WELLINGTON NEWS

Hokitika Guardian, 19 April 1930, Page 2

WELLINGTON NEWS

f .THE MOMETAIIY BAROMETER

(Special Correspondent.)

WELLINGTON, Aprli 16

The quarterly banking returns are looked forward to by an increasing number of people, for financial and economic affairs are receiving a great deal of attention from an increasing number of business men and this is all to the good. A good many people expected the banking returns *for Maicli to show striking adverse features and such people will be very much disap-1 pointed for the returns are by no means unsatisfactory. The worst feature is that there is an abnormal growth in the advances as compared with the corresponding quarter of last year, the increase being £7,271,832, nnd another adverse feature is that the demand deposits or current balance contracted by £1,830,921. Against these must be placed the fact that the deposits both free and fixed in the aggregate exceeded the advances by £355.436, and the note circulation is greater by £46,144. In the March quarter of 1927 the advances exceeded the deposits by the huge sum of £0,271,996 and yet there was no real financial stringency in the country. The free and fixed deposits show a decline of over one million, the figures being £54.032,241 against £55,345,495. This shrinkage in deposits taken in conjunction with the enormous increase in the advances indicates that the pressure from outside obligations such as paying for imports has affected the position. With respect to the advance it must be admitted that the banks have stood bv their customers handsomely. Compared with a year ago the advances made by the Bank of N.Z. increased by £3,940,629 equal to over 20 per cent.; the Union Bank shows an increase of £1,061,490 or nearly 20 per cent. The increase shown by tbe Bank of N.W.S. amounts to £674,431 equal to nearly 12 per cent. The Bank of Australia shows the smallest relative increase for at £250,783 it is only equal to 6 per cent.. The National Bank of N.Z. shows an increase of nearly 14 per cent with advances £1,174,970 greater than last year. The Commercial Bank of Australia increased its advances by £169.529 or over 11 per cent. An outstanding feature of the returns is the progressive growth of the fret; deposits which show an increase of nearly £lO,000,000 over the past four years. This is an unusual phenomenon and can only be explained by assuming that some people with loose funds have not sufficient confidence either in themselves or in the prevailing economic conditions and have handed over the funds for bankers to invest in banking securities. To some extent this has been warranted for commodity prices have been on the down grade. Another remarkable feature 'of the banking returns is in connection with the purchasing power of the' community From the banking returns a good idea can be obtained of the spending power of the people. The note circulation and the current balances are the two items that give indication for the note circulation represents the currency in the possession of the people and available for immediate expenditure and the current account balances are available for cheque payments. In the past two quarters these two items totalled £32,153,972, and this is larger than in any quarter since June 1926 when the amount was over £34 millions. Since then the £32 million mark had not been touched until last quarter. Thus it will be seen that the position during the first quarter of the year was quite good, but it would be unwise t obuild upon that for the economic changes that have taken place during the quarter will tell their tale in the current and succeeding quarter. • The fall in'" commodity prices has been too pronounced and too serious to be viewed as a passing inconvenience. It is believed to be such by some people, at any rate no attempt bas been made at readjustment, that is bringing values of other goods - and services in some relation to the new low level df prices ruling for our primary products the sole source of tbe national income. Those readjustments must be made and when they arei in the process of being made that is when the shoe will pinch. This recession in commodity prices has long been predicted by economists. For i several years certain leading econom-

ists .pnrt’cnlarly in Europe have been of the opinion that the world is facing a shortage of gold, with a gradual downward movement of commodity prices. This view is based on the belief

that the world’s physical value of trade Ls increasing faster than the amount of gold available to handle it. According to one estimate' the increase in the gold supply during the next live years will be equivalent to only about twothirds of the increase in demand at existing price levels. Should the gold supply fail to expand in proportion to the demands upon it necessitating a general downward revision of prices, it is considered to lie likely that the process would be gradual rather than abrupt