EMPIRE BANKING

Evening Star, Issue 22440, 10 September 1936, Page 11

EMPIRE BANKING

" MARKING TIME " PERIOD POLITICAL DEVELOPMENTS In a review of banking in the Empire, the London ‘ Times ’ states that the past year may be described as a period in which the Empire banks have marked time. They made a welcome, if modest, recovery from the worst effects of the international trade collapse, but as was generally foreseen, their full emergence from its consequences is proving a long-drawn-out process. In many countries money rates are so low that earning power is necessarily restricted. One notable exception to the continuance of excessively low money rates is provided by Australia, where, as a result of the combined effect of increasing demands from primary industries and extensive borrowing for Government works, money rates have of recent months shown an upward trend. In all the Empire oversea countries trade, assisted by exchange stability, has given signs of improvement, while South Africa’s prosperity has been well maintained.

The newly-formed central _ reserve banks have come through their initial stages in a satisfactory manner, but the tendency. for Liberal or Labour Governments to regard a central bank under private control as a potential obstacle to their political objectives has caused two of the new Empire central banks to undergo radical changes in their constitutions. The new Liberal Government which came into power in Canada last year has taken steps to bring the Bank of Canada under direct Government control by giving the Government a majority of shareholding. Still more drastic were the changes instituted by the near Labour Government in New Zealand, for, by an amendment to the Act governing its formation and powers, the general functions of the Reserve Bank of New Zealand were restated as being “to give effect as far as may be to the monetary policy of the Government as communicated to it from time to time by the Minister of Finance.” It is strange to find that the views of most financial authorities on the constitution of central banks should be thus disregarded and that central banks should be deliberately drawn into, the orbit of political vagaries. Australia has pursued an opposite policy by fortifying her central bank against political interference.