GOVT. REASONS

Rotorua Morning Post, Volume 2, Issue 442, 28 January 1933, Page 5

GOVT. REASONS

PREMIER'S JUSTIFICATION. Wellington, Friday. After surveying the steps leading up to the Government's deeision to raise the exchange rate and after reviewing at length the finaneial position of the country, the Prime Minister, the Rt. Hon. G. W. Forbes, in the House of Representatives, yesterday outlined some of the advantages which in the opinion of the Government would accrue from the course that had been decided upon. Mr. Forbes s1:ated that he did not propose to deal in detail with the various arguments for and against the Government'd deeision, but said that members would be given ample opportunity for discussing the subject xvhen the Banking Ijidemnity Bill came before the House. "The national income and the national spending power will he proportionately increased," said the Prime Minister. "It is estimated that the proportion of costs likely to inerease with a rise in exchange is ! small. At the present time, industry and trade are being contracted and unemploymen^ h'as not deereased because much business cannot he eon-

dueted on a profitable basis. With production contracting as it is .at present beeause of maladjustment of costs and prices, a rise in exchange which increases prices more than costs will certainly tend to arrest the decline and may stimulate an inerease. "It may be urged that the primary effect of a rise in exi:hange is to inerease Budget experiditure through the inerease in the cost of overseas interest payments and to reduce customs revenue temporarily but the secondary and more important effect is to prevent an appreciably greater fall in taxable capacity and non-tax receipts. It is confidently anticipated that the nett benefit to the Budget from the inerease in exchange rate will not be long delayed. "The full effects of the present depression have not yet been fully felt, but it is quite certain that unless further adjustments are made, the national income and taxable capacity will fall further. It will be remembered that a short time ago I emphasised the opinion that the question of exchange was one that should be properly determined by the banks. Since that date and consequent upon a close examination |of the position, the Government came to the conclusion that the matter had become one of serious national importance and could not be left to outside agencies. Grave Emergeney. "If the country had been able to continue without an alteration in the rate of exchange, no one would have been better pleasec'i than myself, but in the history of all countries, grave emergencies arise when it becomes necessary for a Government to interpose and place upon its own shoulders the responsihility for the course of action it deems best in the interest of the country. What I stated on the occasion to which I have referred was my opinion in the lig'ht of conditions then existing. These conditions have unfortunately become more unfavourable and rendered action on the P'art

of the Government imperative. I recognise that the action of the Government in bringing about an inerease in the rate of exchange does not find favour with those engaged in the import trade and in other business circles, but I would earnestly ask those who are loudly criticising the Government to view the position from a national standpoint and eonsider what would happen if a policy of extreme deflation with all its attendant evils were to hold sway.

Two of the outstanding factors which appealed to the Government were the existence of a distressed farming community and the unfortunate position of the unemployed. Growth of Unemployment. It is indeed a sad state of affairs when 68,000 of our eitizens are out of unemployment at a time usually regarded as the busiest season of the year. When we remember that fact, I feel certain that the pressing nature of the problem must he brought home to everyone of us. I would ask our critics to regard the position in the same spirit as actuated the Government in coming to it-- deeision. If orthodox methods fail to find a solution in times of grave emergeney, then I claim that the Government is justified in resorting to other means in order to lighten the burdens of the people. I feel confident that with the stimulation which will now he given to both primary and secondary industries we may look forward to a gradua'l but certain absorption of a large number of those who are at present unemployed. The importance of this aspect of present conditions can, in the view of the Government no longer he ignored. There are those who hold different opinions from the Government in regard to the policy of raising the rate of exchange to relieve what all must agree is a very serious position but it is jthe responsihility of the Government to decide the course to be adopted. This we have done and we are confident that the wisdom of this step will ere long be apparent.