EXCHANGE RATES.

Press, Volume LXVII, Issue 20176, 3 March 1931, Page 10

EXCHANGE RATES.

" rr ~* ' ' ! •NFW" 'ZEALAND' USED 'AS MEDIUM. AUSTRALIA TO LONDON! - [THIS. PRESS Special Service.] DUNEDIN, March 2, | With the present high eSchangie rates against Australid, ' commercial, men in the Coinmon wealth are exploring ways;of getting money to London: through the medium of New Zealand. A typical cbse'is as follows-: >; » { A* Sidney business' man -wishes tio' send i £IGO to ; London, and wants tto Bar© the exchange premium of 30 . per cent.. ,Accordingly,,. he ships goods oa consignment to New Zealand. Assuming., that -the goods are sold in the Dominion. for £220, he lias a'suni of £2OO transferred to London by cable, the exchange on London taking the balaitce of £2O. With £2OO in London, ho pays his debt of £IOO, and sells the other £IOO to someone or some firm wanting money m London for £IBO.

As a result of this transaction, he saves 20 per cent, on exchange and makes 20 per cent, profit on the sale of the extra £IOO transferred to London. He can thus afford to face a loss on the sale of the goods. It is stated that a certain amount ■of business of this character is at present taking place, and if it becomes general it will react unfavourably on New Zealand manufacturers and on the financial position of the Dominion.

" UNPEGGED " EXCHANGE. A LONDON OPINION. Commending the action of the Bank of New South Wales early in January which led to the "unpegging" of the exehangs rate Australian on London, and describing it as on the whole a healthy development, the "Economist" saya that Australia thus has been once more brought face to faco with realities. While the new burden imposed upon the Government in respect of its debt charges is to be deplored, and while it is perfectly true that exchange depreciation is a Bymptom of, and. not a cure for, serious economic trouble, the journal points out that there is .nothing to'be gained from a deliberate suppression o£ such a symptom, and.it is all to the good that such A symptom should bo faced. It con- % has , repeatedly, shown possible, to prevent a ■af nite.from being cir'dealings f -and that ope ddeid, deserves to' fail, Wow that a mote ' nearly 'true' exchange rate has been established, the nornial economic forces should come into play. Imports into Australia will be isheclced, as they ought to be; and Australian wheat and wool growers will obtain tt new advantage in the world's markets. . This should help to njxrve AMtralia wheat .and wool, and their aale should ovent ually provide Austeijia wa§h ranfflcient -additional, foreign!exchange to permit of a modification of