The Daily News. WEDNESDAY, SEPTEMBER 3, 1919, A STATE BANK.

Taranaki Daily News, 3 September 1919, Page 4

The Daily News. WEDNESDAY, SEPTEMBER 3, 1919, A STATE BANK.

To the effects of the war may, be attributed many new departures from existing customs, one of the most recent being the conversion of Sir Joseph "Ward to the policy ol creating a State bank. He stated in his manifesto, issued when he retired from the National Government, that the strain of war finance had shown the importance of governments in all parts of. the world having associated with them their own banking institutions, though he must have been fully aware that there has been an agitation going on in New Zealand in favor of a State bank ever since the State had to come to the rescue of the Bank of New Zealand. That was an opportunity pre-eminently favorable for the move which Sir Joseph Ward now advocates, and had it been seized, as many urged it should, the Dominion would today possess a State bank that would be a tower of strength to the country and a source of considerable profit. The proposal is that the Bank of New Zealand should have the first offer of becoming the State bank, but it is obvious there would be a vast differencp in the selling price of the shares to-day as compared with the time of the crash when not only were the shares at zero, but had a heavy liability that ruined a goodly number of the holders. The position is somewhat curious by reason of the Government having been the means of setting the bank on its feet and- helping it on the road to a prosperity, that has

been one of the Dominion's greatest marvels, and to have to pa 3' for that success would be the irony of fate. The question naturally arises whether the best interests of the Dominion would be served by a State bank or by an institution similar to that which was proposed in Britain —a trading bank, consisting of subscribed capital which may be used in more enterprising fashion than is the case with the existing banks, somewhat on the lines of the German banks for developing industries, trade and commerce. The Economic Conference of the Allies at Paris considered it was obvious that, after the war, finance would have to deal with brand-new commercial conditions throughout the world. It is, therefore, well worthy of consideration whether the greater benefit will be derived in New Zealand by having a State bank or a Trading bank. Mr H. Wilson Pox, director of the British South Africa Co., boldly advocated that instead of Britain straining by taxation to pay off debts after the war, she should borrow more and divert money from sinking funds to provide capital with which the State, through a Board of Imperial Development, should indulge in enterprises to yield ten per cent per annum. He also gave a warning that the success of every commercial undertaking depends on effective management, and unless it was certain that efficiency would not be sacrificed on the altar of politics, it would be wiser on the part of the State to refrain from embarking upon such an enterprise. That warning applies with equal force to the institution of a State bank. Sir Joseph insists that such an institution should be placed entirely clear of political interest, and he is satisfied that could be done. Probably the Bank of France offers the best example of a highly successful State institution of this nature, and though the capital is not wholly owned by the Government, the bank is directed, controlled and dominated by the Cabinet, the shareholders' representatives on the directorate being a merely advising body. What may suit France may not be successful in New Zealand, where party politics have an influence that is not always irreproachable, nor are Government appointments always ruled by the principles of fitness and efficiency. That some step must be taken to enable the country to cope with its financial exigencies, as well as to develop its resources and promote its industries and commerce, is beyond question. The matter is one that requires the utmost care and consideration. There is no doubt that an efficiently managed State bank, entirely free from political influence, should be a factor in dealing with the problems of reconstruction and advancing the prosperity of the country. There are, however, dangers to be avoided, especially in the temptation such an institution offers to excessive paper issue: Sir Joseph "Ward considers it would be a useful change for the Government to allow banking institutions to substitute Government stock for gold as security for note issue. Such a tendency might have a disastrous effect, on the currency. In this matter Sir Joseph would do well to follow the lead of the Commonwealth State bank, which rightly provides for strong gold reserves, which give stability not only to the bank itself but to the Australian currency as a whole. Oui currency is inflated enough as it is, because of the extra bank note issue permitted during the war, and of the excessive issue of paper money in Britain, on whom we are more or less dependent financially and commercially. Gold is the sheet anchor of currency, and the sooner we get back to it the sooner will we solve the economic troubles that are now affecting the whole of our national life.