The Exchange Rate

Hawke's Bay Herald-Tribune, Issue 150, 13 July 1937, Page 7

The Exchange Rate

XC.

Sir, — "Farmer/ ' whoae letter appeared in your Saturday issue/ need have no fear of the exchange rate being lowered, lf the farmers were the only consideration they would be jettisoned without compunction. The Governmont is fully aware that the mesalliance between the small farmer and Labour is at an end, an-i that no bait will bc tempbing enough to induce a renewal. We must therefore look for other influeuces which prevent any alteration in the exchange rate. Probably the greatest ohstacle in the Government's oginion is the manufacturing industries. The largest Labour vote comes from that eection of . the eommunity, so the Government's solicitudo is easily un,derstood. Any reduction in the exchange is equal to a decrease in the prolective duties. You will remember the immediate incroase in p'rices when the exchange was raised, The rise had exactly the same eff ect as an increase of 1.5 pe'r oent. cn the tariff and the manufacturers took full and pr'ompt advantage of their opportunity. To bring the exchange back to par now means the loss of 25 per cent. proteetion and( with the enormously increased costs of manufacture this is utterly impossible if the factories are to remain in operation. There is, we are all aware, an insistent demand for fnrther proteetion from certain in-dustries, but here again the Government is in a cleft stick. Harp on the importanee of our seeondury industries how at will, tlie Jjabour Party cannot gct round the all-impor-tant fact that the primary exports are essential to our existence and to increase tariffs against the goods of our chief customer must sooner or later invite retaliation. The exehange, therefore, cannot be reduced. There is an alternative of course; the exchnuge can be raised if fuxther coddling of the manufacturer is decided upon, but a considerable doubt arises whether Britain would stomaeh even this expeQient. Another aspect of the question is our trade with Australia, The exchange betwo.en New Zealand and Australia is, for all practical purposes, at par, that is, £ N.Z. 100 fiquals £ Aust. 100, If we bring our exchange back to sterling, does that not mean that £100 of New Zealand money will equal £125 Australian currencyS? The balance of trade is millions of pounds in favour ofvA-ustra-lia at present; to what would it mount if our pound were worth 25/- on the other side of the Tasman? and how much would Australia bijy from us if her pound were worth only 10'/- here? By the way, I h'ave a distinet recolieciu n of our member, no doubt a weil-meaning soul_ when seek-ing election, assuring a questioner that the adverse trade balance with Australia would be promptly and elficiently dealt with by his party if it got into power. Perhaps he, like many more, has been sadly disillusione-d since then. — Yours, etp.,

Gentral Hawke's Bay, July 12, 1937.