The Waikato Times FRIDAY, MAY 15, 1936. EXCHANGE RATES

Waikato Times, Volume 119, Issue 19886, 15 May 1936, Page 6

The Waikato Times FRIDAY, MAY 15, 1936. EXCHANGE RATES

There must have been rumours in Wellington that the exchange rate on London might be raised, because the Prime Minister has renewed his asuii'anec that that step was not contamplated. There is no apparent. reason why there should be any rise. The oversees trading position of the Dominion has disclosed a substantial inargm ol‘ exports over imports, sutticient to cover interest commitments and the invisible imports, and as a result the holdings of sterling in London are still well over $20,000,000, and these are the things that usually control exchange rates. Any further advance would run counter to Mr Savage’s declaration that high exchange rates had a detrimental effect on the Dominion’s trade with Great Britain, and also to his statement that the rates would be reduced gradually. He recognises the difficulties in the way, and long before he is able to redeem the promise to make exchange available to traders at par Mr Savage will probably be willing to endorse the dictum of a. French banker, that the problem of international exchange is not one problem but a thousand.

The Prime Minister admittedly faces a real difficulty in this matter. During the election he stated again and again that guaranteed prices were the alternative to high exchange rates, and he advanced the argument used by practically all his supporters, that the high exchange rates helped the farmer most when he needed it least, and provided the least aid when it was most. required. The first instalment of guaranteed prices, for one section of the producers, has been authorised, the distinct promise made to those engaged in other branches of primary production being shelved indefinitely. Last November Mr Savage seemed to have an idea. that as one system was introduced the other could be gradually abandoned. Thosefin close touch with the position doubted the possibility of such a plan, and to-day it seems to have been jettisoned so that the Dominion has unchanged exchange rates and an instalment of guaranteed prices, and that position, too, was never anticipated.

There are many factors that will make it difi-‘ieult to reduce exchange rates, although the exceptionally wide powers now possessed by the Reserve Bank might be used to overcome some of the obstacles, and the Ministry may have to wait indefinitely for the day to arrive when any adjustment would be advisable. It could hardly he attempted until the guaranteed price system had been extended to cover all primary producers for any reduction of the exchange premium would deprive sheep and meat producers of part of their income, and the guaranteed price was plainly promised us .nn alternative. \Vith regard to high exchange rates it is becoming clear that the Hon. \V. Downic Stewart was right when he said that the Dominion was up a tree and that: the difficulty was to find a safe way down.