RISE INEVITABLE

Evening Post, Volume CXV, Issue 31, 7 February 1933, Page 8

RISE INEVITABLE

THE EXCHANGE RATE

MR. COATES'S VIEW

AGITATION SHOULD CEASE

The opinion that it was high time the agitation against the high exchange was allowed to drop was expressed by the Minister of Finance (the Right Hon. J. G. Coates) in a statement issued last evening. He refuted the suggestion that the rise was unnatural, and said that New Zealand was forced to act just as much as England had been forced to abandon the gold standard.

"In the course of the controversy arising out of the altered exchange rate, an argument which is being stressed is that the course recently taken by New Zealand was 'artificial,' and that the new rate is 'unnatural,' " said the Minister. "In keeping with this view, a distinction is drawn between Great Britain's departure from the gold standard and New Zealand's increased exchange rate. -It is obvious that in many respects the results of our action in New Zealand and the results of Great Britain's action are very much alike. But, it is objected, 'Britain was forced off the gold standard.' Is the distinction really valid? I think not. New Zealand was forced off sterling, just as Great Britain was forced off gold. Only the details were different. Great Britain's financial structure was subjected to a severe strain, as evidenced by the outflow of gold—a strain which, in the judgment of the British Government, was too great to be borne. . The British Government and the Parliament took tho responsibility, and it is embodied in legislation, for suspending the gold standard. This to all intents and purposes meant that the exchange rate rose against Britain, her' importers were placed at a disadvantage, her exporters were benefited.

"New Zealand's problem was similar

m bo far aa there was a severe strain on our economic structure. The major industries, on which the whole economic life of the country depends, were imperilled by the continuing shrinkage of receipts. These difficulties, in our case, could not be manifested in any gold movements. We were already off the gold standard. But the considered judgment of the Government, in tho light of the best and most complete' evidence that we could gather, was that economic conditions necessitated an increase in receipts of producers; and we could find no satisfactory means of bringing this about other than by the means adopted.

"It is clear enough that both Great Britain and New' Zealand were, if we like to use the word, 'forced' to act as they did. The force of economic circums.tances was there, and it was inescapable.' At the last moment, no doubt, the final step was taken-de-liberately, and this" was true of the decision taken by the British Government as well as' that taken by our Government. To ■ pretend that one was voluntary and the other forced is only playing with words.

"It is high time that the controversy and agitation—itself in no small part artificial—in regard to the exchange rate, were allowed to drop. The effect is merely to add to the uncertainty on the part of those who think, without any justification, that an early fall in the exchange rate is likely. It is not in any degree likely, and will not be likely unless and until prices at the other end of the world show a substantial recovery, or unless other circumstances clearly warrant it. "This being so, it is reasonable that business men and the community generally should carry on their normal business activities, and any withholding of orders would, I think, be unwise. "UNHELPFUL AND UNSOUND," "After a, time, but not at present, it will be possible for all of üb, in the light of jexperienco, to judge the main consequences of the increased exchange rate. To-day, the extravagant criticism, on the score that the course chosen was 'artificial,' is unhelpful and unsound. Such criticism may with some show of logic and consistency come from those who hold rigidly to a negative and doctrinaire attitude of laissezfaire, and who believe that the proper role for the Government is one of masterly inactivity. "But most of us believe that when the country is faced with the huge task of,. readjustment that faces it to-day, the Government must; take an active part in assisting the process of adjustmen. When this ■■ latter. view: is accepted, the objection raised on the mere pretext that the action is artificial is seen to be self-contradictory and futile." NEW ZEALAND FUNDS. Questioned concerning a cablegram published yesterday, in which the "Financial News" was quoted as stating that considerable speculative demands for New Zealand funds were reported as a result of the passage of the Banks Indemnity Bill in the New Zealand House of Representatives,. Mr. Coates said "the Government agent, the Bank of New Zealand, had made full investigation into the possibilities of speculative buying being- undertaken. He said the Government had the matter well in hand, and there was no fear of anything of the nature suggested by the London cable.