DOMINION FINANCE

Waihi Daily Telegraph, Volume XXIX, Issue 8302, 26 April 1932, Page 3

DOMINION FINANCE

A ID THE EXCHANGE P.TOBLEM

FALL IN WORLD PRICES

LONDON ECONOMIST’S VIEWS

LONDON. March 5

The Economist makes the accompanying references to ihe New Zealand exchange—- “ During the past 18 months Autralia’s economic and financial problems have overshadowed those of New Zealand, but there is no doubt that the difficulties imposed by the world depression upon the latter Dominion are very real. The fall in world prices of piimary products has hit New Zealand agriculturists very hard indeed, and the blow has only been partially mitigated by the limited depreciation ol the New Zealand pound, which at present is quoted at £llO for £IOO sterling. ( The depreciation of the Australian' pound first to £l3O and now to £125 has also conferred a competitive advantage upon Australia, though the foreign trade of both Dominions has naturally benefited during recent months from the fall in sterling itself.

CONFORMITY WITH AUSTRALIA

“In these circumstances it is not surprising that a body of New Zealand opinion holds that not only should drastic reform, based upon the Australian model, be carried out in New Zealand public finances and in the domain of fixed interest charges, but that the New Zealand exchange should be raised more into conformity with the Australian rate. On these points there is much to be said upon both sides. Dutch public opinion has resolutely refused to meet foreign competition with products of Holland and the Dutch East Indies by means of a deliberate depreciation of the florin, and now, in response to a request from the National Bank ot New Zealand, Professor Gregory has cabled a guarded reply summarising the arguments against a deliberate policy of exchange depreciation.

“He rightly points out that such a policy would weaken Now Zealand credit, render it more difficult for her to deal with maturing foreign debts, bring into being new problems of wages and prices, and encourage a false economic and business atmosphere. Furthermore, once such a policy is embarked upon it becomes very difficult to restrain it within reasonable limits.

“BLACK” EXCHANGE MARKET

“On the other band, there is nothing to be gained from maintaining a currency at an artificially high level, for as Australian experience showed just over a year ago, the only result is the growth of a ‘black’ exchange market to the point which in the end forces the authorities to relax control and to allow the exchange to find its natural level. This probably is the right line for New Zealand to take.

“If any difficulty in obtaining foreign exchange arises, or if there is any sign of the development of unofficial dealings, then her currency should at once be allowed to find its natural level; and if that accorded with the Australian exchange rate one of New Zealand’s difficulties would be removed.”