New Zealand’s Problem

Dominion, Volume 28, Issue 84, 3 January 1935, Page 9

New Zealand’s Problem

Sir, —In “Equity’s” last letter he asks if the income of the people has not been reduced 33 1-3 per cent by the high exchange. The value of imports is roughly about one-third of the national income each year. The amount of the exchange imposed would be 25 per cent, of onethird of the national income, and “Equity” must bear in mind that it is only 15 per cent of the 25 per cent exchange that the Government is responsible for. Considering these facte, it is beyond my reasoning power to form any conclusion as to -how “Equity” arrived at the 33 1-3 per cent, decrease in the national income on account of the high exchange. It is the consuming public of New Zealand that pays the exchange when purchasing imports, and exporters in New Zealand that receive the exchange; a« both classes belong to the general public of New Zealand, how can a payment from one class to another adversely affect the average income of the general public? Again, as exchange is paid from the income of the consuming public, in paying it to exporters it will again be recorded as income 1 So, I would say that the 25 per cent, exchange increases the national income directly 25 per cent, of the value of imports to exporters’ incomes; and indirectly an amount, hard to estimate, of increased turnover brought about by the fact that the exchange bonus, received by exporters, will be spent back in the industries and professions of the consuming public. The Government in pegging the _ exchange increased the velocity of credit in circulation, which has the same effect of increasing business turnover as placing fresh credit in circulation. The disadvantage of working the exchange rate is that it tends to check the public spending freely on imports and the trade balance is affected. „ , ~, A means test sounds well, but would be almost impossible of application on .an equitable basis. “Equity” does not think that, eay. a wealthy sheep-farmer should receive the export bonus. The farmer himself might not need the bonus, but the general industry of the Dominion has need of that farmer spending the bonus. To be fair to the wealthy farmer, how would “Equity” stop the wealthy mortgagee collecting the export bonus from, perhaps, a hundred small farmers? “Equity” remarks that a means test would be leas expensive; I take it that he means that the exchange bonus would be reduced by the amount stopped from wealthy farmers; this action would be in direct opposition to the object of the hign exchange in increasing the velocity ot credit in circulation.—l G. H. WILKIN. Wellington, January 1.