THE DOMINION’S TRADE

Hokitika Guardian, 14 January 1932, Page 2

THE DOMINION’S TRADE

OBLIGATIONS IN LONDON

(By Tilegraph—Per Press Association)

WELLINGTON. January 13

The problem of the external trade of the Dominion in the light of the recently gazetted Order-in-Council, establishing an exchange credit pool has prompted much speculation. It is pointed out that as the Government is under an obligation to find £14,000,000 in London this year, every increase of one per cent, in the rates of exchange on London will cost the Government £140,000 per annum, and this additional cost would, of necessity, be found by the people of this Dominion in the shape of higher taxation.

Remarking that for the 11 months of 1951 ended November 30th the Dominion's exports were vaiued at i£31,814,000 Mu New Zealand currency and the imports at £32,01J,uX) .st.rl.ng, a Wellington authority said that in order to ascertain the true position ot overseas trade it was necessary * to express the value of exports and imports in the same cunency, and as a matter of convenience sterling would be adopted for the purpose. On a sterling Has is, our exports valued at £31,314,000 in New Zealand currency would produce approximately £29,109,000 sterling of English money. 'lnerefore our favourable trade balance, expressed in sterling, or eleven months of inst year, was £6,'j30,000. That was, of course, not taking into consideration any capital movement or “invisible’ exports and "invisible” imports.

Tie continued: 'On the assumption, Vi the absence of any official information to the contrary, that the Government has previously ln-t its interest payments on our external debt by bnirowing in London and has not utilised the excess of exports for that purpose, it i s evident that as the Government and local bodits now require £14,000,000

■ his year from proceeds of the seasons products in meet commitments ! in London. there will be considerably loss funds available for the puipo.se of financing our. export trade.

Granted that the value of our exports this year will be in the vicinity of £30,000,000, the Government’s and local bodies’ requirements, to meet interest on our external debt and tor repayment of principal in London, from the fund created m London as a result of the realisation of our exports will total £14,000,000, leaving £16,000,000 to 1 finance our export trade, which for the eleven months of last year demanded £25,000,000. That means that a contraction of imports is inevitable, with a consequential burden on the Budget owing to a decline in Customs revenue. Higher direct taxation is obviously imminent, nniess steps are piWiptly taken, a s . they should be, to offset, by rigid economy and a substantial reduction in expenditure, the anticipated decline in Customs revenue.

“It is imperative that every means must be availed of to keep expenditure to a minimum and reduce this item wherever practicable, but those

who advocate high exchange rates on London as a palliative ior our economic ills are, in effect, ‘robbing Petei

to pay Paul,’ and, moreover, the effect would be that higher taxation would need to be imposed by the Government to assure Budget .equilibrium, “So that the Government may meet its commitments -in London this year, totalling £14,000,000 it will be necessary to find £15,400,000 if the existing,exchange rates on London are maintained and that means that the Budgut is charged with £1,400,000 in respect of exchange. “The argument for a higher exchange rate -on London cannot, in v lew

of the facts, be sustained. If the exchange rates on London were peimitted to reach higher levels considerable difficulty would be experienced in bringing them back to normal, and this statement is substantiated by Australia’s unenviable experience of high and unprecedented rates of exchange on London.”