NEW ZEALAND FINANCE

Press, Volume LVII, Issue 17127, 23 April 1921, Page 12

NEW ZEALAND FINANCE

SYDNEY NEWSPAPER COMMENT. In an article on "New Zealand Finance,'' the "Sydney Morning Herald" discuses' the financial stringency in the Dominion and the measures taken by the Government to meet fthe situation by the Mortgages Exlfension Act. After referring to the main factors in causing the stringency, it goes on to' say that no doubt excessive taxation contributed towards it. "Last financi&l year income tax was collected from.New Zealand to the amount of ±'6,500,000, against ±13,336,000 collected in .Australia by the Commonwealth and states from practically five times' the number of people/. i Heavy as Austra.ians know their tax is, if New Zealand bad' been taxed on the same scale as Australia, the people of New Zealand would have paid about ±'2,600,000 less in taxation, or 40 per cent. less. They are now feeling that taxation, though it may result to their advantage later on, when, because of that taxation, there will be less loan money to renew." ■ Our contemporary .continues: —"Another cause of stringency has been brought about •by conditions which operate only to a smali extent in Australia. lii New Zealand it is a common practice to deposit, -money with firms, companies, and local corporations, because such institutions give a .higher rate of interest thajt do the bank*, l'he practice ■ has attained dimensions never experienced here, even in (the boom days before 1693. It- was the trading deposits, it will be remembered, which brought about the collarise of the building societies in the ewly 'nineties of the last century. In New Zealand all descriptions of institution? receive money at l call and on deposit for. short terms'. It is a favourable form of investment for co-opera-tive dairy companies, among others, of the higher rate of interest. Recently the institution? go receiving money on -deposit have found that withdrawals have far exceeded payments in. Whether the withdrawals were due to the depositors wanting money for their own business, or because they had their fears aroused because of the financial stringency is not clear. Probably both'causes were contributory to the demand on the receiving companies, firms, and loca* bodies. But the deposits so made were used in the business of the local bodies and other institutions, and the sudden and excessive . withdrawals unless money could be found to take their place! means, at the best, a'curtailment of business. So the local bodies, firma, and cormianies affected had recourse to the banks, calling upon them to make advances. The banks perforce had to grant the accommodation in order to keep up the applicants, and the drain on the resources of the banks was becomin| so evident that the quantity of credit available ,for the ordinary course* of commerce was threatened. In these circumstances very drastic legislation has been enacted in New Zealand." Then follows a reference to the Act providing for the\ moratorium on deposit moneys. The writer adds: "The Bill without amendment was passed through the House of Representatives the same day, and later passed through the Legislative Council. That such & condition of affaire (as described by Mr Massey) could come into being shows laxity on the part of the Governments, past and present, of New Zealand. It would seem, in spite o'f all the lessons of ;the past, that there had been' no restraint on anybody .assuming the function of a banker. In New South Wales any cornpans receiving, money on deposit, whether such company be a bwk or not, has to make ?. S?,^? erl X re , tnrn ° f it 3 average assets and liabilities of the quarter under review. Thus is known how much money is on deposit. It is known that a few firms here do receive deposits. Their statements are published in tha 'Goverorrfent Gazette.' together with those of the banks. If companies receive deposits, and do* not make returns, they are liable to a fine of £SOO. We know, too, (hat the City Council receives money on deposit. It might be well to extend the operation of the Act to all ''public bodies receiving such moseys."