Exchange Problem.

Suggestions That £ Sterling Be Legal Tender in Australia.

THE downright statement that the problem of financial adjustments between Australia and Britain is not one of exchange, but of currency, has been made by Mr. W. R. Carpenter, head of the well-known Islands loading firm.

Mr. Carpenter has remarkable finan cial vision. It was he who, in 1930, pub licly urged that the only way to meet Australia’s growing financial difficulty was to lift the exchange rate on Lon don from the small, nominal figure then ruling to 20 per cent, or more. The idea was bitterly opposed, but it was done, and it saved Australia’s primary industries —our exports being greatly stimulated.

Now, the inevitable has happened.

Our exports, by sheer quantity, have provided funds to meet all Australia’s overseas commitments and —for the first time for many years—Australia is ac cumulating substantial funds in Lon don. The next step, of course, is to re duce the rate of exchange from the present 25 per cent. But, at the bare suggestion, the primary industries, and certain interests which formerly op posed the high exchange rate, are rais ing a furious clamour.

The reduction of the exchange rate would mean, of course, that much of the little remaining margin on such products as wool, wheat, copra, metals, etc., would disappear. Yet it is obvi ously impossible to maintain the pre sent exchange rate in the face of ac cumulating London funds.

Mr. Carpenter’s suggestion (set out in “The Sydney Morning Herald” of July 20) is that exchange be allowed to go free, to fluctuate according to supply and demand; that the British paper £ sterling be made the basis of the monetary system of the British Empire and thereby become legal tender within Australia; and that the value of the

Australian £ be permanently fixed at 12 or 15 English shillings, or whatever number was thought desirable.

“This,” says Mr, Carpenter, “would be a protection to the traders as well as to the Commonwealth Bank, for then, if money accumulated in London, sterl ing could be sent to Australia. It would

also take away from the banks the power to fix arbitrary rates between buying and selling 1 , for if the banks quoted excessive rates, then sterling would flow to Australia, and exchanges would fluctuate according to the bal ance of trade.”