"FORCED ON US"

Rotorua Morning Post, Volume 2, Issue 450, 7 February 1933, Page 5

"FORCED ON US"

("Post" Speeial Commissioner) .

pegged exchange MR. COATES DEFENDS FIXING OF ARTIFICIAL RATE COMPARISON WITH BRITAIN "

Wellington, Monday. Replying in a statement to-night to the critics who have deelared that New Zealand's decision to inflate the exchange was unwarranted hy tlxe circumstances, the Minister of Finaxxce, Rt. Hon. J. G. Coates, deelared that the Dominion was aetually forced to take the course adopted just as Great Britain was forced to go off the gold standard. He said that there was no hope of the rate being brought down until overseas prices reeovered, adding that , it was high time the agitation was allowed t.o drop. ^ "In the course of the controversy arising out of the altered exchange rate, an argument which is being stressed is that . the course recently taken by -New Zealand was 'artifieial' and that the new rate is 'unnatural'," Mr. Coates said. "In keeping with this view, a distinction is drawn between Great Britain's departnre from tlxe gold standard and New Zealand's increased exchange rate. It is obvious that in many respects the results of oxxx* action in New Zealand and the results of Great Britain's action are vex*y much alike. "But, it is ohjected, 'Britain was forced off the gold standard.' Is the distinction really valid? I think not. Forced Off Sterling "New Zealand was forced off sterling just as Great Britain was forced off gold, only the details were d'ifferent," he said. "Great Britain's financial structure was subjecied to severe strain as evidenced by the outflow of gold — - a strain which, in the judgment of the British Government, was too great to be borne. "Th"e British Governxnent and Parliament took the responsibility and it is embodied in legislation for surrendering the gold standard . This, to all intents and pxxrposes, lxxeant that , the exchange rate rose against Britain — her importers were placed at a disadvantage and her exporters were benefitted. New Zealand's probleixx was similar. Industries Imperilled "Insofax* as there was severe strain on our economic structure the xnajor industries on which the whole economic life of the country depends were iniperilled by the. continuing shrinkage of receipts. These difficulties in our case could not be manifested xn any gold movements. We were already off the gold standard. The considered judgment of the Government in the light of the best and most complete evidence we could gathex* was that tlxe economic conditions necessitated an increase in the receipts of the produeers aixd we could find no satisfactory means of bringing this about other than by the means adopted. Forced' to Act "It is clear enough that both Great Britain and New Zealand were — if we like to use tlxe word — 'forced' to act as they did by the force of economic circumstances. "The final step was taken deliberately and this was true of the decision taken by the British Government as well as of that taken hy our own Governxnent. To pretend that one was voluntary and the other forced, is only playing with words. "It is high time that the controversy and agitation, itself in no small part 'artificial' in regard to the exchange rate, was allowed to drop. The effect is merely to add to the uncertainty on the part of those who think, withoui any jus- • tificafcion, that an early fall in the exchange rate is likely. "It is not in any degree likely, and will not he likely unless and until prices at tlxe other end of tlxe world show a suhstantial recovery ox* unless other circumstances clearly warrant it. This being so, it is reasonable that businessmen and the community generally should carry on their normal business activities and any withholding* of orders would, I think, be unwise. "After a time, but not at present, it will be possible for all of us, in the light of experience, to judge the main consequences of the ixxcreased exchange rate. Unhelpful Criticism "To-day, extravagant criticism on the score that the course chosen was 'artificial,' is unhelpful and unsound. Such criticism may, with some show of logic aixd consistency, come froxxx those who hold rigidly to the negative. and doctrinary attitude of laissezfaire and who believe that the proper role for the Government is one of mastex'ly inactivity."