experience, particularly in the cities, appears to bear out Mr. Hamilton’s statement that there is a serious shortage of dwellings In the Dominion, and it may be hoped that by the time this shortage has been cut down appreciably further progress will have been made towards more prosperous conditions in which the building industry will be able to dispense with the assistance that a subsidy affords. The weakness of all subsidies of this kind is that they are a crutch which (bust sooner or later be dispensed with. In a measure they must thus tend to extend and continue the troubles they are intended to alleviate. Where, however, the practice of subsidising industry has once been adopted, it is no doubt better tfiat it should be tapered off than that it should cease abruptly. The subsidising of dwellings only may be defended, both on its direct merits, and because it may be expected to involve some reduction in the total amount of financial assistance rendered to the building industry as compared with that given last year. One question which may be worth raising again, though it was dismissed summarily some months ago by the Minister and the Unemployment Board, ia that of subsidising the work of removing from buildings heavy parapets and other features which accentuate earthquake risk. There is much to be said in favour of this policy, at all events where owners are able to show that they are not in a position to cany out the work unaided. Since many of the buildings in question complied in all respects with the building regulations in force when they were erected, the refusal of a subsidy in the conditions suggested has yet to be justified in any adequate or convincing way.