N.Z.’S CAPITAL EXPORT

Sun (Auckland), Volume III, Issue 926, 20 March 1930, Page 10

N.Z.’S CAPITAL EXPORT

MUCH MONEY LEAVING FOR INVESTMENT RISE IN EXCHANGE RATES Special to THE BC.Y CHRISTCHURCH, Today. Remarks on the latest rise in the j rates of exchange between New Zea- ' land and London, made by Professor i A. H. Tocker, professor of economics j at Canterbury College, yesterday, show’ ■ that although the Dominion’s trade i balance last year was favourable, j payments from New Zealand exceeded | payments to New Zealand by j £ 8,500,000. “Apparently the further rise in rates of exchange on London indicates that the banks find it necessary to take still more drastic measures to stop the net outflow of funds from New Zealand.” said Professor Tocker. “In mid-February. 1929, bank deposits in New Zealand exceeded advances by £11,500,000: in mid-February, 1930, this excess had been reduced to a little more than £3,000,000, in spite of a recorded favourable balance of trade. It is apparent that payments from New Zealand have exceeded payments to New Zealand during this year by about £5,500,000. If this is so a severe strain is being placed on bank resources. “The higher exchange rates will tend to encourage the flow of money to New Zealand and to discourage the flow from New Zealand. They do not mean added profits to the banks. They are rather an attempt to correct a movement, the effects of which on the country as a whole must be decidedly adverse. “The present rates, however, are abnormally high—higher than they could be were New Zealand on the gold standard or had her currency been regulated to maintain approximate parity with gold, for if gold were available in exchange for notes it would be cheaper to ship gold from New Zealand than by exchange at the present rates. Moreover, the present situation is probably due rather to conditions in Australia than to conditions in New Zealand, and many people have wondered why the banks have not made earlier and more drastic changes in the Australian and New Zealand rates rather than in the New Zealand and London rate.”