WELLINGTON NEWS

Hokitika Guardian, 13 May 1927, Page 3

WELLINGTON NEWS

DEARER MONEY. (Special to “ Guardian.”) WELLINGTON, .May 10. It lias come at last—dearer money. It has long been overdue, hut however, much as we may fulminate against tiie banks and bankers. the Lot remains that responsible hankers always display a. commendable reluctance to disturb the monetary t-ontti-tions, and never move in the ilireettinn ol advancing rates until forced to tlo so by the pres- tire of economic circumstances. The hanks havT raised their lending rate from 0] per cent to i per cent. 1 his rise should have been put into client three or nntr months ago, but bankers were no doubt impressed by the sharp decline in imports. and so delayed moving. Had file rise taken place earlier we should by now have estimated the full effects and made preparations accordingly. Rut what has caused the hank rate to go upr The answer to this is simple enough. The hank's have nut the loanable credit available to meet the increasing demand for accommodation, and the higher rate will not only check this demand, but will also induct; those already heavily indebted to the banks to take some active and effective steps for reducing t.hir commitment:-. The banks have also raised their rates for fixed deposits, thereby hoping to attract. such deposits. The increase in the overdraft rates will tend to restrict imports, and merchants and imlentors will now lie more disposed to import only wlutt is necessary, or what are properly known as bread-and-butter lines of merchandise, and cutting out luxuries as far as possible. The trade returns _ for the first quarter show that the'imports of motor vehicles has been very greatly reduced as compared with the corresponding period of hist year, and in the past motor ears have formed the outstanding item in the import returns each year, showing a .substantial increase over the previous year until

now. Most wholesale and retail business houses will now feel compelled to overhaul their alfairs. and the same applies to ihe maun laei. u rers. It must not he surprising if this investigation results in numerous bargain sales, and the general lowering of commodity values, with perhaps an increase in unemployment. As already stated the banks have increased their rates lor fixed deposits, ami these are now only about half of I per cent below the current rates of building societies and mortgagee i u-ti tut ions. ll the latter allow t.'ii.- small margin to continue they are likely to lose deposits and that would scarcely jdea-e them, so that there is every probability that ihe—e institutions will raise their deposit rates, and ii that happens then their lending rates are hound t > be advanced, which means that borrowers on mortgage of real estate will he called upon to pay higher rate ol interest, for loans, and (Ids in turn may. possibly will cheek building operations. It can now truly be said that money is scarce and dear, and is likely to remain so until such times a- the ecinomie adjustments are completed. It- is the process of adjustment that will cause trouble and anxiety, for so much inflation, and lallaeiotis eminuiiir ideals must be c leared out. Ihe extravagance' of the post-war period has been appalling. on appearances it seems that everyone has been living up to the limit of wage's and salaries, and in far too many instances it has gone beyond that and crime lias been committed. \Ye must, now look at < ur alfairs from a new angle, rt ingots-' that the remedy lies in hard work and increased production, and set a! mt doing that hard work and -e: urine: l"a----increase production. Vie mu-t begin to save, for it is only by sti'h means that we can provide the capital required for developing our resources. The present adverse e unlit ions are due to Hie shrinkage of £IO.C<2MHO iu the value ol last years exports ami the excess of our imports. 'I hat I isof income has thrown the whole economic gear out o! action, and m the meanwhile we have* done nothing to recover that loss, nor have we economised to any extent. 'lhe banks, by stiffening thi' money rates, have force;! us all to realisation of the position. There is no call for pessimism. but there is every reason why we should calm I v and in orderly mannei std about retrieving the position. Ibis is not a. one man job, but the duty of everyone in the community.