N.Z. LONDON FUNDS

Hawke's Bay Herald-Tribune, Issue 193, 1 September 1937, Page 7

N.Z. LONDON FUNDS

Our Own Correspondent.)

Activities of Australian Firms UNEASINESS FELT

(From

r WELLINGTON, Last Night. ' The mounting tide of imports und the activities of Australian. iirms in Telation to New Zealand London funds Ara causing pneasinasa her* and a move ig being made, it is understood, to bring the matter to the attention of the Government. o For the half-year ended Juno 30 last, the export fignres rose to a total of almost £8,000,000 higher- than those of the same period in 1936. But the iiuport figures have also risen steeply, and went from £19,800,000, tha tatai fox January- June 1936, to £25,700,000. In other words, despite a large increase in exports the excess of goods sent put pf the country over goods brought in is only £2,0^,000. This fact and the knowledge that the importations are still rising is creating puine nneasiness, espeoially as the favpurable position of the country in tha last six months has been due in part to hign prices for wool, which cannot be forecast with any certainty for the. nest wool season. Also, however, tho Reserve Bank fnnds have been dropping. In August of last year the Lonjdon funds held by the Reserve Banh and trading banks were about £43,000,000. In Deeember thdy were £28,000,000, and in April £36,500,000. Since that time they have risen still further, but it is understood that they have not touehed quite the level which might be pxpeeted of them considering the favourable season which the country has injjoyed. . Oue reason for this, bankers believc, ii that Australian interests, working .through the outside market, haye been using New Zealand funds to settle Aus-

tralian debts. In Australia there has always been a tendency to exhaust XiQndon funds, and the "first drastic raising of the exchange rate there caine about. because of the fact that the funds had drcipped. Kew Zealand, on the other hand, appeaTs to have powers of * accumulation which is reflected in the bank statements. But in both CQttntries there are large firms which are doing an export and import business of appreciable volume and thcse firms, "working in groups, are ablp to mahe London funds available to JCustralians. This fact, which was first mentioned abput seven years ago in an address by Mr B. G. Ashwin, now As-sistant-Secretary qf the Treasury, is one reason why the Treasury was ansious for years to have a separate exchange temd in London for Kew Zea.lagd transactions. Examination of Position 'It is, of course,' apparent that there maj be other Teasons for any fall in the Dominion 's London funds, such as payment of certain loans which ha.ve fallen due and not bepn renewed by holders of the original.bonds. But the f ealing that the volume of outside busi-

ness is large enough to warrant sc-ru-tiny m leading to an examination of the position at the moment. Australians have every mducement to work through New Zealand if they are able to find the means to do so. For the New Zealand rate on London is 1 per cent lower than the Australian (Jommonwealth Bank rate, and so it the technique employed ia mer-ely tlie purchase of funds in New Zealand the Australians are able to malce a prolitable deal by working through the money market outside the banks to obtain funds in this country and then purchasing London funds from the New Zealand trading banks. This, indeed, is tho aspect of o.perations which is now being serutinised. The easiest way to protect this country would be to raise the rate on London. That, however, would not be possible or desirable, it is felt. Another way would be by regulatiou of the fuuds, the Government demanding that all London balances should be revealed and declared separately. That, however, wonld be cumbersome and diffieult. Another way, yet unrevealed, is being sought out of the position for suggestion to the Government.