EXCHANGE FUNDS

Wanganui Chronicle, Volume 83, Issue 169, 20 July 1939, Page 11

EXCHANGE FUNDS

CAPITAL AND CONFIDENCE A DIFFICULT POSITION ! “It is essential that if the exchange ' position is not alleviated in some way • in the near future the New Zealand ' Government should decide upon a i list of priorities, and indicate clearly . to the trading banks the lines upon ! which they must act in any rationing of exchange which may be neces- ! sary,” said Lord Balfour of Burleigh, chairman of the National Bank of New Zealand, at the annual meeting. ' It seems to me that in an economy which is subject to the degree of Gov- ; ernment control now being exercised ' in New Zealand, it is not possible for ; discrimination in the granting of : sterling exchange made by trading ; banks as well as the Government and ■ the Reserve Bank. “I regret, from an economic point , of view, that the Government pur- . sued so vigorous a policy of public ,

works and general internal expansion ] during the boom year of 1937, be- j cause it seems to me that if a Government is trying to insulate its country from the effects of world trade cycles by the regulation of internal ( monetary conditions, it must be just ( as ready to put on the brake during ( times of rising world prices as it is to j press the accelerator when world j prices are falling. “When the exchange control began ; it seemed a reasonable assumption j that the granting of import licences by the Customs or of transfer per- -j mits by the Reserve Bank implied that sterling would be available as cover, and it is regrettable now to find that licences and permits have been granted substantially in excess of the funds likely to be available in the next few months. Facing Difficult Position “A very difficult trade position must be faced for the next six months at least. A surplus of imports and debt services over exports must somehow 1 be financed if goods vital to New Zea- / land's exporting industries are not to be shut out. It does seem to me to s be of the first importance that means should be found to linancl these im- $■ ports. C “The Government must at once see that the volume of import } licences is kept within the limit of ravaiiable sterling. In. the absence of an assurance to that effect, not only s will future essential requirements be 1 held up. but also contracts which I have been entered into will become < incapable of fulfilment, with obvious f consequences of a far-reaching and c undesirable kind. f “New Zealand’s credit cannot be ( maintained if ordinary trading operations cannot be engaged in with conli- 4 donee. Confidence and capital are alike elusive, and the experience oi the past six months has demonstrated to perfection that to prevent capital from leaving a country is the best way to stop it going there.”