REACTION IN EXCHANGE

Hokitika Guardian, 7 March 1931, Page 6

REACTION IN EXCHANGE

AUSTRALIAN COMMENT. Discussing the reaction in exchange rates which eliminated the outside market and brought the rates down to the hank official rates, the February issue of the “Australasian Insurance and Ranking Record,” on the question ol the tendency to flight of capital from tiie country says that for those who desire to remove their capital from the country there are two obstacles to overcome. In the first place, the realisation of assets within Australia would, as a rule, involve a substantial loss as compared with prices ruling a year or two ago or with the original cost of the assets. In the second place. ! the present- adverse rate of exchange would mean a still further loss. So that the idea of transferring capital is by no means attractive, and the balance of advantage is oil the side of retaining capital within Australia, with trust in an improvement of the economic conditions and in the level headed character of the public, which docs not favour such extreme proposals in matters of finance as have recently been ventilated in political circles. A real improvement in the situation would he accomplished bv action on the part of all Australian Governments to effect financial reform in accordance with the. resolutions passed last August. The question of a substantial improvement in exchange and an ultimate return to the gold standard. however, presents difficulties of its own. for experience has shown that descent, is easy, hut recovery apt to he a lengthy process. The effects of the adverse movement during the past year are being felt in directions in which hitherto the question of exchange lias not needl'd consideration. Now that it lias become clear that British, Australian, and New Zealand currencies are three distinct tilings, it is becoming necessary to recognise the difference between them in matters which do not consist of mercantile j transactions in goods, including such matters as oversea shipping freights, [ marine insurance, (he transfer of life assurance policies from one register to j another, especially when loans are 1 granted on tlie security of the policies | Irotn one register to another, especially when loans are granted on the security of the policies, and the transfer of shares in companies to and from Australian registers. The position of exchange, moreover, is to the disadvantage of Governments and others in

making external payments of interest while they receive their revenues in Australian currency, the disadvantage being of the same character as that experienced by the Indian Government during tlie period when (lie rupee was declining from its original level. The ouestion is sometime* asked: AY ho obtains the benefit of the present rates 4, Tlie answer is supplied by tlie coip'se ol sucli markets as those for wool and wheat, shippers of which are enabled to pay so much more money, expressed in Australian currency, the position of exchange being reflected in prices of commodities.