The Guardian And Evening Star, with which is incorporated the West Coast Times FRIDAY, NOVEMBER 4, 1932. EXCHANGE AND STERLING.

Hokitika Guardian, 4 November 1932, Page 4

The Guardian And Evening Star, with which is incorporated the West Coast Times FRIDAY, NOVEMBER 4, 1932. EXCHANGE AND STERLING.

The change ill the exchange rate should have a considerable influence on trade within the Empire, and make it much harder for the Uinted States trading. New Zealand's exchange rate with the United Saai.es was even more unlavourable to the States than was Great Britain’s. Tne danger lacing the New Zealand l manufacturer' who took advantage of currency depredation to extend, his business- is emphasised -by its precarious nature. Trade conditions have been materially laffecited by the fall in sterling, which had had an unsettling effect generally. At the present time fairly large shipments cf goods are coming from the United States and Oanadla, and on some lines the landed costs were l.kdy to be considerably higher than anticipated'. T'his extra cowi would ultimately find its way to the consumer, depending largely on the amount of local stocks held, A substantial' proportion of American and Canadian goods ordered for the summer season and Christmas trade was already op the water, and the bearing the fall in sterling would have on the purchases would depend on whether the contract terms required payment at the time of 'shipment or on landing in New Zealand. It was stated that the general opinion was that the higher costs would he reflected shortly in higher retail prices for 1 seasonal goods, A tendency towards a .rise in the prices of New Zealand’s exports is predicted in some opinions. Since the pound sterling was worth Ims i abroad than before, the price of imports into Great Britain and the.ii general price level tendied to rise in terms cf sterling. This should be reflected in'improved prices of Dominion produce, since New Zealand currency remained at the constant relation of 10 per cent, below Brit.sh currency. A tendency towards higher prices had been in evidence from the same causes since Great Britain went off the gold standard. It,,is not wise to assume that the prices of New Zealand exports to Britain will rise correspondingly with a. fall in sterling, according to one man. ‘The rise in prices in Great Britain would not be immediate, and . did not depend directly on the movement of the exchange rate. There were many .factors, including the accumulation of stocks of imported materials, wh-oh made it unlikely that all prices would rise simultaneously or that any rise would be in direct imserve proportion to the fall of sterling. Thug the depreciation of the currency tended in the short run to give an advantage to the exporter, and thus the British manufacturer generally., reaped the 1 advantages of the change. In the course of time, ' howeyef, when all adjustments were made, there was a tendency for the rise in prices to diffuse itself over the whole range of goods. The effects of the fall in sterling would depend greatly" on the causes of the fall. The recent depreciation might be, due to abnormal seasonal transfers of funds from Great Britain, in which case its effects would be merely temporary. On the other hand, the change might be due to the withdrawal of funds owing to foreign stock-holders being obliged to meet their commitments at home. In this' the heavy withdrawal might not be due to any lack of confidence in Great Britain, but to serious financial troubles in other countries.