London Views Of Australia’s Exchange Policy

Grey River Argus, 30 August 1948, Page 3

London Views Of Australia’s Exchange Policy

LONDON, August 28 Reuter’s financial correspondent says; Well-informed London quarters do not support Australian conjectures that Australia will appreciate her currency to- parity with sterling this week-end or in the near future. They regard as open, the question of whether she will eventually do so. If the change were made, the decision would be made wholly in Australia and would be announced suddenly. The fact that the Australian wool selling season opens on August 30 is not regarded as warranting expectations oi action before then. If action came from London it could certainly not be expected this week-end or in the near future. Such London action could only take the form of aepreciating sterling against the dollar. Many believe that this may happen eventually. No well-informed quarter expects it in the near future. New Zealand’s independent action itself negatives any early expectation of sterling against‘the dollar. If New Zealand had seen any indication of that coming quickly, she would certainly have waited for it. Her independent action saddles her with undesired appreciation against the dollar as well as desired appreciation against sterling. Australia’s dollar trade is relatively more important than New Zealand’s and undesired appreciation against the dollar would thus be more serious for Australia than New Zealand. Leading British economists say the consensus of opinion is that depreciation of sterling* against the dollar should come eventually but not before the present world inflation turns into world deflation. That will not happen this week-end or in any near weekend.

The “Financial Times” says: New Zealand is in the fortunate position oi being able to use its stabilisation funds to apply the corrective to currency adjustment without causing the risk of severe dislocation of the country’s economic structure at any point. Australia is by no means so well placed because Australian exporters have oeen allowed to enjoy the full benefit of high overseas prices. As a result there is no way of reducing the impact upon them of a drop in the local currency proceeds af their overseas “Australia, moreover, has developed many secondary industries which might have difficulty in coping with the .intensified competition from overseas which revaluation would produce. It is a possibility that despite tax abtement, revaluation might severely discourage production, both for home and export, and that is likely to make the Australian Government hesitate before plumping for currency adjustment.