CHAOTIC

Nelson Evening Mail, Volume LXIV, 8 January 1931, Page 5

CHAOTIC

AUSTRALIAN EXCHANGE MARKET

CONSIDERABLE MYSTIFICATION EXISTING (United Press Association—By Electric Telegraph—Oopyright) LONDON, 7th January. Considerable mystification exists in Australian circles over the persistent markin'? down of Australian securities, some of which have fallen fifteen points during the last year. Even when all other gilt-edgeds advanced on the yearend reduction of the New York discount rate, Australians further slumped, and are still described as weak or heavy. It had been hoped that Sir Otto Niemever’s return would have been followed by some reassuring works to dispel nervousness, but in strict accordance with the traditions of the Bank of England Sir Otto Niemeyer has so far maintained absolute silence. Comment is heard that Australia seems to be shirking ’genuine economies in favour of increased taxation while nervousness exists, lest the demand for inflation exceeds incidentally depreciating value of savings bank deposits, life insurances, mortgages and similar investments, thus weakening Australia s ability to face the next two years’ London obligations. Another fear is that “Jiang’s extravagances” in addition to jeopardising the solvency of his own State may embarrass the Loan Council through its partial responsibility for the interest on State loans. There is also disapproval of bounties or guaranteed prices which are thought will only further adversely affect Australian exchange. The hope is expressed that Mr Scullin will meet any challenge by caucus courageously, and steer Australia on a sound course in the interval before large loan commitments fall due in London in 1932, when no conversion or new issue could be attempted .if stocks remain at the present low le\ el. After the banks’ announcement that a chaotic condition prevailed on the Australian exchange market most Australian banks pending the clearing up of the position refused to deal, except in small amounts, large transactions being held over wherever possible. The “Financial News” in an editorial says it is generally admitted that the Bank of New South Wales forced the hands of other banks when it was most important that the banks should cooperate on an agreed policy. Moreover the heavy decline in the value of the pound can only be taken as a measure of failure to make effective adjustments between prices and wages costs, upon which the restoration of currency to gold parity must depend.