The Guardian And Evening Star, with which is incorporated the West Coast Times. MONDAY, FEBRUARY 8th, 1926. AN ADVERSE OUTLOOK.

Hokitika Guardian, 8 February 1926, Page 2

The Guardian And Evening Star, with which is incorporated the West Coast Times. MONDAY, FEBRUARY Bth, 1926. AN ADVERSE OUTLOOK.

A Press Association message last neck gave a brief synopsis of some remarks by Sir Harold Beauchamp on the monetary outlook for the Dominion. As the subject is of outstanding interest, governing a- it does the material progress of New Zealand, it "ill lie of value to give the more extended report of the remarks published in the Wellington papers. 'The report goes on to say I hat at the meeting of shareholders of the Equitable Building and Investment Company of Wellington, the Chairman (Sir Harold Beauchamp), in dealing with the monetary position in New Zealand, said: “It is probable that this year attention will lie focussed on money and markets, and there are indications that the economic conditions of the country will necessitate very careful handling. It is my opinion that the money in New Zealand will he both scarce and dear, and I incline to this view because of the monetary movements in I.ondon and New York. The advance in the rediscount rate of New York Reserve Bank from 3J per cent, to 4 per cent, though primarily intended to eliminate speculative features in American Stock Exchanges, must have an influonce on the monetary situation in London. A year ago, when the rc-dis-fount rate of the Federal Reserve Bank of New York was raised from 3 per cent, to 3J per cent., the Bank ot England found it necessary to raise its discount rate from 4 per rent, to 6 per rvuit. That was early in March last year hef re Britain had reverted to the gold standard, and may have had some relation to that event. However. it is important to hear in mind that New York now dominates the world’s money markets, and London eannot act independently of New York as she was able to do prior to the war. The Bank of England rate may not lie raised as the result of the movements in New York, lmt it will certainly prevent any reduction in the rate. Furthermore. there is evidence that with the embargo on the issue of foreign and colonial loans removed there is hound to lie a big rush of borrowers oil the London market. Two foreign loans, one for a million and another for four millions, wore rushed by eager investors; while the Queensland loan

of £2,o0').()00 .Hid the South Australian loan of £1.800.000 failed to attract investors, for the underwriters were left- with 68 per cent, of the Queensland loan and with 63 per cent, of the South Australian loan. The two Australian State loans carried 5 per (tent, and are on the trustee list, hut the two foreign loans issued carried ~\ per cent., and this is what attracted investors. It i.s a] parent that dominion .loans must compete with these foreign loans, and it is obvious that a ;> per out. rate is ineffective. Underwriters cannot he expected to nurse the hulk of colonial issues just for the pleasure of doing so. The dominions borrowing jp London must expect to pay something more than o per cent, hv way of interest. The rates ruling in New Zealand must bear some relation to those ruling in the

world’s monetary centres. \\*? know Hint those borrowing from the Advances Department must pay higher rates than wore current last year. Loans to workers now hear 6} per plus sinking cent; on loans for redemption of mortgages, fi} per cent: and on loans to local bodies, 0 per rent—all subject to rebates on prompt payment, but plus sinking funds. Loans for buildings on a 36} years’ term will involve the payment of 6} per cent, assuming prompt payment. The banking returns for the past quarter show that the process of leaning on the hanks to a greater extent than usual has begun, and the advances show an increase of £2.617.973. while the deposits have increased by only £l.153,863. The bankruptcy returns are tlso adverse, for there were approxin a tel 659 bankruptcies last year, or 15 wore than in 1924, with formers again

in tlio lead. When we review the state of the produce markets we have to realise that wool, frozen meat, butter and cheese arc all realising lower prices than a year ago, and so far as wool and meat are concerned this drop is most pronounced. I estimate the loss of income, owing to the decline in market values, at approximately £12,000,000; and wool and meat will he responsible for about three parts of the total. Because of this the margin between exports and imports will be very narrow, and unless the Government and local bodies borrow largely outside of the Dominion the demands on the hanks will be very pronounced. With the contraction in the value of our export?, the people will have less opportunity of saving consequently there will die less new capital available to meet the increasing demands of borrowers, many of whom will be obliged to go without or greatly modify their demands. Ad itb a shrinkage in the spending power domestic trade will contract, and that will mean a certain amount of unemployment. The call of the moment is for economy—strict and stringent economy in all departments of .the State in particular. It would also be very helpful if the State* interfered less in commercial affairs. Control Boards, pools and >?mbnrgo are not conducive to expanding business. After all, it is on the efforts of the individual that the prosperity of the country depends. and not on the Government control of industries and embargo on imports. IT then? is one industry in the country that is in a parlous condition, it is that of meat, freezing. Most of the freezing companies made h'*a-" losses in the past season, and to-day mutton and lamb are selling at l-> per cent, to 20 per cent, below the rates ruling last ear. But this is not all. for, owing to the adverse climatic con- • 1 itions, less fat: stock will be available.