WELLINGTON NEWS

Hokitika Guardian, 18 January 1927, Page 4

WELLINGTON NEWS

HANKING KETUKNS. (Special to “ Guardian.”) ;

WF.I.r.rXGTON'. -fan. 14. The quarterly average was publishcd |>y tho banks very accurately reflect tho economic conditions of tho Dominion, and the figures for tho December quarter of 1920 cannot be regarded as satisfactory. Thero has been a substantial contraction iu the deposits ms compared with the same quarter of 1925, the. free deposits alone exhibiting a decrease of £2.058,050. Oil tho other hand tho advances show an increase of £2,769,309. Thus it will ho seen that tho banks have been able to borrow less from tho public while at tho same time they have been called upon to lend more, and it must be obvious that if this is continued tho overdraft rates and the deposit rates must ho raised. As a matter of fact flic banks did increase tho rate for short term deposits and if this does not have tho desired effect they may 1)0 compelled to raise all deposit rates, and as a natuu.d consequence tho rate for advances also. With the- increase in advances tho deposits should have inmtised. but owing to over-importa-tion credit has had to be transferred outside tho Dominion. Taking the (lovernnient free and fixed deposits tho aggregate is £40,619,799 against £49,720,986, a shrinkage of £3,170,097. This decrease is somewhat large, and 1 it is not surprising therefore that the banks have been making special efforts to secure additional deposits. Quito recently the hanks offered higher rates and special terms for short dited deposits, and it is obvious that unless the hanks can obtain additional resources from the public they will he obliged to be sparing in their advances and may even be obliged to raise the overdraft rate. The tendency is therefore for money to harden, and the same tendency is noted in Australia. Dear money would impose a check on many speculative movements that require to he checked, and therefore dear money would prove beneficial in the long run. The banks will no doubt do their utmost to avoid raising the price for money because of the disturbance it is likely to cause, nevertheless it is difficult to see how they can rectify tile position otherwise. The noto circulation during the past quarter nveilagcd £6,757,707, or £189.970 less than in the corresponding quarter of 1925. This deficit added to the shrinkage of £2,058,450 in the free deposits, gives a total! of £2,248.- : 420, and this represents the contrae- 1 tion of the spending power of tlm 1 people as compared with 12 monthsago. Tho economic conditions of the j country are obviously unsatisfactory, 1 and with tho monetary position as it , is the unemployment menace must continue and become much more severe than at any time during the past three or four years. The lessened spending power of the community has affected tho domestic trade of the country, and ns the turnover declines there is loss employment available. Tn some localities the completion of public works has thrown numbers ot men out of work, and how to overcome this difficulty is a serious problem. ; Tho banking returns show that the I Ooveriiroent funds in New Zealand aie about £1.300.000 less than a. year ago. If the unemployment position is. bad now wliat will it be like in the wintei months when even under normal conditions there is a fair amount of unemployment. Most people are inclined to attribute the unsatisfactory economic conditions to excess imports, and overlook the fact that the exports | show an abnormal decline, vet the j (Iron in exports has had more to do with the matter than the excess ini- 1 ports. The exports from New Zealand for the vear ended November 30. 1920 | totaled £40.257.305 as compared with j £50.560.233, a decrease of £10,302.800. | This means that in the twelve months j tho income of tho country has contract- | cd by that amount, and the spending { power has thus been reduced. The ini- • ports totalled £SO-143.218 against £52,- j 324.472, a decrease of £2.181.254. thus I the imports hato actually decreased, j but the balance of trade in the last j year was against us. The imports ex- I reeded the exports by £3,885.853, while j in tho previous y'lir the exports ex needed the imports by £4.235,751. The adverse balance is a temporary affaii for the imports are bound to be re duced and equilibrium restored. Th< economic position will require earefti handling if we arc to csdapo seriou trouble.