WELLINGTON NEWS

Hokitika Guardian, 25 May 1928, Page 4

WELLINGTON NEWS

CREDIT, MONEY AND POLITICS

(Special to “ Guardian.”)

WELLINGTON, -May 23

Wo have not heard anything recently of the demand for a reduction in the overdraft rate regarding which the -Minister for Finance indicated that he would again approach the Associated Hanks and urge a reduction. When the previous request was made by the Minister the banks admitted that the position had improved, hut thought that time should be given to ascertain whether the improvement is likely to be permanent or whether it is merely a temporary phase. The banks prefer to wait until the returns for the second quarter of the year are available before committing themselves to reducing the overdraft rate, and there the matter stands at present. The Government by reason of its interest in the Hank of New Zealand is to some extent justified in approaching that institution with a request to reduce rates, but the Government is not alone interested in the Hank of New Zealand, there are other holders of the ordinary sh ; res and the “ D ” shares, and they are a numerous body.

What would be thought of the ordinary shareholders if they requested the Hank to either reduce or raise its over draft rate, and if it is wrong for the ordinary shareholders to interfere in this matter it surely is equally wrong’ for the holders of preference shares or any other shares to interfere. Tf the Minister for Finance has approached the Associated Hanks it is a worse offence for the Government has no connection with the banks apart from the Bank of New Zealand. The executive officers of the six banks trading in New Zealand are exports, and five out of the six hanks are responsible to directors outside the Dominion, and these bank officers must vu-t with extreme caution. They know more about the purchase and sale of credit, for it is the chief point in their daily work.

Political interference with banking affairs is very risky, and the Finance Minister’s interference appears on the fa ce of it to be a political move in view of the pending general election. The annual meeting of shareholders in the Hank of New Zealand will he held about the middle of next month and it is hoped that a holder of ordinary shares will open up a discussion on Government interference with bank

management. If the overdraft rate is reduced so must the fixed deposit rate, and if both rates are reduced what will be tbo effect? It may stimulate imports and individuals and companies with overdrafts will save a little, hut there will be no groat effect on the general public. There is not likely to be any reduction in the mortgage rate and this is where the shoe pinches most. Stock Exchange securities, and especially those that can be classed as gilt-

edged, will rise in values, for the reduction in the deposit rate will tempt a good many depositors to invest in safer securities which would return a higher rate of interest. Where help is most needed is in connection with mortgages of broad acres, hut private investors have not recovered confidence

in such investments. Although a good deal has been done in adjusting values of farm properties, in the opinion of a good many values still are rather high, and tl lis is to some extent checking sales of farm lands and preventing men with limited means from engaging in farming. The community cannot he too often remind ed that the posperity of the Dominion depends on the efforts of the pimarv producers, and therefore everything should he done to help them, at the same time there should be a readjustment of prices of farm lands. Too many of these were over-capitalised during the war and early post-war period, anti the inflation should be squeezed out. The same applies t > many businesses which are very much over-capitalised. In many retail trades there is excessive competition, with excessive over-head charges, and so prices of goods and services have to lie maintained at a high level. Good times will come, hut they would come sooner ii' we faced economic facts.