WELLINGTON NEWS

Hokitika Guardian, 14 July 1927, Page 4

WELLINGTON NEWS

THE .MONEY BAROMETER. ( (Special to Guardian ”.) j WELLINGTON, .July 11. Hi ere was a good deal ul discussion t in the Mouse last week in respect to | the advance made hy the hanks ill their s rates lor deposits and overdrafts, and ] the suggestion was made that the Gov- ( eminent, being a shareholder in the ] Dank of New Zealand should have pro- f vented that institution from acting m ] association with the other banks. liK- ( .Minister of Finance was, however, abie ' very easily to dispose ol the unsound ; argunieuts of the malcontents. The only alternative to raising the rates for ] overdrafts would have been cai'iing in ; overdrafts and such a slop would have i caused grave financial trouble. It can i be said lor the banks m New Zealand 1 that whilst they are at all times earing i for the interests ul the shareholders, they are never unmindful of their duty to their customers and the country, i The hanking returns for the June quarter were released at the week-end and a close examination ol the figures shows that the hanks were I idly justified m their action, and that the upward movement in rates was in the public interest. We were rapidly developing a position very much like that which laiised the slump ol 1920-21 and tfie monetary stringency ol the subsequent years. The tendency was lor the imports to expand, while linlortunatciy there was a sharp decline in the prices of produce. This had a double efleet on the hanks. Their deposits, and particularly the free deposits contracted, while the demands for accommodation expanded. The hanking returns roi the June quarter bring this out very clearly. The Government free and fixed deposits together amounted to £10.773,409. as compared with .£52.595,(427, in the June quarter of .192(1. We may discard the Government deposits for more than the amount is in. vested in Government securities. The free deposits totalled £24 ,7-11.202, against £27,591.19!). a decrease or, £2,853,231. hut there was ail increase of .£1.071.251 in the fixed deposits, so, that if we take free and fixed deposits: together the total is £-1(5,-190,335, against £48.269,319, a decrease ol £1,778,983. Now the advances totalled £19.244.998, against £46,985,833, an increase of £2,259,105, but there was a small decrease of £220,800 in the discounts, and taking the advances and discounts together the total is £50.753,106, against £18.714,741, an increase of £2,038,365. while the deposits as shown above contracted hy .£1.778,983.1 so that, compared with twelve months ago, the hanks were worse olf by £3.817.348, and to meet this position no doubt some securities had to he sold. If the figures of 1925 are examined it will - he found that the free and fixed deposits for the .June quarter of that year totalled £51,103.025. while l-fit* advances and discounts in the aggregate were £-13.935.769, that is the deposits exceeded the advances by fclio very substantial sum of £7,527.866. The hanks then had plenty ol funds available for advances. For ihe June quarter of this year the deposits tolni £46,190.366. and the advances £50.753,10(5, that is the advances exceed fludeposits by £1,262.710. so that compared with two years ago the hanks are £11,750,000 worse off. and yet it is contended that the banks should not have taken any stops to correct the position. In view of the fiiruros adduced that contention cannot hold. If the hanks deserve any censure at ail if is for not moving earlier in the matter, for such action would have prevented the position becoming as had as i( is. Compared with the first quarter ol the year the hanking figures are encouraging for they indicate that recovery has begun. The deposits are larger by nearly a million, and the advane.es are slightly i'.jwer, and it is reasonable to conclude that the process cf readjustment will he steady during the second halt of the year. The imports for the five months to the cud of .May totalled £18,562,171, against .£20,999,905 in the corresponding term of 1926. a shrinkage of £2.437,131, v.hii'e the exports for the live months disclosed an increase ol £1.488,982. An examination into the spending power of the community shows that a big change has taken place during the past two years. In the June pearler of 1925 the free deposits totalled £30,497.299, and the note eiic illation was £0,893.848, and (his represented spending power equal to .£37.391,057. In the June quartet of this year Ine free deposits amounted to £27,711.262, and the note circulation to £6,587.002 together with £31,328,261. So that compared with two van's | ago the spending power has contracted by £6,062,793. and this is equal to 15 per cent. While two years ago 109 men could ho employed at full wages today only 84 men can he employed, lienee nnempi'oymont. j