DOMINION INTERESTS

Evening Post, Volume CXVII, Issue 103, 3 May 1934, Page 14

DOMINION INTERESTS

BANK OF AUSTRALASIA

CONTROL OF EXCHANGE

Mr. A. Whitworth, chairman of the Bank of Australasia, London, in addressing shareholders of the bank at the annual meetirig pointed to an interesting detail of the year's working which the balancesheet did not show, that exchange transactions throughout the year for customers were substantially up, due both to increase in prices and volume of business. "The liquidity of our position is such that for every £1 of our current accounts we have 13s 9d in specie, Government notes and cash," Mr. Whitworth remarked, "and' for every £1 of total deposits (£37,833,000) 0s 2d is held in the form of specie, cash, and securities of the highest class easily realisable.

"If you turn to the profit and loss account, gross profit is clown by £48,000, but, with a reduction in charges of something over' £37,000, mainly in taxation, our. net profits are up; this alone would not have, justified us in increasing the dividend for the year by % per cent, had we not found it unnecessary to provide so much against doubtful debts as we have had to do in recent years. At the same time as the dividend is raised we are increasing the carryforward to £175,165. I may also tell you that the strength of the bank in its inner reserve is being fully maintained." RESERVE BANK. Referring specifically to New Zealand, Mr. Whitworth said that "during the year the internal public debt of £115,000,000 was, with the exception of £475,000, voluntarily converted V.rith a reduction of 20 per cent, in interest charges. The bill establishing the Centra] Reserve Bank has been passed, and the Bank's first Governor has just arrived in New Zealand. Until his appointment Mr. Lefeaux was an official of the Bank of England, where his career was distinguished by exceptional ability. "The new Bank takes over the note issues of the present New Zealand banks on August 1 next. This transfer has raised a matter (of acute controversy between the New Zealand Government and. the noteissuing banks on the question of the price which the Government will pay the banks for the stocks of gold which the new Bank will take over. Ido not propose to deal in detail with what is a highly tebhnical subject; since August, 1914, along with many other things, the whole conception of gold as a backing for currencies has altered.. Prior to that date, when gold freely circulated in the pockets of the people, gold was regarded as the private property of banks and anyone who possessed it. : "If the public interests of New Zealand demand the establishment of a. Reserve Bank." Mr. Whitworth said subsequently, "the trading banks are well advised in my judgment, to facilitate its establishment. They would appear, however, to have a genuine grievance if the gold compulsorily acquired from them is in excess, as indeed it may be, of the backing required for the currency needs of the country, leaving a surplus available for sale at a profit. • .. CLAIMS OF THE BANKS. "The business of this Bank will not be hampered by the loss of its note issue, nor do I thiuk that the attitude of the Government of New Zealand towards this controversial question can be explained as indicating a general desire to attack private property. Even at this late hour I believe the trading .banks would be satisfied if some recognition, however moderate, was made in satisfaction to them that the claims they have put 'forward were not altogether 6elfish and without substance."

Hie impression he wished to convey from his remarks, he said, was that there was improvement in the present position and in the outlook for Australia and New Zealand and that the financial and commercial structure is ready and capable of taking advantage of every change for the better in ■world conditions. "These, however, today are based so much on political factors as to make prophecy . m regard to them difficult. I foresee that the Commonwealth Bank-and the, Reserve Bank of New Zealand will play an important part in controlling exchanges,' and*that in future rates will become more stable so that the margins between buying and selling, which at times were wide and profitable to' the banks in the past, will be much narrower. The banks must look to increasing trade from an increased population if their earnings are to. come back to what we were accustomed to1 in pre-war days."