POLITICS AND BANKING

Evening Post, Volume CXV, Issue 37, 14 February 1933, Page 6

POLITICS AND BANKING

It is reported now that, though the Government intends to proceed wjtlf the Reserve Bank of New Zealand. Bill, it is v unlikely that the measure will be reached this session, as it will be delayed by negotiations which the Minister of Finance has in Land., The delay is regrettable, particularly in view of die "Government's repeated and emphatic declarations that the Bill was to pro■ceed. An explicit statement should be immediately forthcoming of the reasons for the delay and the nature of the negotiations which affect the principles embodied in the Reserve Bank Bill. Failing such, an explanation the public will be inclined to suspect that the Government, having succeeded in introducing political influence in a branch of bank business which should be conducted solely on banking principles, is now lukewarm in its determination to create a central bank which will Be, in Sir Otto Niemeyer's words, "en-tirely-free from" both the actual fact and the fear of political interference." The Government has certainly given its endorsement in the past to the recommendation for non-political central banking; but it also endorsed, without qualification, the control of exchange solely by the banks. Its sudden right-about-face on exchange does not dispose of the need for a central bank. On the contrary it makes it more than ever essential that important banking policies should be more adequately safeguarded from political influence. The trading banks have been unable to resist pressure. Possibly even a central bank would be compelled to yield, but the deliberate creation of a central banking authority with undivided control of currency and exchange matters- would at least' make political interference more difficult. Sir Francis Bell's warning, uttered in the Legislative Council, on Friday, has a greater gravity. The Government, he said, did not seem to realise it was proposing the ono social experiment that the Socialists were seeking—the control of currency by the State. They had a Government, formed by the country to save it from ono peril, deliberately adopting the one principle which the Socialists and Conimunistsl aliko demanded and sought, the control of currency by the State. In some, quarters it is suggested that the authority given to the Bank of New Zealand under the Banks Indemnity Bill makes it unnecessary to establish a reserve bank to control exchange. But that suggestion is made with only the haziest knowledge of the powers exercised by the Bank of New 'Zealand and those proposed for a reserve bank. The Bank of New Zealand acts only as agent for the Government in buying and selling exchange. It has no more authority than the other trading banks to determine the rate, and no more responsibility than they possess for the financial results. The determination, of the rate has been placed wholly and solely within the power of the political Government. This position is quite inconsistent with the establishment of a reserve bank complying with die fundamental conditions set forth by Sir Otto Niemeyer. If freedom from both the actual fact and the fear of political interference cannot be secured, said Sir Otto, the existence of a reserve bank will do more harm than good, for, while a central bank must serve the community "it cannot carry out its difficult technical functions and cannot hope to form a connecting link with the other central banks of the world if it is subject to political pressure or to.influences other than economic." It is impossible to reconcile the maintenance of a poli-tically-controlled exchange with the establishment of such a bank, and a reserve bank with less authority and less freedom than Sir Otto Niemeyer stipulated will "do more harm than good."^ Possibly the Government is beginning to perceive that it must make its o,wri position regular before it can proceed in good faith with legislation primarily intended to guard banking from ' interference such as that of which it has itself been guilty.

The building statistics of the Lower Hutt Borough continue to rise slowly month by month. Last month 14 permits were issued for work to tho valuo of £46^, of which four were wooden dwellings to the value of £4380.