CONSUMER PAYS

Waipukurau Press, Volume XXVIII, Issue 30, 27 January 1933, Page 7

CONSUMER PAYS

HIGH HR EXCHANGE IMPORTS AND TAXATION “Whatever is done the consumers will ultimately pay for the artificial raising of the exchange rate,” said a Christchurch business man, on Monday, observes the “Christchurch Star.” “They will pay in higher prices for primary products and for imported goods, and they will be called upon to contribute more in general and local taxation to meet the exchange costs on interest payments that must be made overseas. “Before the exchange rate was raised to 25 per cent. £lOO in London was worth £llO in New Zealand, and the equivalent of £lOO in the United States was worth approximately £l4l in this country. To-day £lOO in London equals £125 in New Zealand, and £lOO in the United States is worth £156 here. The differences between the value of New Zealand currency and that of Great Britain and the United States are represented. first, by the degree of inflation that has been adopted in the Dominion, and, secondly, by the disparity between the currency of Great Britain and that of the United States, resulting from Britain's action in going off the gold standard. “If sterling were on a par with the American dollar and the New Zealand pound equal in value to sterling, imported goods would be very much cheaper in the Dominion than they are to-day, but the exporters would be receiving a correspondingly less amount for their goods. “The increase in the exchange rate represents an addition of approximately 131 pei' cent, to the external costs of all goods imported into New Zealand, and a corresponding addition to the cost of remittances sent overseas. A New Zealander in England who draws his income from the Dominion will now receive approximately 131 per cent, less than he did formerly; in other words, £125 in this country will equal only £lOO in England. On the other hand, the raising of the exchange rate will enable persons resident overseas to enjoy a holiday in the Dominion at a smaller cost than formerly was the case. Position of the Banks “The exchange rate of 10 per cent, which was ruling before the Government intervened was fixed by the banks with the object of bringing about a proper relationship between Imports and exports. Normally when credits in London are insufficient to meet the requirements of the banks and the traders the exchange rate rises and it falls again when credits accumulate. The artificial raising of the rate will have the effect of accumulating credits in London and the Government, I take it, has undertaken to buy the surplus from the banks. “The difference between the natural level of exchange and an artificially high rate represents inflation to the extent that the increase is not warranted by the trading position of the Dominion. The principal effect of this is to distribute more currency among the exporters and to force the ' importers to pay more for the goods they obtain from overseas. The community generally is placed in the position of having to pay higher prices for both locally produced goods and imported goods, and the farmers, and, to a certain extent, the manufacturers, are the only sections of the community who receive a direct benefit. High er Cost of Goods “Goods which cost £lOO in England will now cost the New Zealand importer £125, plus freight, and insurance charges, before any duty is paid. The duty will, of course, be assessed on the invoice cost of the goods and will not be affected by the rise in the exchange rate, but the importer will have to pay £125 in New Zealand currency to meet the bill for £lOO in London. This is an addition of approximately 138 per cent. to the net cost and in the majority of cases it will be passed on to the consumers. The local manufacturers will benefit by additional protection to the extent of the rise in the exchange rate, if no alteration is made in the tariff, but an announcement has been made that a revision of the duties on British goods is contemplated.