CO129-555-2 Estimates 1936 30-8-1935 - 29-1-1937 — Page 72

E:CA.

COPY.

42/36/25.

Sir,

CONFIDENTIAL.

Enclosure No.2.

19th September, 1935.

72

I am directed to acknowledge the receipt of

your Confidential letter of 18th September forwarding the

suggestion of the Unofficial Members of the Legislative Council that a forward contract of exchange to cover possible deficit, so far as Sterling commitments in 1936 are concerned, appears desirable.

As explained by His Excellency the Officer Administering the Government in a conference with you, Sir William Shenton and Dr. Kotewall this morning, this important matter was fully oonsidered by the Government when the pre- sentation of the Budget for 1936 was being discussed and it was decided by Sir Thomas Southorn, in consultation with His Excellency Mr. N.L. Smith as Colonial Secretary and the Colonial Treasurer that for the reasons given confidentially to you to-day it was not desirable even to ask the Secretary

of State to sanction such a transaction.

The assumption contained in your letter that the rate of the dollar is likely in 1936 to fall considerably is not one on which the Government is prepared to act at the present time. Your hypothesis that such a movement is likely

appears to rest on the assumption of direct action by this

Government; to fix exchange at present would in the opinion of Government only give rise to the expectation that some such

action is in contemplation; and further if such action were

later found to be necessary it would hardly be possible to

avoid accusations of bad faith by the other party to the

The Honourable

Sir H.E. Pollock, Kt., K.C.