EARLY DEVELOPMENTS LIKELY

Evening Post, Volume CXIV, Issue 121, 18 November 1932, Page 8

EARLY DEVELOPMENTS LIKELY

EFFECT ON POLITICAL SITUATION

ATTITUDE OF CITY MEMBERS

. .The agitation among farming members of the House of Representatives for Government action in the interests of the primary producers has now crystallised into a demand for the raising of the exchange rate. The alternatives proposed by the deputation which waited on members of Cabinet have been definitely rejected, and there is every indication that negotiations are proceeding with a yiew to bringing about an early increase in the exchange level. The objective is 25 per cent, .above parity, and it is hoped in some quarters that the rise will take place within the next ten days.

There is no doubt that. events are moving swiftly, and possible effects on the political situation cannot be overlooked. Whileit is generally accepted that the high exchange lias.the approval of the majority of the members of the House,'it would' not be surprising to find that if an alteration is brought about the Government will be in danger,of-losing, the, support of at least five members who represent urban electorates. One or two of these members have made-it plain that they will leave no stone unturned to - frustrate any effort to peg the exchange^ at au artificially high rate. At the' same lime there are certain city members who, although' previously opposing a high. ' exchange, have . altered their , views and are now actively on the side of the farming element. A' notable exampleis an Auckland member, who contends; that New Zealand is essentially a -primary producing country and that as all other measures have failed they must look to the. manipulation of. the exchange ■as 1 the surest method of saving the country from bankruptcy and'collapse. ' ' r"UTTER LUNACY.".' In" .contrast to this, "'• another ■. city member supporting the; Coalition is of the^ opinion that the high: exchange policy is. "utter lunacy." He j adds emphatically that "if- the' Government allows itself to be stampeded into action along these lines I will be finished with them once and for,all." His greatest fears are that the increase will dislocate trade, force up the cost of living, thus- reducing the purchasing power of the wage and salary earners, and.create an intolerable overseas .debt, service. Another prominent city member who ,has given general support to the Coalition, but has not hesitated on occasions to follow the. Opposition into the lobbies" also took strong exception to any increase in the exchange. rate, and expressed the view that before anything was done the Government': should give members, of Parliament a full opportunity of discussing the whole.problem. He indicated that he would protest most rigorously against action being taken without reference to Parliament. This member mentioned the possibility of a change, being made before the.return to New Zealand on Wednesday next of the Minister of Finance (the'teon. W. Bownie Stewart), and said that if this were done it would be a most unfair action, especially .'as it was known that Mr. Stewart was opposed to a high pegged exchange. ..* . - NOT CONSULTED. Some resentment is felt by urban representatives that they were not consulted in reference to the deputation to Cabinet. It is argued that, all members of the Coalition' are. equally responsiblein helping the Government to carry out its policy, and. that sectional action.is detrimental to the welfare of the Coalition Party as. a whole. The members of the Coalition pledged themselves at the last General' Election to stand behirfd the' Government in its policy of rehabilitation, and it was regarded as being in the interests of all that there should be unanimity and openness in any course of action-. A MODERATE COURSE. While the rural members are unanimous that there should be a high ex.change, there is at least one member who favours a more moderate course .than is generally ■■ advocated. In his .view the exchange rate, as an experiment, should be fixed at 15 per cent, iabove par, and he holds that if the advantages claimed are realised tho rate should be further increased. However, the consensus of opinion among farmers is that the minimum.should be 25 per cent, above normal, and there is a small section advocating an eVen higher level. ■■ It is contended that the lowest a-ate at which internal costs could be satisfactorily adjusted was 40 per cent. OTTAWA AGREEMENT. It is understood that.one of .the problems encountered by the high exchange advocates in the preliminary discussion V.as the decision of the Ottawa Conference on monetary ■policy,- and- questions 3i^iye-been.raised as to the effect a high ■exchange would have. "Thos,e niem"bers representing primary producers," Stated one member interested,' "realise ■the benefits that have followed, and will result from, this trade pact, and I tan assure you,that we have gone fully into this.aspect." He pointed out that jthe, monetary and financial-committee of the Conference had considered the /question of exchange, and in its report at had inserted the following paragraph; which had been adopted:— "The Conference recognises the great Oniportance to traders of stability of rates over as wide an'area as " ThVcomplete solution of this problem must await the restoration of conditions for the satisfactory working jof an_ international standard. In the bneantime, and pending such a solution, |the Conference has considered the possibility of achieving valuable results Jin two directions—first, by creating an Sarea of stability among countries re(jgulating their currencies in relation to fcterling; and second, by avoiding wide jjday-to-day fluctuations between sterling Jand g01d.... . . There are, however, jeeveral conditions precedent to the re|jestablishment of any international [monetary standard. The most 'important among them are: A rise in the general. level of commodity prices in the various countries to a height more an keeping with' the level of costs, including the burden of debt and other feed and semi-fixed charges; and an adjustment of ' the factors political, economic, financial, and monetary which fcave' caused the breakdown.of the gold standard in many countries, arid which, sf not adjusted, would inevitably le/id to another breakdown of whatever international standard may be adopted. COUNTRY?S SOLVENCY. He contended that from this New Zealand, in .raising, the exchange (level, would be acting in the interests of both the Empire and the Pominion. It was of paramount Smportance to New Zealand's oversea 'Jcre.ditors that the solvency of the Do.jminion should not be endangered. There Vas no doubt that New Zealand should follow the example of Australia and tolace her economic position on a sound fend secure basis. Even England had

realised the futility of clinging to an international standard at the risk of internal instability and impoverishment, he" concluded.

Considerable interest is being manifested in Parliamentary circles in cabled advice from- Australia received by a member in.reply to an independent inquiry as to whether the high exchange had been of definite advantage to the-Commonwealth. The sender of the message, tho head of one of the largest trading and manufacturing concerns in New South Wales, replied:— "Definitely to the advantage of Australia. It has stabilised prices, particularly primary produce, it increased purchasing power, and the only question is whether the rate should be increased further." - .