BANKS MAY YIELD

Evening Post, Volume CXIV, Issue 121, 18 November 1932, Page 8

BANKS MAY YIELD

FORCING THE PACE

BUSINESS FIRMS ANXIOUS

Public interest in the action taken by certain members of Parliament to induce the Government to come to the financial aid of primary producers, and that at once if possible, is just awaking to realisation of the effects on the community as a whole if the rate of exchange New Zealand on London is artificially raised from its present 10 per cent. rate.

Importers are gravely concerned at the probability of the banks as a whole giving way under pressure from within and without.

A Tate of 25 per cent, has been stated as the objective, but 30 per cent, and more has been mentioned as the rate to be aimed at, if the producers can get it. . ' . ■

A subsidy to farmers exporting was suggested fully six months ago. This subsidy, of course, Avould have to come out of the public funds. A Government loan of £5,000,000 was mentioned, the rate being 5 per cent. This was put to a meeting of some members of Parliament who 'had. waited on the general manager of the Bank of New Zealand, Sir Henry Buekleton. But it is understood that neither the members nor the GoVernmentvwere attracted by the idea.' .

The next alternative suggested was for the banks to raise the rate of exchange New v Zealand on London. On that point the banks, with one exception, have hitherto been agreed that the current rate of 10 per-cent, was hardly justified by the present condition of the money market, the necessity for pooling funds in London to meet Government, and local body requirements for funds there having been met for the time being; in fact the "outside" market for exchange of late has actually been under the banks' rate of 10 per cent.

From, inquiries made by "The Post" to-day it would seem that the banks may be forced to yield to raising the rate.

The Bank of New South Wales has not been averse from an advance in the rate, and indeed, it, took the initiative in Australia. The attitude of the other banks as-separate institutions it is difficult to describe. Sir Henry Buekleton, as general manager of the Bank of New Zealand, when asked today for his view on the raising of the rate of exchange, said the matter would come beforo a special meeting of the board of directors of the Bank for Monday next. The directors of the bank are Sir George Elliot, Sir Harold Beauchamp, Mr., William Watson, Mr. E. W. Gibbs, and Mr. R. A. Anderson.

Sir Harold Beauchamp is not in New Zealand, but he is due in Wellington from London on Wednesday next.

The Minister of .Finance, tho Hon. W. Downie Stewart, is also due in Welington on his return, from London ou Wednesday next. •

The reasons given by the majority of, the banks for not increasing the- rate havebeen published from time to time, and it may be of general interest to reiterate that they were summed up in seven words: inflation is "against the best interests of the community." Other reasons that have been stated and that may be repeated are that for every £100 the Government will require to meet; in London the public of New Zealand will have to provide £130, if the; 30 per cent, rate is fixed as hoped for by the advocates for an increased rate. The local body obligations that have to be met in London will require increased payments in the same way. It has been estimated- that the increased cost to the country for the provision that will have to be, made to meet Government interest payments and incidentals in London will be £1,800,000; the cost to local bodies with interest.and other obligations to meet in London will increase by £400,000. .

Many importing houses will be forced out of business. Their staffs will go to swell the ranks of the unemployed, and,will have to be provided for by increased taxation for unemployed. Income tax paid by importing houses will be lost. This has been estimated to' amount .to at least £500,000. Customs revenue will decline through contraction of imports by £1,500,000. . Great Britain looked to the agreements reached'at Ottawa as calculated to increase its exportß to New Zealand. But exporters there will regard the increase in the rate as nullifying the concessions made to New Zealand at that, Confereneo, inasmuch as a high exchange rate will inevitably reduce the volume of imports from the United Kingdom. ,

If loss of- revenue from income tax, Customs duties, and the cost of remitting Government and local moneys to London are substantially increased then an increase in taxation will be unescapable.