EXCHANGE RATES

Hokitika Guardian, 10 November 1930, Page 7

EXCHANGE RATES

The adjustment in the exchange rates between the .Dominion and the Commonwelath probably will be regarded as the best solution of a. somewhat difficult problem. Business men in Australia, faced with the necessity of obtaining funds in London, were attracted by two conditions favourable to New Zealand.

One was that the rates ruling in London from here were lower than their own, and the other was that London balances on New Zealand account were in a better state than those reported by' the trading banks on Ausi tralian account. The result was a tenk. dency to finance dealings through New Zealand, the trans-Tasman operations representing purely' transfers, and not what are termed legitimate trade requirements. The course adopted by the banks will not add to the exchange rates on trade between the two countries, because for such purposes no further charge will be imposed, but it will enable the banks to make a clear distinction between trading and transfer business, and to exercise a strict control. Doubtless some interests will be adversely affected, but the only alterna- _ tive open to the banks would have been to have brought our exchange rates into line with those now in force for business between Australia and London, and that would have meant, a further impost on the business community here.

The action of tho hanks shows that it is possible to ensure the protection

of thp_Dominion to some extent, but, In our opinion, there is need for further action, designed to make certain t|iat London balances held on New Zealand account arc not used to .strengthen Australian credit at the cost of the Dominion. The banks trading in the C'onmimiweallii have undertaken to .provide a very large sum annually in London, in order that the Commonwealth may meet ils obligations, and with wool averaging about 8d per lb that may not be an easy matter.

The balance of trade between New Zealand and the Mother Country of late years must have provided fairly' substantial balances in London, and some assurance is wanted that these lands will be available for the financing of purely New Zealand business.