RESERVE BANK

Wairarapa Times-Age, 25 July 1940, Page 4

RESERVE BANK

PROFIT FOR PAST YEAR POSITION OF STERLING EXCHANGE. ADVANCES FOR HOUSING. (By Telegraph—Press Association.) WELLINGTON, This Day. After making provision for rebate on unmatured Treasury bills and for depreciation in other assets, the net profit for the year ended March 31 1940, of the Reserve Bank of New Zealand was £361,363 6s lOd, according to the annual report of the bank tabled yesterday in the House of Representatives by the Minister of Finance, Mr Nash. An increase of approximately 43 per cent in expenditure is reported, the main factor being the higher cost cf the note issue, while salaries and office accommodation also accounted f:. larger sums. On the other hand, the report says, there was a marked increase in revenue, occasioned mainly by the considerably higher level of advances to the State throughout the year, which was much more than sufficient to counteract the reduction in the rate charged by the bank for this accommodation. The yield on sterling funds was also greater than in the previous year. The increase of £8,794,294 in the bank’s holding of sterling exchange- on March 31 was accounted for partly by the proceeds of the bulk of the Dominion’s exports under war-time arrangements with the United Kingdom Government being received at a much earlier stage than before and partly by delays in deliveries of imported goods beyond the months for which authority to remit in payment for them was authorised by the Reserve Bank. Dealing with advances, the report says that Marketing Department advances as a whole declined by £3,708,’821, though the transactions now embraced a wider range of commodities than was the case before the war. This development was another consequence of the new basis on which the Dominion’s exports of dairy produce, meat and wool were purchased by the British Government!. The new arrangement, besides being based on prices which did not entail the accumulation of further deficits, provided for payment to the producers by methods which involved only small temporary advances in respect of dairy produce and meat, while the wool account was actually maintained in a credit position.

Advances for other purposes increased by £6,735,000 during the year and of the total amount outstanding £10,400,000 represented advances for housing purposes. The rates ruling on March 31 for this accommodation were as follows: 1 per cent for the first £5.000,000, 2 per cent for the next £5,000,000, and 3 per cent for the balance. As only 1 per cent was being charged on advances to the Marketing Department up to a total of £5,000,000. it was possible for the Government to borrow up to £25,000,000 from . the bank at an average cost of 2 per cent per annum. “In general, production, business activity and employment were fairly well maintained throughout the year, a falling-off .in some kinds of business unfavourably affected by import restrictions being offset by an expansion of local manufacturing industries,” says the report. After analysing the figures for external trade, the directors report that export values increased by £l,-800,000,-imports decreased by £8,800,000 and the rise in the excess of exports over imports was £10,600,000. Commodity prices are also discussed by the report. During the first period (April-August), the all groups index number of wholesale prices rose by 3-1 per cent, imported items by 2J _ pei cent and locally produced items by 4 per cent. During the second period (September-March), wholesale prices rose generally by more than 6 per cent, the increase being almost entirely due to a rise of about 11 per cent in the index number of prices < I’ imported items, while the prices of locally produced items rose only slightly. Retail prices, the index number of which included rent as well as food, clothing, drapery, footwear, fuel, light, and a largo number of miscellaneous items, showed a slight rising tendency throughout the year, the increase during the first period being 3 per cent and that of the second period being not quite 2 per cent.