MR. FORBES'S DEFENCE

Evening Post, Volume CXVI, Issue 103, 28 October 1933, Page 10

MR. FORBES'S DEFENCE

NECESSARY TO STATE

DEBATE CONTINUED

Tlic extent to which the restoration of world trado rests upon financial cooperation between the different nations was. emphasised by the Prime Minister (the Bt. Hon. G. W. Forbes) in the House of Representatives yesterday afternoon, when defending the proposals in the Keserve Bank of New Zealand Bill. The view was expressed by Mr. Forbes that if the legislation were not passed, New Zealand would bo seriously handicapped and deprived of the full benefits of tho financial policy that could be carried out through the central institution in co-operation with other countries. One of the foremost questions before the World Economic Conference was that of financial co-operation, the Prime Minister said. Recommendations had been made that each country should have its Central Bank which would give effect to the measures which, it was calculated, would put an end to present economic difficulties. It was quite clearly demonstrated that a country which did not have a Central Bank would be unable to play its part in the co-operation of the financial institutions throughout the world and receive any benefit from that co-operation. The aim was co-operation between the nations, not tho domination of one by the other, it being held thatif all could work towards a common object a great many of the difficulties concerning currencies and financial policies would be overcome. Co-operation did not mean, he insisted, that one country would dominate another. Mr. W. E. Parry (Labour, Auckland Central): It means the international control of public credit. A COMMON POLICY. "By establishing a Central Bank in New Zealand," the Prime Minister retorted, "we will be able to do something towards effecting a common policy with regard to finance. It will help to ao away with the dislocations and upheavals that have caused so much loss and hardship in the past. This will be realised when the people thoroughly understand the terms of this Bill. After my visit to the World Conference I say unhesitatingly that if the bank is not established we will bo handicapped and prevented from getting tho full benefit of the policy that can be carried out in co-operation with other countries. When Sir Otto Niemeyer presented his report about two years ago I had my dubts, and I admit I did not thoroughly understand the value of the; recommendations. Since then there has been a full opportunity for study and examination; and no Government has given to any measure the close attention and analysis of the advantages and disadvantages of a Central Bank as the present Government has to this. We have had exceptional opportunities for gathering information, both in Ottawa and London, and in the discussions that have taken place since. No Bill' has been more thoroughly investigated and weighed and tested as the Reserve Bank of New Zealand Bill." CONTROLLING- A BOOM. Tho Prime Minister said he was at a loss to understand opposition to a measure which proposed to strengthen the finances of th© country under an institution which would also aim at a policy of cheaper finance and easier credit. Had the bank been in existence during the boom period there would never have been the high prices which were paid for land. Mr. E. A. Wright (Government, Wellington Suburbs): How would a bank stop that? The Prime Minister: A Central Bank would influence the banking policy of the country. Mr. Wright: Yes, but how would tho bank stop a man buying land at his own price? Mr. F. Langstone (Labour, Wairnarino): Wouldn't taxation stop the price of land rising? The Prime Minister said a Central Bank could exercise a tremendous influence during a boom, as it could completely control the situation. He ventured to say that New Zealand would' be in a sounder financial position than ever it had been before when the Central Bank was established. Instead of having five or six commercial banks competing with each other, there would be one bank whose policy would be dictated by the needs of the country. It would have a duty to perform in the interests of the Dominion as a whole. WHAT MIGHT HAVE BEEN. One of the main benefits of a Central Bank would be that New Zealand would be supplied with information relating to world movements. If there had been a Central Bank in 1931 New Zealand would have been in a much better position to meet the conditions which arose. The Government would have been forewarned regarding the depression, and couid have taken steps to meet it. It was absurd to suggest that the Government did not control the monetary policy of the country. As a matter of fact the Government would bave a greater control than ever it had had previously. MEMBERS' VIEWS. .Mr. A. J. Stallworthy (Independent, Eden) expressed the opinion that it was time that financial dictation was ended. New Zealand should have a uational currency, with control of the monetary policy. Mr. F. W. Schramm (Labour, Auckland East) characterised the shareholder capital provision as a retrograde step. Mr? A. S. Richards (Labour, Roskill) said eventually the bankers' banks would get a monopoly of public credit and resources. All industrial undertakings were controlled by banking institutions. Prosperity could only be' secured by increasing the consuming power of the people, anct that was not provided for in the Bill. It was not merely a question of providing cheap :re (lit. \ .' Mr. J. Ilargest (Government, Invereargill) said he was heartily in accord with the Bill. The banking system'was on trial today. He urged that the matter of the.price for the trading banks' gold should be carefully- considered. Profits from the sale of gold should not go to the public account, but should be placed in the, reserve fund. He also advocated a definite yold reserve for the bank, and suggested that the governor and deputy governor should be appointed by the State. The debate was adjourned.