WOOL AND WHEAT.

Auckland Star, Volume 55, Issue 95, 22 April 1924, Page 8

WOOL AND WHEAT.

DIFFICULTIES OF FINANCING. BANKS AND CURRENCY. LONDON", February 28. The. "Financial News" to-day discussing the recurrent difficulties produced by seasonal production and its marketing in the Old. World, says: — '"The difficulties which Australian banks are experiencing in financing the current harvest and wool clip have directed attention to an important aspect of inter-Empire banking co-opera-tion. Australian bankers and the Press as well, have all emphasised that it is beyond the capacity of the banks' local resources to finance these operations to ithe extent desired and required, owing, it is asserted, to the accumulation of large Australian credits in London and the impracticability of transferring the purchasing power which they represent to Australia, except in the form of imports, which might be a serious detriment to internal trade. "The suggested solution has been a. temporary increase in the Australian paper currency by the issue of, notes tothe banks against deposits of cash or money at call, held by them in London. In support of the proposal it has been contended that it would alleviate a situation which is causing considerable embarrassments to Commonwealth finance and industry. The proposal has attractions, tut we, nevertheless, think the action of the Commonwealth Notes Board in rejecting the suggestion on the ground that it would lead to inflation was a wise one nnder the circumstances. "The increase, in the notes issued would, doubtless, enable Australian banks to provide more accommodation in the financing of trade —internal trade —but the contrary would be the result as regards accommodation for Australian requirements in Britain, because the Australian credits here would, or should, be reduced by the amount of new 'currency notes issued. If they were not, it would be inflation, pure and simple. "It is a natural desire on Australia's part to reduce imports as much as possible, but it seems a somewhat farreaching proposal that this should be done by PTM-roaehing in a wholesale fashion up>H the credits in London, on which a considerable part of Britain's trade with Australia depends. This proposition certainly extends further, because by pledging the London credits against the issue of paper currency in Australia, a blow is struck at the development of inter-Empire trade. The present position deserves sympathetic consideration, but from a financial and economic point of view, the remedy does not appear to lie in the issue of additional currency against Australian credits here. "One of the causes of the excess of imports over exports—from which arises the lack of accommodation in Australia —is the very high cost of production which still operates there. Even with the tariff imported goods are cheaper than many home-manufactured articles, consequently, the public, instead of taking their own wares, % prefer the foreign ones. We, consequently think if more attention were given to this part of the problem the question of interfering with the intricacies of credit would .not present any difficulties."