THE INDEMNITY BILL

Waipukurau Press, Volume XXVIII, Issue 31, 28 January 1933, Page 5

THE INDEMNITY BILL

Higher Exchange

MINISTER OF FINANCE SPEAKS.

LABOUR AMENDMENT FOLLOWS

WELLINGTON, Last Night

The Banks Indenpiity (Exchange) Bilf was introduced in the House of Representatives by Governor-General’s message this afternoon and was read tho first time.

Moving the second reading, the Rt. Hon. J. G. Coates said that the Government had made an exhaustive ininqciry into the country's economic position, and every avenue had been explored before a decision was reached. He believed that the concern expressed by business men and others could be explained away. They would find after a while tho benefits which would ac-

crue from the Government’s action. Air J. McCombs (Lyttelton): Il will create more unemployment. Mr Coates: It will prevent further unemployment.

The Minister said there were two courses open to the Government, The first was to let matters take their course and allow further deflation. That might be the right policy but he did not think so. In his. opinion, if the Government had been content to stand by and watch tho policy of deflation continue it would have meant the wrecking of the primary industries and the people of the country and would have resulted in incalculable distress. Mr Coates said that the rise in the exchange would not affect the cost of living to the extent some thought. It was true that if the extra 15 per cent wore added to every form of commodity. there would be a flat-rate increase in living costs, but this would not occur at all. However, the central point was that the primary industry had to be assisted as it was the source of the national income. If the country neglected it, the saying, that grass would grow in the city streets would be proved true.

Air R. A. Wright (Govt.. Wellington Suburbs): Nonsense.

Air Coates: Who said nonsense?

Air Wright: I did. (Loud laughter). Air Coates: T hope the honourable member for AVellington suburbs will not get into the habit of saying “Nonsense.” I know that he has got into the habit of saying when I am speaking that I talk nonsense. Retail Prices Fall. Continuing, the Alinister said t>*t when the exchange rate was increased in Australia the fall in retail prices had continued. The increase in the exchange rate would not bridge the whole gap between commodity prices and producers’ costs, and provision would have to be made for a further reduction of costs. Costs at Lowest Level. An endeavour would be made to get costs down to the lowest level .possible, and he believed that as soon as conditions settled down workers would find that their purchasing power would be greater than formerly. Labour’s Motion. The following amendment to Hie second reading was moved by the Leader of the Opposition and seconded by Air Al. ,T. Savage (Auckland West): —

“This House refuses to accord the second reading to the Bill, which fails to provide an adequate method of dealing with the serious economic distress of the country as the fixing of the rate of exchange at an artificially high level will raise the cost of living, intensify unemployment, foster unnecesary antagonism between town and country, and afford no permanent help to the farmer, while increasing the financial difficulties of the Dominion.”

Moving the amendment, Air Holland said that while criticising the Government’s failure, the Labour Party presented its own alternative proposals. His party recognised that the first steps to he-taken must be towards the restoration and stabilisation of the purchasing power—which involved raising the incomes of both farmers and. workers — and also towards the restoration to economic employment, of those who were now classed ns relief workers.

Benefits Only Temporary

It was clear that any benefits accru-

ing from an artificial increase in tho rate of exchange could only be of a temporary character. Practically every speaker at the recent farmers’ gathering had made this clear. As he saw it, only exporting farmers whose proper- 1 tics were mortgage-free would reap direct benefits, and there were not manyfarmers without mortgages in New Zealand. The beneficiaries would be principally tho banks and other financial institutions and stock and station agents. In. any case; farmers could only benefit if exchange remained high over a long period. It was somewhat remarkable that it had never occurred to the Prime Minister and his colleagues to peg up exchange as an alter;, native to wage 'reductions. The Taxation Aspect The banks having refused to accept responsibility for the surpluses which would accrue in London as a result of tho shrinkage in imports, the Government would now have to find money to buy up those surpluses, and tho money raised would have to be met out of taxation. In the end it would mean aditional imposts on farmer* and others. The cost of living would be substantially forced up and there *aust be an increase in wages to .-catch up with increased prices. Exchange pegged at a high level would not increase the income of tho Dominion; it would only transfer wealth from one section to another. Labour’s Proposals Air Holland urged that the Labour Party’s proposal for a guaranteed price to the primary producers was a better method than tho temporary expedient of increasing tho exchange rate. Permanent help for the farmer could onlycome with a guaranteed market for 'his goods, and that market was only visible when the incomes of the consumer were raised to a point that would enable them to purchase the farmers’ goods. There was no difficulty about getting the money if they were producing the goods. A State bank would have to come. Even without, waiting to establish a State bank, under the existing banking legislation they could issue all the legal-tender paper money that might be required, and in a state of emergency, the Government of the day could, under tho Public Safety Conservation Act, 1932. take control of the banks and make them do the work of tho State. An explanation of the difference betwen credit and currency was given by Mt Holland. He stressed tho greater importance of the former, and insisted that values created in the form of goods and services constituted the background against which credits could safely be created. The national capacity to produce, he said, was tin? only possible foundation for the issue of financial credit. After dealing with the economic distress prevalent throughout New Zealand, Mr Holland expressed the opinion that the numbers of registered unemployed might easily go up to 100,000 during the slackness of the winter* months. It was unthinkable that There should bo any talk of reducing the allocations, and yet this was being, forecast. by the Unemployment. Board. The Hon. A. .T. Young supported the view expressed by Mr Coates: That,- instead of increasing unemployment, the raising of the exchange rate would reduce unemployment because it would increase the national income. It would in particular bring relief to unemployed in country towns. He did not agree that tho Government’s action would promote antagonism between town and eountrv, Irecause tho cities would eventually realise tho value of the step to th<s Dominion as a whole. The debate was adjourned and the House rose at 5.30 till 2.30 on Tuesday afternoon.