HIGH EXCHANGE

Hawke's Bay Herald-Tribune, Issue 153, 16 July 1937, Page 5

HIGH EXCHANGE

-Own Correspondent.)

Reserve Bank's Attitude Questioned EFFECT ON STERLING

(By Telegraph-

AUCKLAND, Last Night. The rate of exchange was diseussed at a meeting of the Auckland Chambor of Commerce this morning, when Mr J. Hislop moved that the Reserve Bank should be asked to justify the demand made upon the holders ,of its notes of 24$ per cent. as the rate necessary to eifect the exchange of the notes with sterling pounds. Mr Hislop said that the question was one of great importance to the whole of the community. He contended that the Reserve Bank had no legal authority to make the demand. From 1904 to 1930 the New Zealand pound had never lost its value to a greater extent than 5 per cent., and it was only at a discount on three occasions in those years. It was not due to the gold standard. Immediately the Eeserve Bank began to function the rate was fixed at 25 per cent. There was not a scrap of authority in the legislation to justify the Eeserve Bank devaluing the New Zealand pound by 25 per cent. Fool's Paradise. Mr Hislop said that they had been living in a fool's paradise. The secondary industries of New Zealand were being driven off the markets by the Australian jndustries, and they could not get any help until the value of the pound was restored to sterling parity. Then the New Zealand manufacturers' costs would drop by 33 1-3 pOr cent., and it would be added to the purchasing power of tlie people of New Zealand. In 1931-32 Australians found themselves short in London pf fifty odd millions eredit, and at the time New Zealand had a eredit of fourteen millions there. Had New Zealand gone back to sterling parity she would have come into line with South Africa, India and Canada. The cost of exchange was shifted to New Zealand and they were fools to accept dt. Devaluing the Pound. Continuing, Mr Hislop said that it was never done to assist the New Zealand farmer, but they had to be made use of for propaganda purposes to devalue the New Zealand pound. Mr J. A. C. Allum said that the English pound was no more sterling than the New Zealand pound. It was "put over them," as it was in New Zealand. The New Zealand pound was only worth 10/- against the price of gold. There had been juggling with currency all over the world. If the exchange rate had not been fixed there would have been partial repudiation. If they attempted to go back to true exchange they would have to face direcf taxation, which would cause an uproar. It was doubtful if Australia would follow, and they would be swamped by Australian inanufactures. If New Zealand alone tried to alter the situation it would cause chaos. Mr B. Kingston said that if it, wero wrong in law the only way to test it was for Mr Hislop to sue the bank and contest the matter in Court. "Beating the Alr.,# Mr Gaiuor Jackson said that ho was afraid that the resolution was "only beating the a4r. " "Have we anything to gain by holding an inquest on this alfair?" asked Mr W. B. Darlow. He added that h« understood that all exchanges were determined by community value. Not many wanted a return to parity. Speaking in reply, Mr Hislop said that a return to sterling was the only salvation for New Zealand. The president, Mr W. E. Fee, said that the Eeserve Bank was praetically a State Department, and the matter was more or less political. They could preserve their dignity more by not asking a question when they already knew the answer. The motion was lost.