WELLINGTON NEWS

Hokitika Guardian, 13 April 1928, Page 4

WELLINGTON NEWS

THE .MONEY BAROMETER. (Special to “ Guardian ”•> WELLINGTON. April 11. The hanking returns, which may he accepted as the money barometer c»l the Dominion, are now available lor the first quarter of the year, and they do not give the lull encouragement that wtis anticipated. Although the main purpose of hankers is to earn profits for their shareholders, a very grave responsibility rests on the executive ollicers. They control the credit of the country and must see to it that it is adequate for the needs of the country, at the same time to check the misuse of credit. An abundance of credit gives rise to wild speculation. Prices of commodities and services advance and for a time there exists it fictitious prosperity which is invariably succeeded by a crash. It must be confessed that our banks exercise a wise control of credit. Early last year it was obvious that merchants were overimporting and the trade balance was very much against us. The demands on the hanks were excessive and a check was imperative. This was accomplished by raising the rates for advances and deposits. 111-balanced minds attacked the banks lor this gesture, but the latest banking returns show that their action was fully justified. The trade ligates to the end of February show that the balance of trade is now definitely in our favour, exports have expanded and imports have contracted. | When the hanks raised their rules the object was to curtail advances and attract deposits, and they have succeeded in both. Compared with the March quarter of last year the fixed deposits increased by C 1,388,789, the aggregates being 62 5,476,144 against 621,088,834. This substantial increase in the fixed deposits will enable the hanks to reduce their overdraft rate, and it would occasion no sai prise if during the next week or "two a reduction is announced. The free deposits or current account balances show the trilling increase of 611.373. the aggregate figures being 621,182.L31 against 621,1■10.778. That the increase should he so small is somewhat surprising in view of the ratio balance, and it must he assumed that the money has been devoted to the settlement of accumulated liabilities. hence the great expansion in the fixed deposits. The* contraction of the advances compared with the March quarter of last year amounts to .C-t.lt/IS,. IT, the totals being C 14,305,475 against £48.939.189. This shrinkage has been brought about mainly by the reduction in the imports of what may he termed luxuries. In the two months of January and hehru,i ry of this year only 1781 motor vehicles were imported as compared with IKiSI in the corresponding two months of 11)27. and 7>202 in the 15)211 term. The values of the motor vehicles imported were 6321,12/ against Co 12.121) last year and £830,5)2$ in Ipgli. 'l'liis shrinkage affects the motor trade, causing dullness. While the hanking returns are satislactory as showing that economic conditions have improved and that the overseas trade position is better conditions respecting internal trade are far Irom satisfactory. There are two items in the hanking returns that give an indication of the immediate spending power of the community, these arc the free deposits or current accounts, and the note circulation. Against the current act-mint balances cheques can he drawn at any time to meet current expenses, while the note circulation represents the money in tin; pockets of the people and available for prompt expenditure. In the March quarter the I roe deposits amounted to 621.182,1 U. and the note circulation to L'(>,37().()(>B, the two together being 630,8)8,819, which compares with CM,nil. 101 l ill the first quarter of last year. 633,!i!i!i,53J in l!)2li and £36. 155».Tf>1l in 11)2:., Ii will I’e seen front the above that the spending power of the community has contracted in the past three years. Compared with last year there is a drop ol nearly (MOO, OOO. compared with 1020 the shrinkage is C 2.800.000. am! compared with 102 J the decline is 65.700,000. This has been the cause of slack trade l within the Dominion, the drop in imports and ol unemployment. No relief is to he expected this winter and trade will only he moderately good.