A SERIOUS MATTER

Evening Post, Volume CXIII, Issue 30, 5 February 1932, Page 8

A SERIOUS MATTER

EXCHANGE PROBLEM

EFFECT ON CITY FINANCE

CERTAIN INCREASE IN

RATES

The Mayor, Mr. T. C. A. Hislop, at last night's meeting of the City Council, drew the attention 6i councillors and the public of 'Wellington to what he stated would be an inevitable and serious increase in city rates should the exchange rate be increased further. Higher exehango would mean that ratepayers -would have to find £120,000 per annum to meet the higher charges upon loan renewals during the next two years..

"Councillors, >aa well as the public, will bo aware of tho controversy going on about the Tate of exchange," said Mr. Hislop. "A mattor like that, in the ordinary course,is a purely business matter, but it has now apparently become a matter of political controversy because of the representations being made by tho farming community, and the methods being adopted. It seems to me, without in any way saying anything on the merits of the proposals, that the point to councillors and the public of this city is< what effect any very heavy increase in the rate of exchange would be likely to have on us. RENEWAL LOANS. "In 1932-33 we have to send to London, in the form of sinking funds, the sum of £424,500, and by way of interest £190,306. In the following year we have to send £213,500 in the way of sinking fund, and £131,170 in interest. In the next two years we have to send £638,000, in sinking fund and £324,476 in interest; that is to say, nearly a million sterling. If the suggestion be adopted—l do not want it to bo taken that I suggest that definitely in any way —if ita operation be such that the rate of exchange is allowed to rise to 125, instead of 110 as at present, the effect on us, looking at it from the point of view of citizens, will be a very serious one. An adverse rate of exchange of 25 per cent., and that is the. suggestion as far as one may read it, will represent the payment of £.240,619 in the next two years, or at the rate of £120,309 per annum. "I am not saying whether it will benefit the community as a whole—l do not know whether anybody knows that —bu,t we do know what the immediate effect will be on. ourselves. I think it is desirable that that fact should be made known. If the matter is to result in exchange going to 125, w- will have to find additional money to send sinking funds and interest to London at: the rate of £120,309 a year. When you come to think, our position is serious. Our entire rate is £508,000, and if wo have to find an additional £120,000 by way of exchange, you will have to increase the rate 25 per cent., or so cut down expenditure that you can do no work, and throw all your people out of employment. It will cost us a rate increase of 25 per cent. "I am only pointing out the effect on us if the Government of this country adopts the proposal. I know that to send Home sinking funds and bare interest to England will ' cost us £120,000. That will cost our ratepayers' an additional 24 por cent., to bo exact, more than they aro paying to-day, < I wish this to go out so that those who will be affected to that extent will consider whether or not they aro going to make any representations on their side against the representations made so widely by the representatives of the primary producers, who believe that tho community will benefit. They may be right; they may be wrong. We know what we will have to pay. It is an extraordinary thing to see representations made from all quarters which arc apparently going to bring about a high increase in the rate of exchange. We have an eminent Australian economist ... (A councillor: "Who is paying him?") who is telling ua what to do. No doubt his reasons will receive, the consideration ' they should receive, but in considering the. representations of the people who support him'l think it d'esirablo that tho' citizens' of Wellington should Know that if tho arrangement is made for exchange to go to 125, it will cost this city £120,000 more per year." ' ; ' Mr. Hislop further pointed put that as there was already an adverse exchange rate, of 10 per cent., the proposal would increase the exchange xaieonly by 15 per cent., and even if £80,000 additional had. to. be paid,' that, would represent-only 15 per cent, additional on the amount which would have to be sent under the present,rate of exchange of 110, but, as compared with the pre^ sent city rates, the ratepayers would have to face-an additional 24 per cent., which was ■ caused by the addition of £120,000 to tho existing rate. ■: MUNICIPAL DEBT OF DOMINION AFEECTED. "Not only .Wellington, City is concerned," continued Mr. Hislop, "for the1 whole _of the municipal debt of the: Dominion must- receive consideration from, the Government. What impresses me is that no public representations ; whatever have been made on the other side of the picture. It may be that it is in the long run for thebenefit of this city that we should have to pay another £120,000 per year in exchange, but I think it requires very? careful consideration before citizens will come- to the conclusion that in the long run they aro gong to be benefited—and they can only b& benefited if the country as a whole can be benefited. It requires very careful consideration before we can allow such a proposal as is now in the air to go through without protesting." If it does go through and the exchange is to bo 125 instead of 110 —and the chairman of the Associated Banks has said that the rate is a trifle higher than it should be now—then our ratepayers will haye1 to find 25 per cent. more. We should consider whether the municipalities of the country should not make themselves heard. Nothing has been heard from them so far, and the matter has already gone very far. STATEMENT TO BE PREPARED. Councillor C. H. Chapman agreed that the matter was one- for the most serious consideration. He suggested that a statement should bo prepared for submission to tho Government showing what would be tho effect of the proposed increase in the exchange rate on city finances. Further, he- thought that tho matter-' should be referred to an emergency session of the Municipal Association. The council was a little in the dark over tho matter, for it was a little difficult.. to assimilate such figures in a moment, but the obvious effect of an increaso in tho rate of exchange would bo an increase in city rates, and already it was difficult for tho council to collect rates.

The Mayor formally moved that such a statement should be prepared and that the whole question should be referred to'tho Municipal Association at a special meeting. This was agreed to. CANNOT FORWARD. MONEY NOW.

Councillor W. Appleton asked whether it would not be possible to get some of the money to London now: it would be good business to do so. The Mayor: "We' have applied, but wo cannot do so until it is required." Councillor Wallace: "The Harbour

Board sent money for the floating clock before it was required." Mr. Hislop: "Since tho rationing camo in you havo to get a permit; wo havo made- application, but they will not lot us send money until it is actually required. ''

Councillor Chapman suggested that tho Mayor should get into touch with the Harbour Board also in the matter. Mr. Hislop replied that ho would do so.

EXCHANGE INCIDENCE

MATTER FOll BANKERS

NOT ECONOMISTS OR FARMERS

(By Telegraph.—Press Association.)

AUCKLAND, This Day. Commenting on what he termed the "missionary work" being carried out in the Dominion in favour of high exchange rates by Mr. A. C. Daviclson, general manager of tho Bank of New South Wales, and his associate, Professor Copland, Sir Harold Beanehamp said it was significant that neither had converted tho rest of the executive officers of the trading banks or the directors of the Bank of New Zealand. The opinions of the two visitors wero based more on theory than on practice. Sir Harold claimed that rates of exchange and ' other banking matters should be left to the bankers, and that policies should not be dictated by economists or farmers who wero lacking in knowledge 'of the practical effect. If the exchange rate wero increased from 10 to 25 per cent. £8,500,000 would be taken from one section of tho community and placed in the pockets of tho farmers, while the disturbance of Government finance would be simply alarming. . Sir Harold also said that the directors of the Bank of New Zealand held the view that the conditions which in the immediate past had governed Australia were not applicable to New Zealand. He would point out that for some years Australia's imports'had exceeded the exports by £30,000,000 a year, whereas we had had an excess of exports.