FINANCIAL POSITION.

Taranaki Daily News, 10 November 1922, Page 8

FINANCIAL POSITION.

GOOD PROSPECTS FOR NEW ZEALAND REVIEW BY MR. HAROLD BEAUCHAMP. An interesting review of the financial position here and at Home was given by Mr. Harold Beauchamp, who returned to Wellington by the Ulimaroa on Wednesday, after some months of travel in Great Britain and the United States. Interviewed by a New Zealand Times reporter, Mr. Beauchamp, who was looking very well and fit, said: “So far as New Zealand is concerned, I should think that the prospects are good for cheaper money for mortgages, and that the outlook for our primary products is quite encouraging. We are. assured of good markets for our lamb, our mutton, and our daily produce; but, on the other hand, the outlook for our beef is distinctly gloomy. That is due to over-production in the Argentine, the lifting of the embargo on the importation into Britain of cattle from Canada, and increased production of beef in Brazil, China, and other countries, a large quantity of which is directed to the London market.

“ONLY FLY IN OINTMENT.”

“It seems that producers in this country will have to look for a low price for beef for a very long time to come. That, so far as I can see, is the only fly in the ointment.”

“The genera! outlook in Australia is also good,” added Mr. Beauchamp. “Australia i<- likely to get 50 million pounds for her wool clip this season, and prosperity in Australia is naturally reflected in New Zealand, seeing that so many Australian banks are represented here, and they will therefore be able to allocate more money for the legitimate trading and industrial requirements of this Dominion. Quite recently, I understand, the rate on overdrafts has been reduced by 4 per cent. here. On the other hand, although rates for money are so exceedingly low in England for short term investments, I think it probable that, with the consequent expansion of trade and industry in Great Britain, these rates will not continue so low as they are to-day. When I left England, at the middle of September last, the rate for over-night and weekly fixtures was on the basis of lj per cent, per annum; but if loans were required for anything like a long term borrowers had to pay 5 to 6 per cent. In fact, some companies were issuing long term debentures and were offering as high as 8 per cent, per annum, which shows that so far as investors were concerned, they did not care about locking up their money for long periods until they could ascertain more definitely what the trend of the market was likely to be,”

LOW VALUE OF MONEY

“Until August was entered,” continued Mr. Beauchamp, “money was very cheap, so that short loans ruled at II to 2 per cent., and three months’ Treasury Bills were allotted at one and eleven-sixteenths per cent. This was rather remarkable, in view of the fact that Government securities could still be bought to yield 4| per cent., and industrial companies had to pay 54 to 8 per cent, upon debentures and preference capital issued. The difference is probably due to the time required to secure enough savings to be locked up in long investments. Credit produced by Government expenditure was largely of a nature that could only be employed in short ; form, and hence the cheapness ,of money, which has since moderated owing to the modest deflation which had taken place. Then the need of the Government to offer Treasury Bonds at 44 per cent, prevents long-dated stocks from appreciating. “A general view may be expressed in this way, so far as the average members of the community are concerned. People unwilling to face risks or mortgage the future, living from hand to mouth or day by day, so to speak, are glad of little. Those who venture, on the other hand, hope for the big thing in time.

BANK RATES. “During the past 12 months or so, the Bank of England rate fell from 6 A to 6 per cent, on June 23, 1921, to 3j to 3 per cent, on July 13, 1922. It is generally concluded that these reductions reflect the lack of confidence arising from the depression in trade; and, of course, this factor has played a great part in leading to the reductions in the bank rate from 7 per cent, in 1920 to 3 per cent, to-day. There is, however, another element in the matter, and that is a return from the abnormal position, created by the war and its aftereffects, to something more normal. There would not have been a 7 per cent, rate in 1920 had it not been for the fact that a huge over-trading position had been created, which required a high rate of money to bring it into check. This war-trading has, of course, disappeared; and the effect is seen in a lower value of money and reduced activity on the part of the banks. Lombard Street’s diminished rates are now reflected in the activities of Threadneedle Street, and in the appreciation of Stock Exchange securities.”