WELLINGTON NEWS

Hokitika Guardian, 10 May 1929, Page 3

WELLINGTON NEWS

NEW ZEALAND IN 1928,

(Special Correspondent.)

WELLINGTON, May 8

In the “Financial Times” (London) Banking Supplement, which was issued on March 25th. last; the Hon W. P. Reeves, who is Chairman of the National Bank of New Zealand, has an interesting article entitled as above. He starts by pointing out that depression in New Zea’and and its recovery are mninly .affected by the' prices in the world’s markets of five or six large exports. When the prices of butter and cheese, wool, frozen meat, hides and tallow are high prosperity conies; when they fall, trouble ensues. This is a plain acknowledgement that New Zealand’s prosperity is dependent upon the man on the land. Mr Reeves goes on to say that from a banker’s point of view the year has been fairly satisfactory, particularly so because it has justified the policy of the banks in limiting imports and encouraging deposits two years ago. He declares that experience has shown more than o'hce lhat in a producing country like New Zealand a sharp fall in the value of primary exports is not followed as soon as it ought to be by a reduction either in the price or the volume of imports. The result is that merchants and retailors become overloaded and importers become embarrassed at the very time that producers for export see their profits cut down. The only thing for the banks to do is to take tlm unpopular step of nutting up the advance rate, and this step the New Zealand hanks took after considerable hesitation. The result was expressed in the official figures for the vear ended March 31st. 1.928, and these a'-e emphasised by the figures for the calendar year iust. end°d; these last show an excess of exports over imports which constitutes a record, and Mr Re o ves adds: “The favourable trade balance for 1928 was therefore more than £11.000.60°, and large as the balance ought to lie in the case of debtor country like New Zealand, it was larger this time than was absolutely necessary, and did a little to atone for .the two previous years.” Mr Reeves has a tilt- at the Coates Government in his reference to deposits. When the hanks put up the advance rate from 61 to 7 per cent, they at the same time raised the rates for deposits for two years and longer from 4} per cent, to 5 p n r cent. This was mainly done, as Mr Reeves states, to counter the action of the Government in taking deposits of sums as high as £4903 in t!o Government Savings Bank. The banks of issue contended that a Government savingbank was meant to encourage thrift amongst persons of small or moderate means and not to attract the surplus funds of the rich. What in practice was going on iVas that the Treasury was making use of the Savings Bank as a means of carrying on Government borrowing internally. Its deposits were borrowed by the Government and used for public’ purposes. This, declares Mr Reeves, might have been all very Well had there been money ->nough to go round. But, as it was, the millions lent in this way to the Government by the larger deposits of in the Government Pavings Batik were depleting the deposits of the trading banks, and restricting the accommodation they could offer to the public. With respect to the Associated Banks, Mr Reeves makes an able and convincing defence of the limited cooperation indulged in by the bank. He points out that in one respect the position of the banks in New Zealand is somewhat unusual. Only one of the six has its headquarters in the Dominion, and that one—the Bank of New Zealand—is owned as to onethird of its paid up capital by the Government which nominates four directors and its auditors. There is, therefore, but one bank chairman arid duo board of directors, and these are euiefiy Government nominees. For the rest banking is represented there by executive officers, managers of experience. The head men of these form a comriiitte, which meets in Wellington to settle matters of common concern to the six banks. Thus, to a certain extent the banks work together, though the extent of this co-operation is greatly exaggerated by popular rumour. With respect to the proposed new bank, Mr Reeves recalls the fact that a Bill was passed by the late Government in the final session ot the ast. Parliament for the establishment of a seventh bank of issue. “Jt seems to be understood,” -observes Mr Reeves “that the ' new institution would cater specially for the agricultural producers and land-holders, and [ believe that most of the politicians who voted for it did so under the imofessioh that its establishment would be generally viewed with lavour by the f Armors.”