ALL PEOPLE WILL BENEFIT FROM CURRENCY RESTORATION

Wanganui Chronicle, 23 August 1948, Page 4

ALL PEOPLE WILL BENEFIT FROM CURRENCY RESTORATION

Mr. Nash Explains; Government Will Maintain Price Control (P.A.) Wellington, Aug. 22. The Government intended to adhere firmly to its price control policy and make absolutely certain that full advantage of the adjustment in the exchange rate was passed to consumers, stated the Minister of Finance (Mr. Nashjin a broadcast in which he discussed the Government’s decision to bring New Zealand currency to parity with sterling.

The Minister said there was no doubt that the alteration would benefit everybody in every walk of life. Mr. Nash discussed its advantages and disadvantages, and denied that appreciation made in the value of New Zealand currency was contrary to the general agreement on trade and tariffs made at Geneva last year, and ratified by the New Zealand Parliament this session. He claimed that the action taken would facilitate trade and that that was precisely what the agreement was designed to do. STEP OF MAJOR IMPORTANCE The Minister said the Government’s decision to appreciate currency was a step of major national importance. In simple terms the position was that until Thursday night five New Zealand pounds were worth four pounds of Britain’s, and the difference was the rate of exchange. Now, it is five for five, or parity—our pound now being equal to the British pound sterling. In North American currencies the rate of exchange on Thursday was £1 New Zealand for 31 dollars Now it was £1 New Zealand for four dollars. The New Zealand pound today would'buy 25 per centum more goods overseas than on Thursday. Any change in 'exchange must be made without notice and no possible risks of leakage could be taken. No one should profit by prior knowledge. To the best of his knowledge no person had gain a penny by prior knowledge of the Government’s intention. There was no doubt that the exchange alteration would benefit everybody; some would benefit immediately and directly, and others would share in the national advantage. The Minister referred to the desperate plight of the farmers during the depression of 1929 to 1933, when the value of the New Zealand pound was depreciated by approximately 10 per centum. He said that in January, 1933- the then Government, in an effort to improve the position of the farmer, further devalued currency to £125 New Zealand to £lOO sterling. Since 1933 £125 was received in New Zealand for £lOO worth of produce sold in Britain. On the other hand the community had to pay £125 for what it had been able to buy previously for £lOO. NOW IS SUITABLE TIME TO ACT The Minister said there was never a more suitable time than the present to make the adjustment in the exchange rate. The devaluation of the pound had been done primarily to help New Zea and farmers out of the slump and save them from bankruptcy. There was no doubt that the New Zealand producer would continue to prosper, as long-term contracts would secure his stability for a long period. It was expected prices wou d continue as high as they had been for wool and the payout to the dairy farmer would not be affected. Dairy and apple producers received a guaranteed price for their products and they need not receive less. The fanners’ costs would be reduced as the result of lower prices for farm requisites, and they wou’d also benefit from the lower cost of living. Farm produce nor normally exported would not be adversely affected, while producers of those commodities

would receive the benefit ot lower cost Th' .eminent would continue to opet the guaranteed price proced. as the best means of security and ; - osperity, and it was prepared to consider measures to meet the costs of production if these were desired. The Stabilisation Pool accounts were worth more now in terms of the lower price farmers would pay for imported goods and materials. The purenasitig power of money in the poo* accounts was greater. The same applied to all savings. Those who had rallied to the call to save wou d have the satisfaction of knowing that their savings now had a higher value. Though all sections of the community wou <1 benefit, there might be some particular difficulty to importers holding stocks bought at the old rate. He was convinced, on the evidence of demand, that they would be able to clear a fair y large portion of the goods before goods bought at the new rate arrived in any quantity. He would suggest the wisest course was for them to meet the new situation at once, and when the new goods came they would be at a price beneficial all round. Restoration to parity did not mean there could be more goods, but the rate of demand would be maintained. There would be a direct gain to overseas residents deriving fixed income.-* from New Zealand, and pensioners and the like. Others outside New Zealand with property and investment# here would slightly benefit. LOCAL BODY DEBT. There would be considerable benefit in the amount required to meet the national and local body debt overseas. Visits overseas would cost less, though shipping and transport problems restricted these. It was the Government’s firm inten tion to adhere to its price control policy and make absolutely certain that consumers got the full advantage of the reduction in prices which would come about. Some New Zealand manufacturers would have to meet sharper competition and tlfe Government intended to see that they were adequately protected and, to the extent they were producing necessary goods at anything like comparable prices, they would get the protection they needed. Nothing had been done which would hurt Britain. On the contrary, the sterling prices for goods remained unchanged and British manufacturers would find New Zealand a better market, because goods could be sold here cheaper. The real cost of imports from dollar sources would not change to the extent that dollars had to be found, but whereas the dollar had been worth 6s 4d, it now was 4s lOd and the disparity which previously existed whereby New Zealand had sometimes to pay high prices foj* dollar goods while dollar sources could purchase New Zealand goods at a lower price, would be removed. It had been suggested that the action taken was contrary to the Geneva Agreement. This is not so. It was provided under the agreement that signatories should not, by exchange action frustrate the principles of the agreement. All those principles were in the direction of encouraging trade and the action taken would be one which would facilitate imports. That was precisely what the agreement intended to bring about.