THE BANK RATE

Hokitika Guardian, 20 May 1927, Page 1

THE BANK RATE

REASON EOR INCREASE. WELLINGTON, May 18. “Mr 11. E. Holland, in criticism of the banks for tlio increase in the rate lor advances fails to realise several important tilings,” said Mr W. 11. Leitdh, chairman of the Associated Banks, to-day. “The banks need to obtain more money on deposit; and to do this have had to raise the deposit rate. This being up, it naturally follows that the advances rate must be increased also, otherwise there would be only one course, which is to call up advances Which is the better course, that of increasing the rate for advances or that of calling up loans? The answer is quite obvious. We were reluctant to take this course, but were forced to do it by the condition of the country, “As to the co' of hardship being indicted on the farmers, what is the position? The average overdraft of the dairy farmer in New Zealand, f should say, is about £SOO or CGOO. The increase of one half per cent per annum will represent only about £2 10s to £3 a year, tie would think nothing of spending that on petrol. “Tlhe step has been taken only after very serious consideration, and I bclieve. will have tiie same, salutary effect that it had once helore. The hanks have not been free with advances for some time, and the result can he seen already in the import figures for last quarter, and will lie increasingly apparent this year. “As for being a combine, we are no more a combine than are the banks in the Old Country, which accept the decisions of the Bank ol England. There was no cry of our being a combine when we reduced the rate lor advances from 7 per cent to (IV per cent four or five years ago. As I have told a deputation from the country which waited on me. they are better off than are the farmers in Australia. Mr Holland’s comments on the fact that the Bank of England is lowering the rate for advances take no accotmf of local conditions. The price of money in England has nothing to do with the price of money here, ally more than with the price in America. Motley is generally cheaper in London, but there have been times (war time for instance) when it was cheaper lieie.