THE MONEY MARKET.

Ashburton Guardian, Volume 51, Issue 206, 13 June 1931, Page 4

THE MONEY MARKET.

POSITION IN AUSTRALIA.

NEW ZEALAND LOAN IN LONDON.

THE WEEK ON ’CHANGE

(Written for “ The Guardian ” by Investor.)

The outstanding event of the week has been the decision of the Australian Premiers, in conference, to turn their backs on all plans of inflationary character and on. compulsory courses for the reduction of interest charges, and to undertake the greatest conversion transaction ever known in the Commonwealth, or indeed in few other countries. The very idea of converting all the internal issues hearing interest above 4 per cent, is staggering. It affects the bulk of the issues, which range up to as high as per cent., but with the greater part bearing interest of between 5 and 6 per cent. The politicians have tried to avoid tilings unpleasant, and some of their schemes would have ruined any country. Mr Lang still seems to have a few such in reserve. But tlie steady weigth of economic pressure has brought the leaders, at any rate, to face the real issues, and the result is that the plans to be enforced are based on the recommendations of the expert committee, and that consisted of economists and bankers. At last, it would appear, the expert in matters financial has come, in part, into his own, and it is to be noped that, in future, some way will be found- to enlist the- economists in the interests of national financial stability. Most countries would have avoided costly mistakes had that course been adopted long ago. The first result lias been to strengthen the Australian issues in overseas markets, and once the country has shown its determination to put its house in order there will be practical assistance from those quarters. It is going to be a supreme test in Australia, and the- road will be hard and long, but when this stage of tlie journey has been -covered let us hope that the people will begin to study tlie courses that led the country into such a position, sheet home the responsibility and take all precautions that there is no more, extravagance in the political life.

The Lender* Issue. Next in importance has been the comparative failure of the New Zealand loan in London. The public response was surprisingly limited, and tlie underwriters must carry the burden until such time as they can place the issue privately. The soundest explanation, to my mind, is that the banks and other institutions that usually subscribe for large holdings cf short-term issues have purchased so many, in times of financial stress, that they* did not want to take more. Maturinjg loans '.usually find their way into the hands of the banks and financial houses, because those investing trust funds take every opportunity to secure longer investments and thus avoid any loss of interest. They sell the maturing issues anc] buy something with a longer life. The Dominion will get the money, of course, hut we must realise that it is costly, and that, as far as possible, we must finance cur programme •ourselves. Such a course, would mean draining the markets of money required for industry and commerce, so that there will luive to be a most careful review of our resources and wise use of the money available. The Importance of Reserves. From time to time, when referring to the state of depression that exists, I have stressed, as the outstanding lesson, nationally and individually, the importance cf reserves. It would not be over-stating the case to say that our neighbour lias been saved from a disaster by the reserves of the trading banks. A* most capable financial writer commenting on this aspect the other dav, said, referring to one leading bank: “The reserves are still intact and available for meeting any contingencies that arise. ’ The absence of any far-reaching crash in the industrial world in the Commonwealth. may be put down to the same tiling. There are manv men and women in New Zealand to-dav who are able to carry on, despite the lack of work, solely because thev provided the in sc l\ es with a reserve fund. It makes for stability and safetv. We would luive been in sore straits had not tlie Treasury possessed a substantial balance to bring into the annual accounts. Reserves are the things, in good days or bad. The remarks hv way of introduction have exceeded the usual space because there have been no developments in the markets calling for comment. Business During the Week.

Dealings in Government issues have been light, with tax-frees at from £9B to £9B ss, 5$ per cent, stock at £9B and £9B 10s and 5} per cent, issus at £99 2s 6d and £99 7s 6d. In the banking group buyers are a little above last week’s levels. A.B.L. s were sold at 18s 4d and could be p need at 13s 6d, Commercials at 14s 2d, E S and A’s at 78s and 70s. Unions are firmer at £7 8s 6d and £7 9s 6d and the onlv sale of New South Wales was at £24 17s 6d. New Zealands have been the most active but prices , eased from 48s Gd to 47s 6d and after the balance sheet was issued, 48s 4(1. Insurances have been very quiet with onlv one sale thus far South British at 51s. For Goldsb rough Morts 18s Jd has been the ruling price. \Z. Breweries were weaker with business at from 34s 2d to 33 Gd but recovered to business and buyers at 34s 3d. For Staples 32s Gd ami 32s have been paid. _ N.Z. Refrigerating partly paid have been in demand at from 3s 8d to «jS 10? J. * Mi’nino- continues the most active market." King Solomons went to -s lOd with substantial tuniover while Waihis have been steady at 14s 8d and Grand Junctions moved from 2s lid to 3s 2d. Mt Lye Is are fractional{> easier with sales at from 16s 103 to 16s 8d cum. div. , Taken altogether a very quiet veek, but if the Melbourne conference plans o-o into effect, and in the Dominion we keep tb? major issues in the national life well to the fere, we shall be m a position to benefit materially once things improve in the consuming markets" There are many things unit we cannot control but we can and must maintain production, lailure m that respect would have serious tonsequences for the whole country.