WELLINGTON NEWS

Hokitika Guardian, 22 November 1929, Page 2

WELLINGTON NEWS

NEW YORK MONEY LOWER

(Special Correspondent,)

WELLINGTON, November 18.

The crash on the New York Stock Exchange was evidently much more serious than could be gathered from the brief cable messages bearing on the subject. The crash itself was due to the over-capitalisation of future earnings, so much so that the returns from many concerns was down to 2 per cent. This was one factor in the situation, hut the more ■ important matter has been that since the beginning of the second half of the year business has slowed down. Tims for;instance building operations which have been of immense influence in mass production showed considerable ' falling off. The United States Steel Corporation, according to the “ Iron Age,” was in need of new business, and the motor industry was also curtailing operations. The New York slump is most likely to accelerate this slowing down process. To help restore the position Congress is to be asked to make some taxation reductions, and the New York Federal Reserve Bank has hastened to reduce money rates, the rate of that institution now being 4-J- per cent., which is the rate maintained by the other eleven Reserve Banks of the country;

The immediate effect of this reduction was to see shares advance sharply, but there is little likelihood of the previous speculative craze reviving. The New York rate is now H per cent be- , low London, and that should result in the transfer of funds from New York to Europe and therefore a big demand for sterling exchange. As a matter of fact as soon as the Bank of England rate was raised to 6.j per cent the exchanges, moyed in favour of London, and if the Bank of England rate is not further reduced sterling exchange will reach the,gold point and gold will recross the Atlantic. The Bank of England gold reserve is well below the minimum rate ~ fixed by v the Cunliffe Commission and it is therefore unlikely that there will, be much of a reduction in the rate. Possibly , the Bank rate will be reduced this week by £ per cent, bringing it down to per cent, but jt is not ’likely' to go. below that: until there is*greater clarity. i ■[' Then i there' is. the setting up of ■ the International 'Settlement: Bank, which will involve transfers of gold from various points ini-Europe to Switzerland, where the headquarters is' to be located. Comparatively high money rate's are likely to i rule for the balance of the year. Cheap money irl London would be a relief to Australia as the Commonwealth’ Government is in need - of, funds which are difficult and costly to obtain in Australia. In addition to these difficulties the decline olf values in produce is hampering domestic trade. Tim outlook for 1930 is said to be causing some anxiety to the merchants ;Th v the Commonwealth who are reducing.'stocks as much as possible in view of the probability of limited business. The . woollen mills on the other side have found it necessary to reduce their prices 7 to .10 per cent and are doing business with retailers on • a (wholesale basis which is resented by merchants.'-.s •*. ; 1 v

EXPORTS; FROM NEW ZEALAND. The true export year ends on September ,30tli, for then we get the full seasonal figure. The imports of produce from the Dominion (excluding reexports and specie) amounted to £54,765,574 for the year just closed, which contrasts with £54,759,723 for the previous year, and £44,929,283 for 1926-27. The increase for the past year was exceedingly small, and as there have been two seasons’ almost alike in the volume of returns it would seem that the price level has reached the peak. Both years show a great increase on 1926-27, and this increase has been mostly.due to increasing prices, increasing production playing a small part. Wool exported in the past year realised £15,893,160 against £16,599,995 in the previous year, while the quantity exported was 693,601 bales against 657,667 bales. That is that while there has been an increase of 5} per cent in quantity there has been a decrease of per c§n.t in value. And a farther decline in values seems certain' judging by the sales, and if that reduction amounts to 25 per cent

on last 1 ' season the return from wool will be no greater than it was in 1926-27. when the yield was £12,629,992. There was a slight contraction in frozen meat, the value being £10,292,662, but the quantity exported exhibited a shrinkage, the figures being 3,427,801 cwt against 3,664,607 cwt in the previous year. It is doubtful whether frozen meat will make as much money in the present season as in the past. The freezing companies in the North Island that buy fat stock for freezing for export are giving’ about 8d to BJ-d per lh for fat lambs, which is about 2d below last season’s price. There may be an increase in the quantity exported because there has been an increase in sheep, but adverse climatic conditions have caused .a big mortality, and the increase may not be as large as anticipated. Butter and cheese both show steady expansion. The value of the butter exported in the twelve months was £12,754,805 against £11.524,380, and the increase is partlv due to the increase in volume, the figures being 1,580,255 cwt against 1,483,245 cwt. The figures for cheese are also very satisfactory. The quantity exported was 1,741,257 cwt against ],499,719ewt and the value £7,128,431 against-£6,,381,359. If prices are reasonable the present year should show further increase as the quantities of cheese and butter exported so far show appreciable expansion.