TRADE AND FINANCE.

Auckland Star, Volume LVII, Issue 26, 1 February 1926, Page 4

TRADE AND FINANCE.

THE MONEY MARKET.

ADVEKSE OUTLOOK.

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il'y Te!o?raph. — Spe-ial to 'iMJir. ) WELLINGTON, this day.

A' 'in , iiiniM-il iner-tinp "f shareholders of tii"' E-iurable Building and Investment Company "t Wellington, held today, the chairman (Sir Harold Beau-r-hanip tlit rtVaing with the monetary position in Ni'w Zealand, .-aid: "It is probiilile that this year attention will h<. fr,i.-u-sed money and markets, and thrri.' ;ire indications that the economic conditions of the country will neeessitat." very careful handling. It is my opinion thru money iv New Zealand will he both Bi-areu and'dear, and I incline to this view because of the monetary movements London and New York. The advance in the re-discount rate oi New \ork Federal Reserve Bank from :IJ per cent to -1 per cent, though primarily intended to eliminate, speculative featurea in American Stock Exchanges, must have an influence on the monetary situation in London. A year ago, when the re-dis-count rate of the Federal Reserve Bank of New York was raised from 3 per cent to 3k per cent, the Bank of England found it necessary to raise its discount rate from 4 per cent to 5 per cent. That was early in March last year before Britain hud reverted to the gold standard, and may have had some relation to that event. However, it is important to bear in mind that New York now dominates tlie world's money markets. and London cannot act independently of New York as she was ble to do prior to the war. The Bank of England rate may not be raised as the result of the movement in New York, but it will certainly prevent any reduction in the rate. Furthermore, there is evidence that with the embargo on the issue of foreign and colonial loans removed there is bound to he a big rush of borrowers on the London market. Two foreign loans, one for a million and another for four millions, were rushed by eager investors; while the Queensland loan of £2,500.000 and the South Australian loan of £1,800.000 failed to attarct investors, for the .underwriters were left with OS per cent of the Queensland loan and with ti3 per cent of the .South Australian loan. The two Australian State loans* carried 5 per cent and are on the trustee list, but the two foreign loans issued carried 7>V per cent, and this is what attracted investors. It is apparent that Dominion loans must compete with these foreign loans, and it is obvious that a n per cent rate is ineffective. Underwriters cannot be expected to nurse the bulk of colonial issues just for the pleasure of doing so. The Dominions borrowing in London must expect to pay something more than 5 per cent by way of interest. New Zealand Rates. "The rates ruling in New Zealand must bear some relation to those ruling in the world's monetary centres. We know that those borrowing from the Advances Department must pay hig-her rates than were current last year. Loans to workers now bear 6£ per cent; on loans other than for redemption of mortgages, <i$ per cent; on loans for redemption of mortgages, 6i per cent; and on loans to local bodies, 0 per cent —all subject to rebates on prompt payment, but plus sinking funds. Loans for buildings on a 36£ years' term will involve the payment of 6J per cent, assuming prompt payment. The banking returns for the past quarter show that the process of leaning on the banks to a greater extent than usual has begun, and the advances show an increase of £2,617,973, while i-he deposits have increased by only £1,353,863. The bankruptcy returns are also adverse, for there were approximately 6.39 bankruptcies last year, or 15 more than in 1924, with farmers again in the lead. The Produce Markets. "When we review the state of the produce markets we have to realise that wool, frozen meat, butter and cheese are all realising lower prices than a year ago; and so- far as wool and meat are concerned this drop is most pronounced, I estimate the loss of income, owing to the decline in market values, at approximately £12,000,000; and wool and meat will be responsible for about three parts of the total. Because of this the margin between exports and imports will be very narrow, and unless the Government and local bodies borrow largely outside of the Dominion the demands on the banks will be very pronounced. With the contraction in the value of our exports the people will have less opportunity of saving; consequently there will be less new capital available to meet the increasing- demands of borrowers, many of whom will bo obliged to go without or greatly modify their demands. With a shrinkage in the spending power domestic trade will contract, and that will mean a certain amount of unemployment. The call of the moment is for economy—strict and stringent, economy in all departments of the State in particular. Ifc would also be very helpful if the State interfered less in commercial affairs. Control Boards, pools and embargo are noit conducive to expanding business. After all, it is on the efforts of the individual that the prosperity of the country depends, and not on Government control of industries and embargo on imports. The Freezing Industry. "If there is one industry in the country that is in a parlous condition, it is that of meat freezing. Most of the freezing companies made heavy losses in the past season, and to-day mutton and lamb are selling at 15 per cent to 20 per cent below the rates ruling last year. But this is not all, for, owing to the adverse climatic conditions, less fat stock will be available."