STATE NOTE ISSUE.

Taranaki Daily News, Volume LIV, Issue 147, 18 December 1911, Page 4

STATE NOTE ISSUE.

Mr. Harold Beauchamp, the chairman of the Bank of New Zealand, does not view the Government's State note issue proposals with any misgivings from the bank's point of view. Discussing the subject with a London correspondent, Mr. Beiiuchamp said in Australia the Government took authority to issue up to five million pounds worth of notes, against which they were only compelled to hold 25 per cent, in go_ld as security. The notes are redeemable only at the Treasury at the capital of the Commonwealth, which for the present is at Melbourne. If there is any issue of notes over and above £5,000,000, the Government must keep a backing in gold to the extent of pound for pound against the excess. That means, of course, that the Commonwealth has the use, free of interest, of £3,750,000, representing the sale of notes to the banks. "From what I can gather from the cablegrams," Mr. Beauchamp continued, "the proposal of the New Zealand Government is to limit the issue to £3,000,000, against which they will be compelled, as in the case oi Australia, to hold 25 per cent, in gold. I take it also that these notes will be redeemable only at Wellington, but on that point lam not clear. In the minds of the public there is a great deal of misapprehension as to the profits made by the banks on their note issue. It is really nothing like the public imagine. To begin with, the banks in the past have paid a very large amount in note tax, and the cost of printing, registering and circulating the notes is considerable. For that reason I think the banks in New Zealand will accept the position as readily as in Australia." Asked if he saw anything in the proposals tending towards a State Bank, Mr. Beauchamp replied: "No, I do not think so. I think that the fact that the Government to-day holds £500,000 worth of preference shares in the Bank of New Zealand, on which they are receiving a dividend at the rate of 10 per cent, per annum, should be a sufficient argument against the establishment of a State bank. These shares, it will be remembered, were issued to the Crown when the Bank last applied to the Government for financial assistance. To pay for them the Government borrowed £900,000 at 3% per cent., so they are now nuking a clear 6'/ 2 per cent., or over £30,000. yearly." Mr. Beauchamp also had a few words to say concerning the suggested farmers' co-operative banks, to be guaranteed by the State under paper safeguards. He said that personally he thought the establishment of such hanks a most risky experiment, and with some knowledge of„the facilities which to-day are afforded to borrowers of every description in New Zealand, lie could not see any reason fot bringing such banks into existence.