EXCHANGE POSITION

Evening Post, Volume CIX, Issue 100, 30 April 1930, Page 14

EXCHANGE POSITION

LITTLE LIKELIHOOD O¥ EASE

Australian balances in London continue to remajn at a low level, although the severe restriction on imports by the Commonwealth are expected to relieve the situation."Hopes are centred in a good season for all exportable primary products, with reasonably remunerative returns to alleviate the position, but not much before 1931, unless the unexpected happens in the wheat, wool, and other export markets. . The existing ' official quotation of £6 10s per cent." for telegraphic remittances is largely nominal.' Customers of the banks wanting London credits are still being strictly rationed. The Commonwealth will have large interest payments to make in London on- Ist July, and funds in that centre must be husbanded so that the payments shall be met when they fall due. 'Australian bankers unofficially have expressed ; the opinion that there is little likelihood of easing in the exchange position before the end of this year, if then. Constant attention is being paid by financial authorities to the exchange position, and it is understood that it is the intention to reduce the rates at the earliest possible date. The heads of some Melbourne business firms who have closely studied the question think that a reduction at an early date is likely..-- They base their opinion on several factors. The first is that the recent action of ilie Federal Ministry in prohibiting importation of certain goods and rationing importation of others will automatically reduce the demand for money in London to pay for exports to Australia, The second is that as £ 100 for telegraphic transfer to Australia can be bought in London for £93 '17s 6d a very profitable investment in Australian Government securities can be obtained, the interest in some instances, including the advantage of the present exchange rate, being over 8 per cent. Transactions of the nature indicated would naturally increase the balances in London and Australian; banks. The third reason is that the general depression throughout Australia is lessening the demand for goods from overseas, and merchants generally are finding that the money being made available in London by, the bankai is more than' meeting their requirements. A further reason is that -exports from Australia are on the increase. , .■■ -.■:,'.■■ ' As against' these contentions ia the fact that money on London is still being sold in Australia at rates much higher than those quoted officially by the banks. The banks state, however, that higher rates are being paid only in very pressing cases where money in London is wanted immediately. Although a few bankers think that exchange might rise still further, the majority appear to hold that the rate has reached a level at which it is likely to remain steady.