RESIGNATION OF DOWNIE STEWART

Rotorua Morning Post, Volume 2, Issue 434, 19 January 1933, Page 5

RESIGNATION OF DOWNIE STEWART

("Post" Special Commissioner,)

SERIOUS SPLIT IN COALITION CABINET EXCHANGE RATE AND INTEREST REDUCTION

. Wellington, Wednesday. All the ingredients of a first-class political crisis are at hand, and ' when the House of Representatives meets on Thursday next events may develop with sensational rapidity. Since Cabinet commenced its deliberations after the New Year holidays, there has been a lack of unanimity on the policy which is to be presented when Parliament ' resumed and the elimax was reaohed on Monday when the Minister of Finance (the Hon. W. Downie Stewart) handed his resignation to the Prime Minister (the iRt. Hon. G. W- Fprbes). In political circles there has never been wilden excitement and there is no douht that the leaders of the Coalition are bewildered and dismayed by a situation which in some quarters is regarded as extremely ' precarious.

The two points on which the split has taken place are the exchange rate question and the rumoured decision of the Government to impose a further statutory reduction in interest r'ates. Both questions have, been live issues for some months and strong pressure has been vested in Cabinet by members of the Coalition representing rural constituencies to peg the exchange at an artificially high leyel and'to lessen the burden of fixed changes. On November 16 a deputation of 30 members headed by the Hon. A. D. McLeod (Government, Wairarapa) and My. C. H. Clinkard (Government, Rotorua), presented what was described as a minor ultimatum to their leaders to take drastic action in the interests of the primary producers. The four alternatives submitted by the deputation were : — (1) Another cut in wages, salaries and interest charges; (2) payment of a bounty to the farming community; (3) a high pegged exchange; (4) re-establishment of a moratorium. It was, of course, made clear that the proposals were in the nature of alternatives and the principal objective was the high exchange. A Tense Situation During the next few days the lobbies were seething with excitement and rumours, and the situation became tense when the urban members of the Coalition, headed by Messrs. A. J. Stallworthy (Government, Eden), and R. A. Wright (Government, Wellington Suburbs), consolidated the forces of the anti-exchange inflationists. Parliament buildings became the scene of all sorts cf negotiations, and conferences with the Opposition standing aloof. Throughout the proceedings the Prime Minister and the Minister of Public Works, the Rt. Hon. J. G. Coates, adopted somewhat vague and evasive attitudes. Both stated that the position was entirely a matter for the banks, and when the Associated Banks decided that an artificial exchange did not come within the scope of their practice it seemed as if the exchange inflationists had received a permanent set-back. They did not admit defeat, however, and there was some heart-to-heart talking during a Coalition caucus. As the r-esult of the caucus it was decided to adjourn the House in order to give Cabinet an opportunity of formulating a policy which would place the primary producers on a more st'able basis. Mr. Sfcewart's Views During the whole of this period the Minister of Finance (the Hon. W. Downie Stewart), was absent from New Zealand. He had proceeded from the Ottawa Conference to London, and it was significant that when he returned he was presented with a memorial from a group of urban members protesting against the high exchange proposals. It was wellknown that Mr. Stewart had been the means on a previous occasion of preventing a determined move, to peg the exchange at a high level, and there was every reason to believe that he had not changed his views. In fact it is authoritatively stated that he was in favour of linlcing the New Zealand exchange at par with sterling as soon as the trade- position warranted such move. Mr. Stewart has also been rigidly opposed to any statutory interference with interest rates, and it will be re-

membered that it was with extreme reluctance that he allowed himself to be id.entified with the National Expenditure Adjustment Act, of 1932. During the discussions on the measure he broadly hinted that he was supporting the Bill more out of loyalty to his party than to his principles and there is no doubt that this has been a sore point in Cabinet circles for some time. Interest Rates In replying to deputations during Mr. Stewart's absence abroad, Mr. Forbes repeatedly asserted that interest on other fixed charges were intolerably high and would have to be brought d own, and it was also a matter of common knowledge that he was speaking- for the majority of his colleagues. From tliese facts it can easily he sgen that unless views were modified there was grave danger of a parting of the ways between Mr. Stewart and his colleagues. Apparently a stalemate has been reached, and the upshot is that Mr. Stewart's resignation is now in the hands of the Prime Minister. In fact it is stated' on most reliable authority that Mr. Forbes received the resignation of the Minister of Finance at 6 o'clock on Monday evening. Since then Mr. Stewart has not attended a meeting of Cabinet and now that the news has leaked out the public is anxiously awaiting an announcement from the reticent leaders of the Coalition. Strange Silence "I cannot commertt," was Mr. Forbes' reply to a direet question tonight and Mr. Coates also refused to be drawn. Mr. Stewart was next approached and he advised the "Morning Post's" Commissioner to eonsult the Prime Minister. The attitude- of all concerned is baffling in the extreme, but is only in keeping with

the shilly shallying policy which has characterised the Cpalitiop's tenure of office. In some quarters it is stated that the member's resignation is figurat-

ively a bombshell as far as Cabinet is concerned, and that the leaders are hoping against hope that the most able ahd most well-informed of the Ministry may be persuaded to withdraw his ultimatum. It seems obvious, however, that Cabinet will have to change its rumoured intention of carrying out a policy of exchange inflation and lowering the rate of interest by act of Parliament. It is confidently stated that the majority of Cabinet has practically decided to peg the exchange at 25 per cent. above par and to make a further eompulsory reduction in fixed charges, and that it was as a result of this decision that Mr. Stewart decided to withdraw from the Government. Thus it can readily be seen that there must be a definite somersault on the part of one side or the other before the breach can be healed. It is impossible to gather so far whether Cabinet has considered Mr. Stewart's resignation, but it is authoritatively understood that Mr. Ste-, wart has not been present at Cabinet meetings since Monday night. However, he has been working in his office, but there is no significance in this fact as every minister has a great deal of routine work to do, and it is unlikely that Mr. Stewart will relinquish his duties until his resignation has been definitely ac- , eepted. I