WELLINGTON NEWS

Hokitika Guardian, 17 January 1928, Page 1

WELLINGTON NEWS

NEAY ZEALAND BUSINESS CONDITIONS. (Special to “ Guardian ”5 AYELLINGTON, Jan. 13. The business conditions in New Zealand as revealed by the banking returns for the December quarter are not very satisfactory for they reveal many adverse conditions, but particularly that spending power during the past sixmonths declined very considerably as compared with the first half of the year. The free deposits of current account balances which stood at £23,131,103 at the December quarter of 1920 dropped to £21,438.335 in the December quarter of 1927, a shrinkage oi £1,092,708. The free deposits or current account, balances can be" drawn against by cheques, and therefore represent spending power. 111 the AI arch quarter of 1927 the aggregate of the free deposits was £24,440,778; in the June quarter the amount was larger for the free deposits amounted to ,e 24.741.202, so that during the first half of last year purchasing power was normal. In the September quarter, however, there was a sharp decline for the aggregate was down to £21,815.504 while 111 the December quarter there was a I iii-ther drop to £21,420,897. Thus it will he seen that in the second half year the free deposits decreased by £3.314,305.

Those who could draw against their hank accounts had over three millions less to draw upon, and this no doubt

accounts for the sharp expansion i unemployment. There was not tl; money available in the second half <: 1927 to employ the full number of me at the rate of wages fixed by the Ai

bitration Court. But this is not all, for there is the note circulation which represents the money in the pockets of the people and available for immediate expenditure. Thus, taking the free deposits and the note circulation which together really represent the spending power of the people, the aggregate of these two items in the Alarch quarter amounted to £31,944,459, and for the June quarter of last year the aggregate was £31.328.264, so that during the first half of last year the spending power was practically normal. In the September quarter there was a remarkabe decline in the spending power, for the total was £28,194,831, and in the December quarter there was a further decline to £27,990,958. Thus compared with June quarter there was a shrinkage of over £3,337,000. In the course of a short six months the spending power contracted so seriously that it is not surprising that there was so much unemployment. And the question is will there he any improvement:-' AA'ili the spending power increase during the current half year? And if it does not increase what is to happen? It is obvious that there cannot he any sharp increase in spending power, consequently one of two tilings must happen, either there must he an increase in the spending power, and how that is to he obtained, it is difficult to say. or those in work must accept less so as to provide work for more. But it would he cruel to lin

wages unless commodity prices are re duced so that the smaller wage may g( as far us the present, inflated wage. A

very unpleasant time is in store for 11 unless those in authority sel about a<

justing conditions. It will lie remenihcred that last May the hanks raised their rates for fixed deposits by 10s per cent, and for overdrafts by 10s per cent, and this has proved effective, that is to say there Inis been an increase in fixed deposits and a reduction in advances. The fixed deposits for the December quarter totalled L21.2Kn.2G0, and there has been a substantial gain in tlie second half of last year. The average of the fixed deposits for the first half of the year was £21,1 IK.ooK, and in the second half the average was .1123,839,203. Bank advances in the December quarter averaged £48,087,788, as compared with £49,390.430, in December, 1920, a decrease of £1,308,G0 I. Hie discounts averaged £1,071,870, as compared with £1.870,772. a decrease of £204.890.

In the June quarter of last year the advances and discounts combined amounted to C3o,733.'JfH>. while for the December quarter the total was £ 19,To!),Of! I. or a drop of nearly a million sterling in six months. This should have the elicit of furtlier contracting imports and the balance ol trade improval. It is difficult to escape from the conclusion that the next winter will be a very trying one unless something unforeseen happens.