8.—3.

Thursday, 12th April, 1934, at 10.30 a.m. Witnesses : .Messrs. T. G. A. Harle, E. C. Fussbll, and J. Shaw, representing the Associated Banks of New Zealand. The Chairman.—We are pleased to see you gentlemen here again this morning to finish vour evidence. Several members have questions they desire to put to you, and possibly other questions may arise as we proceed. Now, Mr. Fussell, what has been the average number of notes in circulation during the past three years ? Mr. Fussell: Around about the six million mark. The Chairman.] Under the conditions existing at the present time, if you wanted to increase the number of notes, you would do so ? —lf they were required. Are they not required ? —They are not effectively required. Every one at the present time is complaining of the shortage of money, as you know. To what reason do you attribute that ? —ln my opinion it is due to the lack of confidence or the lack of sufficient avenues for trading. The man who can obtain money from the banks either by overdraft or otherwise will not use that money unless he can use it effectively or profitably. There are not sufficient avenues for the employment of money at the moment. You think that is through lack of confidence ? —Lack of confidence in the prospect of profitable trading. You think that that is what has brought about the present state of affairs ?—That is the immediate effect. Conditions overseas caused by the depression is a major reason why money cannot be profitably employed to the extent it was before. But trading has increased and improved in the Old Country ?—Yes, it is most definitely on the upgrade, and more money is being used. Could not that be made applicable to New Zealand ? —To a certain extent yes, and that is also reflected here in the price of wool, for instance. So far as the banks are concerned, if more money is wanted it can be provided. Do you think that the holding of gold in New Zealand, when public securities can be made use of instead, is advantageous to New Zealand ? —-In a broad way it may be considered advantageous, but merely to the extent that we have the gold here. It is definitely a universal asset, but there is no technical reason why it should not be held overseas, or that sterling balances be held instead of it. There is not. the same sense of security with gold anywhere outside of the country as there is in our own vaults. So that if we had no gold at all, notes and subsidiary silver and bronze coinage would answer all practical purposes would they not ? It is not necessary under legislation to hold gold ? —lt is not necessary under legislation to hold any gold here for actual banking purposes, although legislation prohibits the export of gold at present without the permission of the Minister of Finance. There is no real banking reason why it is absolutely essential to hold gold in New Zealand. Public securities would do instead I—They1—They would do—l know the question of monetary gold is a vexed question with the banks at the present time. Mr. Ashwin.] That question is settled. It is all over ? —I do not know. The Minister of Finance said that he was quite prepared to reopen the question if anything further was proposed. Mr. Ashwin : That is so. The Chairman.] Now, Mr. Fussell, it is stated that to hold the gold means a loss of about £330,000 per annum to New Zealand. l)o you think we should save that money or hold on to the gold ?—My personal opinion is that there is really no necessity to hold it here. Of course, we would not get £330,000 per annum if we sent it away. We would get interest-rates at about 1 per cent., perhaps, in the market where we had the gold. It would be held in London ? —Yes, by way of sterling balances. They would not actually hold the gold. Still, that does not alter the fact that holding gold here is a loss to the Dominion ?—To a certain extent it is. It is a loss in actual cash to the extent that you might get a small rate of interest on it overseas, but there is more to it than that. The knowledge that the gold is held here in times of difficulty means that we have a definite basis of confidence. One admits that; but that does not alter the fact that it is not compulsory to hold the gold, and public securities would do instead. There would be a big saving to New Zealand ?—The gold, at the present time, is the property of the banks, so that it is their own profits that suffer to a small extent by holding the gold here. If the gold were sent to the Old Country this country would make a slight profit out of it, and if the gold were sold at the present market price the country would make a large profit. On the present market price, that is true, but if the gold here were sent Home it would be an additional security in the Home-country, and that would bring in a certain amount of extra money to this country ? —Yes. One admits that the rate of interest might be low ? —Yes. I am not saying anything against the policy of sending it out of the country. lam stating that holding it here does, in bad or difficult times, give an added sense of security. lam not saying anything against the policy of sending it out of the country and collecting interest on it. What use would gold or anything else be if the security of the country were no good ?—lf Government security were no good, you could not do anything, but gold is a universal asset, although I will admit that £5,000,000 worth of gold would not be of much use in a time of world cataclysm. If securities became valueless you could not base much on that at all. Would not the security of a country come before gold or anything else ? —I do not think so, because national credit —that is, the security of a country —has fallen away almost to nothing in some cases, but the value of gold has not fallen away. It is always worth its market value.

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