STATE BANK.

Taranaki Daily News, 23 July 1920, Page 5

STATE BANK.

OPPOSED BY PREMIER. THE BANK OF NEW ZEALAND. GOVERNMENT'S SATISFACTORY POSITION. (By Wire. —Parliamentary Reporter.) Wellington, Last Night, An interesting statement was made by the Prime Minister in the House this afternoon regarding the relations of the Government to the Bank of New Zealand.

Mr. Veitch had moved tlie second reading of the State Bank Bill, and had urged that the establishment of a State Bank in this country would solve most, if not all, of the financial troubles of the Government. In proof of his assertion he cited the case of the Commonwealth Bank, claiming it had made enormous profits for the Federal Government.

Mr. Massey said the position of the New Zealand Government was not parallel with that of the Commonwealth Government at the .time the Commonwealth Bank was established. At that time the Commonwealth Government was not a a partner in any of the big banking institutions operating in Australia. The New Zealand Government was a partner in the biggest bank in the country—the Bank of New Zealand —and the Government found it a very profitable business. Mr. Wilford: A junior partner. Mr. Massey: Yes, but in the actual management of the institution we have more say than the shareholders themselves. ,

Mr. Parry:.. The bank "would have died only for the State guarantee. KEVEMUE FROM, THE BANK. Mr. Massey said he thought the State had acted wisely and properly in coming to the rescue of the Bank of New Zealand. He wished the House to understand that the Government drew a very large revenue from the bank. The bank nolo issue was taxed to the extent ,of three per cent., and under this alone the Government had collected from the Bank of New Zealand £312,220. In the accounts of the Commonwealth Bank he could find no record of any payment for tax on notes. Out of the profits the Government received ten per cent, from preference shares, 50,000 of them, and there were also 14,750 B shares. Under these heads the revenue from the bank last year had been £8X6,776, with the addition of some £37,000 for interest.

Mr. Massey confessed that he did not much like State institutions of the kind proposed by the honorable member in hh Bill He thought the relationship of the Government 'to the Bank of New Zealand had been nf mutual benefit. As to the outlook, he thought that tliers was a good prospect of the income of the State from the tank being considerably increased. There would be legislation dealing with the bunk during the 'preesnt session. Mr. Veitoh: To let the shareholders water the stock. Mr. Massoy said that this was not at all the purpose of the Bill. The provisions .of the Bill would be beneficial to the 'shareholders and the Government alike. He urged that while (lie State was a shareholder in a highly successful bank it would not be good brines* for the Scate to open "another Dank to compete with the well-estab-lished bank, "to the restriction of its own interest in that bank.

Mr. Ngatn: Why not let the shareholders take over the State's share? Mr. Massey: Oh, no; wa have no intention of doing that. Mr.'Parry. It is too good a paying concern.

Mr. Lysnar: Have not you power to take over the bank? GOVERNMENT'S POWER. Mr. Massey: We have power to' take over any property in this country. He went on to say that he thought there could be no better arrangement than that at present existing between the Government and the bank. In addition, the State had the Savings Bank, which was not a commercial bank. Mr. Luke: Could not you extend the use of that bank? Mr. Massey said he did not think it would be wise for the Government to do this, and he would be very much opposed to any proposal to alter the constitution of the Post Office Savings Bank. The idea had got abroad that the bullion and coin behind the note issue was small in comparison with the issue. He was glad to inform members that such was not the case. Ho was not.at the moment expressing an opinion a3 to whether too many notes had been issued or not; that was another matter which, for the moment, he did not wish to discuss, but for the quarter endjfd March 31 the notes in circulation had been £7,705,560, while the coin and bullion held by the banks was £7,807,212. He thought this was a very satisfactory state of things. The notes were legal tender at present, and possibly it might be necessary to extend this provision by other legislation during the present session. The bank was safe and the Government had a very profitable investment in it. In such circumtsances he did not favor the establishment of a State Bank.

OBJECT OF THE, BILL. COMPETITOR OF PRIVATE BANKS. By Telegraph.—Press Association. Wellington, Laßt Night. In the House of' Representatives this afternoon, Mr. Veitch moved the second reading of the Dominion State Bank Bill, which, he said, was framed with the idea of establishing a Slate Bank similar to the Commonwealth State Bank. Such an institution, with its own bank notes, would not debase currency, as was generally suggested, while it would be of infinite benefit to local bodies and to the State generally. The amount of interest which would be saved would more than compensate for the amount of taxation now received from private banks. It was proposed to empower the Treasury to advance to the bank £500,000 to give it working capital. In Australia it was intended to transfer to the Commonwealth Bank £1,000,000, hut it was never necessary to transfer any money, which, he claimed, was a most satisfactory position. Loans were raised for Australia cheaper by the State Bank than they could have been raised in London, being 4s <Jd against £2 73 6d per cent. War loans had T»een raised cheaply in New Zwland. hut ha doubted if mora cheaply