New Zealand’S New Exchange Causes Stir

In S. Pacific

Variations In £’s and Francs Provide Plenty of Headaches

riIHE sudden, unexpected move of the X New Zealand Government, late in August, in lifting the value of the New Zealand £ from par with the Aus tralian £ to par with Sterling (that is, an increase in the value of the NZ £ of 25 per cent.) caused a widespread dis turbance of all exchange relationships in the South Pacific.

It was at first assumed that Australia would follow suit. But Australia an nounced that she would stay where she was (that is, the Australian £ remains at 25% under Sterling). So everyone in the South Pacific countries who has any trad ing or financial relations with New Zea land began to make new adjustments.

Islands Territories affected included Fiji, Samoa, Tonga, Cook Islands, Norfolk Island.

To describe simply what has happened, the value of the various currencies in the South Pacific may be shown in terms of Sterling (the British £): Australia; The Australian £ is worth 15/- sterling; and, now that NZ has gone to parity with Sterling, and in view of Australia’s huge overseas credits, the Ausis the cheapest money in the South Pacific. The Australian £ was de preciated to its present level in 1931, dur ing the Depression.

Papua, New Guinea, Norfolk Island: Same as Australia, with slight local ad justments.

New Zealand: The NZ £ is worth 20/- Sterling. Since 1931, it had been worth 15/-.

Samoa and Cook Islands: Same as New Zealand, with slight local adjustments.

Fiji: The Fiji £ (125% under Sterling) is worth 17/6 (sterling or NZ) with slight local adjustments. It has been on this basis for some 15 years.

New Caledonia and adjacent islands, and French Oceania: The Pacific franc (about 160 to the Australian £) has been the basis of transactions in the Pacific The NZ £, formerly worth 160 Pacific francs, will now command about 200 francs. The French Metropolitan franc has been heavily depreciated (864 to the £ Sterling) and this may affect the Pacific franc.

Tonga: The kingdom, for years, has worked on its own local note issue, the value of which was based on Australian currency. All transactions were suspended when NZ exchange altered, and on Sep tember 1 Tonga still had not made up its mind what to do—whether to follow NZ to Sterling, or to remain on Australian values, or move half-way, to parity with Fiji.

The position of the trader in Suva (now the cross-roads of the Pacific) gives a good idea of the exchange embarrassments of a man in business in the Pacific. The Suva merchant has to work in no less than six currencies—Fijian, for home use; Sterling, for all transactions with Britain, New Zealand, Samoa and Rarotonga; Aus tralian for transactions with Australia and her Territories; Dollars, for all American transactions; Francs, for dealing with French Pacific colonies; and (in the case of Indians) Rupees, for the frequent transactions with India and Pakistan.

IT is known that the currencies of Australia and Fiji have been under close scrutiny and, in view of the good over sea trading position of each of those

countries, and the sound condition of their internal finances, it is expected by some good judges that they both will move presently to parity with Sterling.

It is possible, however, that Australia is awaiting clarification of the Sterling- Dollar relationship. It is argued that Sterling is not at its present level as the result of economic law (which should be the only basis of exchange) but is held there arbitrarily by politicians, in accord ance with Socialistic theory that thereby they can influence the cost of living. The Americans may yet break down some of these “controls.” Australia is also bound by an international agreement which does not permit her to alter her overseas ex change more than 10 per cent, without giving notice. NZ was not so bound.

Situation In Samoa

APIA. August 26.

THE alteration in the New Zealand ex change rate was received here with satisfaction. It is expected that American and Australian goods will be cheaper. Copra and cocoa producers will receive less for their products; but, as the prices are now very high, they will not suffer much, while the small people and wage earners will benefit.

Strangely, even now, a week after the announcement in New Zealand, no official instructions regarding the application of the new exchange rate to Samoa has been received here, and all financial trans actions are suspended in the meantime.

The bank here does not even accept New Zealand bank notes (Samoan exchange was brought into line with NZ on August 30. —Editor).

A lot of people, including many Samoans, got caught with hoarded dollar notes and are bound to lose, as under the new rate the dollar will probably be wortn only 4/9, instead of 6/-.