THE FINANCIAL POSITION.

Taranaki Daily News, 24 December 1920, Page 11 (Supplement)

THE FINANCIAL POSITION.

j • HOW IT HAS ALTERED. »i " ' d AN INTERESTING STATEMENT. s e BY BANK OF NEW ZEALAND 0 CHAIRMAN. e 8 _____ o At the recent half-yearly meeting of ; . the Bank of New Zealand, Mr. Harold . Beauchamp, chairman of directors, re- , ferred to the financial position of the , country. He referred to the fact that jr the .Imperial Government had paid since . the commandeer something like t £1470,850,293 for our produce, which , had had a fertilising -effect an business, , t on trade, and on prices, generally, but f it was not wholly responsible for the , war prosperity. The New Zealand Govr eminent borrowed £80,080,025 for war r purposes and most of this money was _ obtained and spent locally But the Supplies Department has practically run , its course, and has now merely-to ara range for the shipment of its accumulated purchases, and also for the shipt ment of the butter manufactured up to j March 31 next, which has been pur- _ chased by the Imperial Government. Mr. Beauchamp continued: A very r great change in the economic conditions s has developed within the past "few t months, and the outlook generally is not so favorable as it was. There is an F "l CI * asi ?,g demand for loans on the part , of the Government, also by many local ( bodieii and large joist stock companies. , the Government issued a £2,000 000 ; loan for Public Works in April last, and v the interest rate was 5 per cent., sub- ; ject to income tax. There is now bein» offered to the .public a 54 per cent, loan ' of £6,000,000. Local bodies have obj tamed authority to borrow, in the agt gregate, about £6,000,000, and such of . them as managed to appeal to the mar- • ket early in the year secured their loans: the majority have, so far not been able to arrange their finances. .There ate probably two Reasons for this: (lj that the rate of interest is lower than most investors now expect ' to receive, and (2) the average investor l » overloaded with such securities. This ; difficulty on the part of local bodies In raising money may not be without its advantages, for it must be obvious that many of them Were influenced by a desire to carry out too ambitious programme* in respect to municipal enterprices. A great modification in the news of those in control of boroughs county councils, etc., must result from their difficulty in borrowing. This however, may prove a blessing in disguise, for when money is again available at a more moderate rate of interest, industrial conditions may then be more favorable, and the projected pubhe undertakings will iu that case cost much less than they would if put in hand now. Many joint-stock companies have raised capital by the issue of preference shares and debentures, and while, earlier in the year, 0 and 0% per rent, were considered sufficient, higher interest is now demanded by investors. Ihe banking averages for the past quarter gave striking evidence that a change had commenced. This was shown : by the vely substantial increase in the ( advances and discounts as exhibited in : the following table: Sept., 1919. Sept., 1920. , tf nnm '•"■ 28,785,870 37,191,941 ! DIBCOUn » 1,363,903 1W.86? j 30,149,773 39,017,808 ' Total Increase: £8,868,033. ( There was also an increase in the two ! classes of deposits, which show: Sept., 1919. Sept, 1920. , free Deposits .... 30,331,317 30,486 999 ' * ati Deposits 15,041,568 16,044,694 f _ 45,372,883 53,131,693 i Total Increase: £7,758,808. c The increase in the deposits is consider- I ably less than the expansion of the ad- ' vances, and it is doubtful whether the * deposits have been increased by fresli l income: it is more likelv that the in- J crease follows naturally on the increase ' in bank advances, since it is well known * that bank advances usually make bank " deposits. * v The mortgages registered and dis- " charged in the Dominion also furnish fi indications of the changed conditions. ,5., e „ twelve month * September 30 the figures are: Year to Year to t Sept. 30 Sept. 30 ' 1919. 1920. » £ £ Mortgages Registered 29,924,312 65,947 629 Mortgage* Discharged 15,078,291 3o]s4l's2o ■Amount Advanced , 14,840,021 35,405,809 The excess of mortgages registered over mortgages discharged in the past twelve months is considerably more than double that of any previous year, and is in some measure due to the mortgages registered in connection with the Government's arrangements for placing discharged soldiers on the land, and' partly to the generally inflated values of urban, suburban and rural land. The export and import returns for the nine months to .September 30 also emphasise the change that is taking place. Compared with the corresponding nine months of last year the figures are: 8 EXPORTS: 1919. 1920. £ £ Six mouths to June 30 29,570,348 22 8"4 87° Soptembw quarter ... 11,005,019 u>',m',m 40,575,967 35,185,567 Total decrease: £5,390,400. IMPORTS: 1019. ..1920. £ £ Six raontta to June 30 15,876,502 24,198,674 September quarter ... 6,516,602 18,950i970 Total Increase: £20,780,540. It will be seen from these figures that while the exports decreased during the nine months by about 12 per cent., the imports increased by about 90 per cent. This is a complete reversal of the trade tendency during the past few years, as the table from which I now quote shows:

