WELLINGTON NEW!

Hokitika Guardian, 16 July 1926, Page 3

WELLINGTON NEW!

THE MONEY BAROMETER (Special to “ Guardian.”) WELLINGTON, July 14.' The Banking Returns which arc issued at tile end of each quarter serve a very useful purpose, for they yield very accurate information for those who know how to read the figures. The hanking averages for the June quarter have just been issued and they reflect the changed economic conditions disclosed by the returns of our foreign trade. The export and import returns

for the year ended May .‘list, last, the latest available, show that the imports for the period amounted' to £52.236015, and the exports to £45,764,578: there was thus an excess of imports amounting to £56,471,437. Ale bought more than we sold, and we have had to pay for our purchases, for foreign merchants cannot he kept waiting for their money like the grocer, baker, and butcher. The tanking figures show how tho debt was discharged. The hanking returns furnish many details of liabilities and assets, but the most important items are the deposits and advances and discounts. There arc three classes of deposits, Government deposits, free deposits or current account balances and fixed deposits. AVo may omit tlio Government deposits and deal only with the other two which represent the amounts borrowed by the

banks from their customers. The free deposits for the June quarter average £27,594,496, as against £30,497,209 r the corresponding quarter of last year, there was thus a decrease of £2.902,713 which is fairly substantial and not a very good sign. In the June quarter of last year the free deposits showed

an increase of £2,160.419 over those o r tire preceding year which shows the great change which has taken place this year. The fixed deposits amounted to £20,674,853, against £20,966,426 in the June quarter of last year, a shrinkage of £291.573. The Government

deposits show an increase of £1,238.598. Now taking the aggregate of all these classes the total is £52,595,627 as

against £54,551,315 a. decrease of £l.055,688, which means hanks were aide to borrow that amount less from their customers. Let us turn now to the advances—these show a. total of £46.985,833 as compared with £42,421,0-1 f twelve months ago, an increase of £4.564,784. Tt must be obvious-that bank advances make bunk deposits; for instance, if Robinson borrows a thousand pounds from a bank and pays the amount out to creditors in cheques, and they lodge the cheques with their bankers we should have Robinson’s bankers showing the advance of £IOOO. and the banks of those to whom he had paid the money wiiold' show deposits aggre-

gating £IOOO. But our hanking averages for the June quarter show that

while the advances have increased by £4,564,784 the deposits of all classes have contracted by £1,955,688. There should have been, according to the rule an increase of deposits, but instead of that there is a decrease. What has become of the credit? The increase in advances, as shown above, and the decrease in the deposits together, amount to £6,520,472 which is practically the .amount of the adverse trade balance referred to above and which totals £6,471,437. These trade figures are only up to the end of May, and if the June figures could he included it would probably he found that the hank figures more closely approximate to the excess of imports. What appears to have happened is that the amount borrowed from the banks together with the amount withdrawn from tlie deposits has been sent overseas to pay for the imports. From the hank figures it is also possible to got a fairly good idea, of the spending power of the people. The notes in circulation, which means the notes in the pockets of the people are available for expenditure immediately. Then there are the free deposits against which cheques can be drawn. These two items represent immediately available spending* capacity. In the June quarter these two items totalled £34,442.051 ns compared with £37,391,057 in the June quarter of last year, a shrinkage of £2,949,006, which means that the community had about £3,000.000 less to spend than a year ago which accounts for the dullness of trade and for unemployment.