The Hawera Star. TUESDAY, OCTOBER 14, 1924. THE BANKS AND THE PEOPLE.

Hawera Star, Volume XLVIII, 14 October 1924, Page 4

The Hawera Star.

TUESDAY, OCTOBER 14, 1924. THE BANKS AND THE PEOPLE.

Delivered every evening Dy b o’clock in Ha were, Manaia. Okaiawa, Eltham, Pate*,, Waverley, Mokoia, Wbakamora, Onangai, Meremere, Eraser Bead. and Otakeuo Manutahi, Alton, Harleyville, Maugatoki, KapoDga, Awatuna, Opunake,

The quarterly bank returns are always interesting to those who are keen about the country’s welfare, and every good citizen should be that. In another column we publish the figures for the quarter ended September 30, and we think that'the outstanding features are the good recovery which the country is making from the slump period and the indication of nervousness on the part of people with money, though the record of advances shows an increase of £1,108,128, while deposits are £1,183,189 larger than for the corresponding quarter twelve months ago. An improvement in the balance of deposits over advances is recorded, while note circulation has remained almost stationary, being only £I9BB more than for the September quarter last year. Coin and bullion show but slight movement.. The figures, we think, show that while trade is generally quiet and lifeless the country’s financial position is strong, and as people, especially the primary producers, overcome the numerous difficulties caused by the slump there will be a return of confidence and less reluctance on the. part of people with money to lend. Prices for primary producers appear promising, and it is to be hoped that no serious fall takes place on the London markets. The greatest difficulty is being experienced in connection with exchange rates, which entail (and bankers admit it) a levy upon the producers. The question is one which is causing much thought throughout the Empire, and it is recognised that the position will not be satisfactory until exchange can be stabilised. When imports exceed exports to any great extent exchange has a tendency to operate against the importer. When exports exceed imports, as they have far some months past, the rates of exchange on London operate against the producer. The difficulty is that money accumulates either here (in the case of an excess of imports) or in London (when exports exceed imports over a period), and to transfer the. money means expense. Bankers say that buying or selling exchange is not a profitable business, and that though they realise the effect upon importer or producer as the case- may be, they have not been able to find a satisfactory solution. They would far rather that London money was not at a discount in New Zealand, and would be much better satisfied if it were possible to keep it at about par, but they say that they cannot alter natural laws. In a statement to the Wellington Post, the Associated Banks explain the position. They show that it is necessary to hold large sums of money at both ends — New Zealand and London —available whenever required, and consequently not employed in the. niost remunerative manner. The funds thus held in London were usually, during the past year, earning about 24 per cent., as compared with the New Zealand minimum lending rate of 64 per cent. When, owing to heavy exports, New Zealand borrowings in London, and' other causes, these accumulations in London become excessive, and it becomes necessary to effect transfers to New Zealand, the cost is often greater than the margin of profit between the banks’ buying and selling rates. It. is so at present. If this were not borne, but the funds were left in London, there would, the bankers say, be a shortage of money here, and the banks’ borrowing customers would be seriously inconvenienced. These factors materially reduce the apparent margin of profit. It is contended that the producer or exporter is suffering through London exchanges (which he sells) being at a discount, and complaint is made that he now receives 45s per cent, less for his bills than in December, 1920, and throughout 1921, when they were being bought at par. “But this

(the statement points out) is not profit, to the banks; it is a fluctuation in price; and the importer, who buys London money, is to-day paying 60s to 70s less than during the period named. This should be reflected in the cost of imported commodities and is an advantage to every consumer in the country; the producer, as a user or consumer of such goods, is doubtless receiving in his store bills and merchants’ accounts the return of a considerable part of the exchange which he pays.” New Zealand desires that her trade balance should remain favourable—that is, that exports should exceed imports—but under the present system of exchange the higher the margin of exports over imports the higher the exchange rates against the exporter are likely to be. It is a very difficult problem, and a solution does not appear to be within reach, though . suggestions are being made. However, it is satisfactory to know that the financial position of the country is sound and that the prospects for its future are bright.