'Figures relating to gofd bullion not available for publication. Specie excluded.

The imports for the current quarter may be expected to show a considerable increase on the figures for the December quarter of last year, while the exports, as a result of the lower prices now ruling, may not dsnot* aßy , s .

pansion. In respect to a large proportion of our exports, it toust be remembered that payment for these—wool in full and meat to the value of 75 per cent.—has already been made in ad--1 vance by the Imperial Government; consequently the real margin of imports oyer exports is much greater than that disclosed in the figures I have placed before you. In comparing imports with exports, the true position will not be shown until we are able to eliminate entirely from our exports all produce shipped on behalf of the Home Government and previously paid for. The nett result for the year must therefore exhibit a bi°| margin between exports and imports.

Imports can only be paid for by exports, and difficulty is being experienced this year, and especially since the turn of the half year, in financing the imports, I have already referred to this difficulty under the heading of exchange. In addition to financing the imports, there is the obligation of paying .interest on oitf loans raised in London.

A check to over-importation is being applied now by the operation of the jaw of supply and demand, as well as by the restrictive policy pursued by this and other banks in the Dominion. In normal times there are available four principal means for settlement of trading differences. They comprise shipment of goods for goods-that is, equalising the value of imports by those of exports; the shipment of gold; the raising of loans; and the gelling of securities. In the past, loans floated in London always jave to New Zealand a lair amount of credit With which to finance purchases of merchandise and interest on loans, but credit cannot be so readily obtained in London now, because the British money market is not able to meet all the demands that are being made upon it, even at high rates of interest. The raising of loans in London is just now out of the question. New Zealand has not yet become, to any considerable extent, an investor in the securities of other countries, so that the sale of securities held abroad 13 not a practicable method of remittance. The after-war conditions which still exist render impossible those movements of gold coin which were formerly common banking transactions. The only movements of gold at present are the shipments which are regularly made of the bullion produced from the mines of the Dominion, and which are properly included in the export figures already quoted The value of the gold exported in the nine months ended September 30 last was £580,374, as compared with £033,842 in the corresponding term of 191!). I would emphasise the 'point that, to preserve our financial equilibrium, it is imperative that we should stimulate production, expand exports by every means in our power, and curtail imports. The need for increasing the volume of our exports becomes more urgent in view of the.substantial decline in value of most of our primary products.

\enr to Exports. Imports. Total Trade Dec. 31 £ £ £ 14113 22,810,363 21,053,632 44,403.!>!I5 1914 28.233,!);!!) 21,144,227 47,398,152 1915 31,430,822 20,65S,720 .12.089,542 191G 33,381,1157 25,045,403 58,32G,4(il) 1917" 30,613,184 20,742,124 5l,355,3»S 1818* 28,438,187 24,131,729 52,569,9111 1919* 52,573,520 30,308,908 82,882,428 1820 (9m. ) 35,159,037 43,143,579 78,302,011