EXCHANGE RATES.

Waikato Times, Volume 111, Issue 18537, 18 January 1932, Page 3

EXCHANGE RATES.

EFFECT ON PRODUCER. BENEFIT OF PREMIUM. • CLAIM FOR FREE MARKET. "(Special to Times.) WELLINGTON, Saturday. Further views and information concerning the. .question, .of. exchange rates and Government control of London credits is contained in a letter to the press by Mr W. A. 'loms, chairman pf the .New.Zealand.Dairy. Board., Mr ■lorns writes as follows: ) May I supplement the report of the deputation of primary producers to the Prlipe Minister , and members of the Cabinet by emphasising what to my mind was the most material point brought out in that deputation? This was that producers are being unduly penalised by the pegging of the exchange rate with Britain at a rate below its proper free level. In line with Australian ' experience, from whose condition this country cannot now be regarded as .materially different, our exchange rate, if freed from restrictive influences, would in all probability rise to riot less than 30 per cent. .

.The"export , value of the Dominion’s goods tb-day is computed at £.35,000,000 annually, including the 10 per cent, premium accorded on to-day’s exchange rate. In addition to export goods,'the farmer sells to consumers in New Zealand, in the form of butter, cheese, wool, meat, etc., goods to the estimated value of £15,000,000 annually, making total of export arid of £50,000,000. On the exchange position as It stands, the producer, in comparison with his Australian confrere, Is being deprived of a 20 per cent premium. Twenty per cent on £50,000,000 Is £10,000,000, and that is the’ sum of which the producer Is being deprived by the unwarrantable restrictions Imposed upon the. exchange rate. - Additional Money. '■>

If the exchange rate were freed and allowed to rise to Its normal prospective figure of 30 per cent., the producer would have that additional money passing into his pocket. While it Is true that this would add to the cost of goods consumed locally, it is only right that it should do so, because the farmer to-day is selling ‘his goods in New Zealand at the lowest price that has obtained for the past- 40 years, while Ms costs are still-' high. It Is not. to the interest of the towns and cities in the Dominion that they should "purchase the - farmer’s goods at unduly low prices, because that is immediately restricting ; the buying power of their own best customers. The reason given to yesterday’s deputation by the Prime Minister for agreeing to the banks-pegging the exchange rate at 10 per cent was that a departure from that rate' would increase the cost to the Government of remitting to London-the annual interest bill and repayment of loans. According to the Prime Minister’s figures £12,000,0’00 has to be paid to London this year, approximately £1,000,000 a month. At the existent exchange rate of 10 per cent that will cost the country £1,200,000. •

If the exohange rate were freed and rose to 30 per cent.’, the -cost to the country would be £3,600,00.0, . thus adding £2,400,000 to the Government’s bill over the existent cost. 'From the primary producer’s point of view, therefore, lie is being, deprived, on the •Government’s own statement, of £10,000,000 in order that the Government he saved £2,400,000. On behalf of the primary producers, tho ■deputation strongly protested against that situation. We pointed out to the Government that it, as an important 'landowner, would benefit by the Increased prosperity which would accrue to the country from a free exchange rate. . , Grazing at a Loss. ■' l”:j Mr Jones, chairman of the Meat Board, estimated that at the present time 10,000,000 sheep in New Zealand are being grazed at a loss; i.e., they will not be able to pay rent and Interest for their grazing. The •Government, as an Important owner of lands on which these sheep are grazed, will lose—ln fact, Is now losing—the rent and interest that would normally be paid by those landowners. That factor in itself would reimburse the Government largely for the 2i millions extra cost of remitting money to London. Even more important than that factor, however, is that the extra ten millions, circulated among New Zealand primary producers, would give them more money for distribution, would put heart into them to expand their business and absorb men at present unemployed, and in ils 'percolation through Ihc rest of the community would materially add to the prosperity of the whole Stale. In addition to the prosperity of Hie community, Mi at money would increase Hie ability of the community to provide the publib revenues, and Hie net outcome -in our view is that the Government, instead of making a loss through allowing exchange to take its normal course, would, in point of actual fact, make a handsome profit. The .situation ns it -stands Is that Hie hanks and commercial interests have stabilised Hie exchange at a poinl to suit themselves, regardless of the interests of the primary -pro.-

ducers. In tho past those commercial interests have been extremely prominent in insisting upon the advantages of free markets. The producers now ask for nothing more than that the normal course of the market be allowed to operate. They should not bo deprived now of what the commercial Interests formerly advocated, viz., a free market for exchange. These points constitute the case for the primary producers. They ask for no subsidy or undue assistance. They simply ask that the normal economic factors be allowed to operate. The Prime Minister admitted that the exchange would rise if it had not been pegged and the bank commandeer instituted. The very fact that that commandeer has been instituted proves that the exchange would rise. The Government's action penalises every primary producer in the country at a time when they require assistance and not hindrance.

P.S. —Dairy producers last year received £905,000 by way or exchange premium. Had the Australian rate obtained they would have received £4,400,000. That position Is giving tho Australian -dairyman a great advantage at the present lime.