HIGHER BANK RATE

Ashburton Guardian, Volume 50, Issue 96, 3 February 1930, Page 6

HIGHER BANK RATE

AN AUCKLAND VIEW. NO OCCASION FOR PESSIMISM. CALL TO GREATER EFFICIENCY. ' (Special to the “Guardian.’') AUCKLAND, February 1. “This action of the banks in raising the rate on overdrafts is a summons to greater efficiency, increased caution in importing and a signal that we must get down to ‘tin tacks,’ but there is not occasion for pessimism.” That was how the head of one of the largest .importing houses in Auckland summed up the position this morning, when he was asked for an opinion) concerning the probable effect of dearer money. Undoubtedly' importers would immediately become keener and more cautious, he said. This would be all to the good. No doubt there would be a tendency for imports to decrease to a somewhat marked extent. This would have the immediate effect of giving the Dominion an improved trade balance, even though the price of wool had fallen and our primary products were competing on a falling, market. The cost of living would, he admitted, rise in consequence of the higher bank rates, because the increased interest charges all went to make overhead costs higher. Overhead costs went on. to the price of the goods and the consumer had to pay. “However, no one should he down in the mouth about it,”' continued the importer. “Lately' there has been a rather too pessimistic feeling abroad. Jt must be remembered that mon<?y is a commodity and one has to pay the price for it,' whatever it may he. Importers will, of course, be affected more or less substantially, because there are periods of the year, as for instance immediately' before the opening of a season, when accommodation at the bank is necessary to facilitate the purchase cf substantial new stocks. Those goods will, of course, be- slightly more expensive. “As I see it, this increase in the hank rates is in the nature of a move to counter-balance the falling prices of our pHniary products, and so help to stabilise the Dominion’s trade balance. In that -respect it is sound economically, since the country cannot afford to have a balance on the wrong side, as we did a little time ago.”

The ireporter said he could not stress too strongly the fact that as money became expensive and conditions became more difficult all round as a direct consequence of the banks’ action, the necessity’ for efficiency and hard work in every department of a business became more apparent. Overhead costs must be reduced to a minimum, and that could be done only by the co-operation of. everyone concerned. The most humble employee in every business house could render valuable service in this connection. Another factor which would operate adversely’ was the increase rate of remitting money' to »Great Britain by cable. Twelve months ago the rate was only 15s per £IOO, but there had been a steady advance, and yesterday the rate was raised to £2 12s Gd per hundred. Thus every £IOOO .worth of goods imported cost an additional £lB 10s. When that was added to the extra £5 paid in additional interest on overdraft the total extra amount demanded of the importer was £23 10s. What this would’ mean to a house which imported £IO,OOO worth of goods at one time would be readily seen. The extra £235 had to be added to the price of the goods. New Zealand importers would have to pay thousands of pounds during the coming year m consequence of the increase in jhe bank and remitting rates.