THE MONEY MARKET

Southland Times, Issue 20081, 19 January 1927, Page 6

THE MONEY MARKET

BIG DEMAND FOR CREDIT,

SHOWN BY BANK RETURNS.

CONTRACTION IN DEPOSITS.

ADVANCES INCREASE.

The banking returns for the past, quarter are not as satisfactory as could be wished. There has been a big shrinkage in the deposits, especially the free deposits, while the advances have increased substantially, and the note circulation shows an appreciable contraction, indicating a lessened purchasing power. If the demand on the banks continues, and the deposits show further signs of shrinking, the rates for money may harden. However, the economic position, though satisfactory, is not so bad that it cannot be set right with care and economy, and that in a very short while, states the Dominion.

The banking averages for the December quarter reflect the trading conditions. Although the trade returns for last year are not available at the time of writing, they are bound to disclose an adverse balance, for the figuress for the eleven months showed an excess of imports over exports amounting to £3,857,590. The banking returns show that the deposits have declined by over £3,000.000 while the advances increased by £2,700,000.

Taking the three classes of deposits, the figures compare with those for the December quarter of 1925 as under:—

Dec. 1925. Dec. 1926. Deposits. £ £ £ Gov’t. 3,696,534 2,383,149 1,313,385 t Free 25,189,553 23,131,103 2,058,450* Fixed 28,840,809 21,105,547 264,738*

49,726,896 46,619,799 3,107,0977

* In crease. t Decrease. The fixed deposits show a small increase, but the other two classes of deposits are substantially less than in the corresponding quarter of 1925. The shrinkage in the free deposits of current account balances is rather large and is the first contraction to be noted since 1922. Except for a small gain of £19,955, shown by the Commercial Bank, all the institutions lost heavily in this class of deposit. Taking the aggregates of the free and fixed deposits for the December quarter of each of the past five years, the figures compare as under:— Free dep. Fixed dep. Total dep. Dec. Qr. £ £ ' £

1922 23,542,867 17,561,552 41,104,419 1923 24,261,042 18,569,163 42,830,177 1924 -24,776,888 19,899,611 44,676,499 1925 25,189,553 20,840,809. 46,030,362 1926 23,131,103 21,105,547 44,236,650

The advances have increased by £2,769,369, and all the banks show increases except the Bank of Australasia, which reduced advances by £24,775.

The discounts show a contraction of £50,585, the totals being £1,876,772, against £1,927,357. Increases are shown by the Union Bank, £5617; Bank of New South Wales, £2l, 643; and the Commercial Bank, £6674. The decreases are Bank of New Zealand, £47,805; Bank of Australasia, £29,099; and National Bank, £7615. The aggregates of the advances and discounts for the December quarter for each of the past five years show as under:—

Advances. Discounts. Totals. Dec. Qr. £ £ £

1922 41,770,678 1,660,338 43,431,016 1923 44,427,858 1,801,536 46,229,394 1924 44,227,557 1,708,897 45,936,454 1925 46,627,070 1.927,357 48,554,427 1926 49,396,439 1,876,772 51,273,211

It is usual for the advances to exceed the deposits in the December quarter; at all events, that has been the case for the past seven years. This will be seen by the figures given in the table below:—

Excess of Deposits. Advances advances Dec. Qr. £ £ £ 1922 41,104,419 43,431,016 2,326,597 1923 42,830,177 46,229,394 3,399,217 1924 44,676,499 45,936,454 1,259,955 1925 46,030,362 48,554,427 2,524.065 1926 44,236,650 51,273,211 7,035,561

The excess of advances in the last quarter is very large, and very significant. The note circulation in the past quarter averaged £6,757,707, or £189,970 less than in the corresponding quarter of 1925, while coin and bullion showed an increase of £69,765. The aggregates are as follow: Coin and Circulation. bullion. Dec. Qr. £ £

1922 6,763,908 7,884,110 1923 6,643,900 7,867,841 1924 6,749,595 7,722,470 1925 6,947,677 7,740,219 1926 6,757,727 7,809,894 As the free deposits were less by £2,058,450, and the note circulation lower by £189,970, the purchasing power of the community, as compared with 12 months ago, is £2,248,420 less, and that must, make a difference to domestic trade.

It cannot be said that tho economic conditions are as satisfactory as they were a year ago, still, there is no occasion for any serious concern, for with ordinary care the position will soon be righted. There is a tendency for the imports to shrink, and if that is continued the balance of trade should soon be in our favour.