MONETARY POLICY

Press, Volume C, Issue 29518, 20 May 1961, Page 16

MONETARY POLICY

“Tight Credit Will Continue”

Bank credit will be scarce in the months ahead as the trading banks “are now under great pressure to reduce their advances,” says Mr J. W. Rowe, research director of the New Zealand Bankers’ Association. Summarising the trading bank returns for April 26, Mr Rowe says that advances and discounts fell from £233m to £229m during April, but are still £s2m above the April, 1960, figures. “The March peak of £233m was affected by exceptionally heavy tax payments,” the statement says. “Advances and discounts are, however, still well above year ago levels owing to continued heavy importing and the generally greater tempo of business activity reflected in a sharp rise in cheque clearings. Unexercised Overdrafts “Unexercised overdraft authorities are now lower than a year ago but still substantial. This large reservoir of unused credit is one reason why banks cannot reduce advances quickly Although actual advances rose by £49m in the past year, bank lending policy is better indicated by the £4om rise in total credit limits. “The ration of advances to deposits this year is unusually high and the trading banks are consequently very short of liquid funds (overseas exchange and free cash). The Reserve Bank’s current policy is to maintain pressure on the trading banks through the reserve ratios and at the end of April the banks as a whole were borrowing £Bm from the Reserve Bank. Borrowings have since increased still further as a result of another increase in the reserve ratios. “Customers must therefore expect credit to remain tight as the banks endeavour to reduce their borrowings from the Reserve Bank,” Mr Rowe concludes.

Retrenchment At Newcastle (N .-Reuter—Copyright) CANBERRA. May 19 Three Newcastle firms yesterday announced staff' retrenchments to take effect at the end of next week. Courtaulds (Australia), Ltd., will give 71 employees a week’s notice on Friday, the Commonwealth Steel Company will dismiss 30 men from its Warabah plant, and Rylands Bros. (Australia), Ltd., will dismiss 22 men from its plant at Mayfield,