The Waikato Times With which Is Incorporated The Waikato Argus. TUESDAY, NOVEMBER 29, 1932. THE EXCHANGE PROBLEM

Waikato Times, Volume 112, Issue 18805, 29 November 1932, Page 6

The Waikato Times With which Is Incorporated The Waikato Argus. TUESDAY, NOVEMBER 29, 1932. THE EXCHANGE PROBLEM

The Bank of New Zealand has refused to undertake the responsibility of raising exchange from 10 per cent, to 25 per cent, and now the Government is appalled at the extent of the problem thrown hack on their hands. The Bank acknowledges the urgency of the problem and offers to help by lending £2,000,000 on favourable terms. It also suggests that tho Government should pay the county rates for the farmers. The proposals are not attractive. In the first place, they are inadequate. An additional exchange of 15 per cent, would not put farmers back to the position of 12 months ago; it would only have helped. On exports totalling £30,000,000 it would have amounted to £4,500,000, while the £2,000,000 subsidy would be only 6 per cent, additional in place of 15 per cent. It would besides have placed the country more than ever in the hands of the Bank and that is a position which is good neither for the country nor the Bank. That the Government should pay county rates would help a little, but not much, and the Government have not the money. There is always the danger too, that the Government may remit the rates without paying them. So many strange actions have been taken in interfering with contracts that nothing seems impossible.

The Government are reported to be anything but satisfied with the alternatives suggested by the Bank. That is not wonderful, for they are obviously inadequate and the Government are compelled to consider now what they should have considered long ago. When a rise in the exchange was recommended by a' committee of economists the Government would not adopt it, and did not stop to think what they might have to do as alternatives. Even now they scarcely recognise the Importance of the matter. Two ministers are away taking part* in the Molueka by-election, as if it mattered who was returned to a House which can take no action. They are anxious that Labour should not score a victory, hut have drifted into doing very much what Labour would do; they have increased taxation, interfered with contracts, and alarmed those who control money, so that it is placed on fixed deposit with the banks which seems the only place free from interference. When the Government have fully considered what will have to lie done If the exchange is not raised they will probably decide lo raise it as the lesser of the various evils. Their delay has however done much harm, and a course which could have been safely taken last January will ;io\v bo difficult. If the Government had then called on the Bank of New Zealand to increase the rate of exchange it would have been done without any of the heat and excitement that has been engendered over it. One of the other banks Is known to favour the course, and it is possible there are more than one. It is not right to call on the banks to take decisions on matters of policy that rightly belong to the Government; tho banks are entitled to act on precedent and practice, and when a new position arises, In which there is no precedent to guide us, it Is the Government that should shoulder the responsibility. More harm has been done with the public than with the banks. Twelve months ago Hie number of those who knew anything or thought anything about exchange was very small. Now everyone lias become an expert and speaks with entire decision from the point of view of his own business only. If it hurls him, he thinks it must be bad for the country. The position as between different classes cannot too often be pointed out. Since 1929 the price of exports has fallen 46 per cent to September last; since then it lias fallen still more. For locally produced goods at the same dates the fall has been 18 per cent., and for imported goods it has been 4J per cent. In this country it is exported goods which decide our economic position. If the producer of the exported goods cannot earn a living and something more, tho local manufacturer and the Importer will have very few customers. Something must be done for the primary producer, if he is to be kept alive and producing. So far high exchange is the best of the many remedies suggested, though there are of course drawbacks to it, as there are to every course. It calls on the local manufacturer and the importer to run some risk. They may lose some money; though it is not certain that they will do so. If, however they cannot make the sacrifice and the Government cannot find strength of mind to insist that it shall he done, then wc must all come lo grief together. Wc sec , references occasionally lo the fine spirit with W hich people arc meeting Hie tribulations of these times. On tho question of exchange Ibis lias not been so apparent, largely because in spite of many self-constituted authorities the question has not been understood.