INCREASED BANK RATE

Hokitika Guardian, 5 February 1930, Page 2

INCREASED BANK RATE

SUMMONS TO GREATER

EFFICIENCY

AUCKLAND, February I

“This action of the banks in raising the rate rif overdrafts is a summons to gen ter efficiency, increased caution in importing and a signal that we- must get down to ‘tin tacks,’ but there is no occasion for pessimism.” That was how the head ol one of the largest importing houses in Auckland up the position this morning, when lie was asked for an opinion concerning the probable effect of dearer money. Undoubtedly importers would immediately become keener and more cautious, lie said. This would be all to the good. No doubt there would be a tendency for imports to decrease to a somewhat marked extent. This would, have the immediate effect of giving the Dominion an improved trade balance, even though tlie price of wool had fallen and our primary products were competing on a falling market. The cost of living would, he admitted, rise in consequence of the higher bank rates, because the increased interest charges all went to make overhead costs higher. Overhead , costs . went on to the price of the goods and the consumer had to pay. s ,

“However, no one should be down in the mouth about it,” continued the importer. “Lately there has been a rather too pessimistic feeling It mqst he remembered that money is a commodity and one has to pay the price for it, .whatever it may be. Importers will, of course, be affected more or less , substantially, because there are periods of tlie year,, as for instance immediately before the opening of the season, when accommodation at the bank is necessary to facilitate the purchase of substantial new stocks.

Those goods will, of course, he slightly more expensive.

“As 1 see it, this increase in the bank rates is in the nature of a move to counter-balance the falling prices of •our primary products, and so help to stabilise the; Dominion’s trade balance. In that respect it is sound economically, '.since the-country cannot afford to have- a balance on the wrong side as we did a little time ago.” . The importer said he could not stress 100 strongly the, fact that as money became expensive and conditions: became more difficult all round as a direct consequence of the banks’ action, the necessity for efficiency and hard work in every department of a business became.niore apparent. Overhead costs must be reduced to a minimum, any that 1 could be done only by the co-operation of everyone concerned The most humble employee in every business house could render valuable service in this connection.

Another * factor which would operate adversely was the increased rate of remitting money to Great Britain .by cable. Twelve months ago the rate was only 1.5 s per £IOO, but there had been a steady advance and yesterday the rate was raised to £2 12s 6d per hundred. Thus every £IOOO worth of goods imported cost an additional £lB 10s. When that was added to the extra £5 paid in. additonal interest on overdraft the total extra, amount demanded of the importer was £23 10s. What this would mean to a house which imported £IO,OOO worth of goods at one time would be readily seen. The extra. £235 had to be added to the price of the goods. New Zealand importers would have to pay thousands of pounds during the coming year in consequence of the increase in the bank a-nd remitting rates.