NECESSARY MOVE

Wairarapa Times-Age, 22 October 1938, Page 5

NECESSARY MOVE

CONSERVATION OF OVERSEA BALANCES. A RECURRING PROBLEM. (Received This Day, 9.30 a.m.) LONDON, October 21. The “Financial News” points out that the alteration in the New Zealand exchange is only of technical significance, being a long overdue remedy for the trading banks’ loss when they obtained sterling from the Reserve Bank, or New Zealand. The “Financial Times” says the move is necessary to enable the trading banks to conserve their oversea balances. The “Economist” says New Zealand credit has long felt the consequences of the Government’s efforts to improve the lot of the dairy farmer and the ordinary citizen, which is commendable in principle of costly in practice. Despite Mr Savage’s assurances the British investor cannot regard the future without anxiety, owing to New Zealand being faced with the ever-recurring transfer problem. The substantial decline in trade in 1938 suggests that the export surplus will again be insufficient to provide £10,000,000 to service the Government’s debts in Britain. Meanwhile stocks remain deflated, although falls, ranging to four points since April, when pensions at 60 years of age were announced, are not entirely attributable to a general reaction against fixed interest securities. Mr Savage’s first problem in connection with the British investor is repayment of the £17,000.000 3J per cent stock in January.

The Associated Banks state that the alteration in the exchange rates, which came into force yesterday, is a normal business movement within the Reserve Bank rates of buying £124, selling £125, and in accordance with the present export and import position. The present adjustment brings the selling rate quoted by the trading banks into line with the Reserve Bank selling rate. Previously the trading banks were charging customers £N.Z.124 10s for £stg.loo, though the banks had to purchase substantial amounts from the Reserve Bank at £N.Z.125 to enable them to meet ordinary trade requirements. The adjustment also increases the payments by the trading banks to exporters by 10s on each £stgloo purchased by the banks from them.