The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News, The Echo and The Sun. FRIDAY, DECEMBER 19, 1930. A TIMELY WARNING.

Auckland Star, Volume LXI, Issue 300, 19 December 1930, Page 6

The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News, The Echo and The Sun.

FRIDAY, DECEMBER 19, 1930. A TIMELY WARNING.

For the cause tJiat lacks assistance, For the wrong that needs resistance, For the future in the distance, And the good that we can do.

In Australia a great many politicians appear to believe that banks are institutions which simply exploit the public, and that bankers' opinions about public administration need never carry weight with the man in the street. It is partly this strange superstition which explains the refusal of various party leaders and governments to carry into effect the' agreement reached at the Melbourne Conference in August last. The Prime Ministers of the various States then pledged themselves to see that all extravagant expenditure was cut down, and that budgets would balance. Unfortunately, these promises have not been kept, and the Australian banks, finding that their advice has been largely ignored, have addressed a further warning to the governments and people of the Commonwealth in terms even more impressive and ominous than before..

The protest that the banks have now issued deals specifically with the difficulty in which they are placed by the necessity for financing the expenditure of the various States on public works, wages and salaries. It was pointed out some time ago that, unless administrative expenditure could be cut down effectively, the banks could meet the requirements of the governments only by calling up advances already made to industrial and commercial enterprises. It is largely the fear that the reckless demands of the various governments may force such a policy upon the banks that has induced them once again to warn the country of the inevitable and disastrous consequences to which the present policy is leading.

It is said, in New Zealand as well as Australia, that, if the banks would only extend credit more widely, the increased circulation of currency would check the fall in prices and commercial prosperity would at once be restored. But the Australian banks point out that they have already extended credit on a scale "unparalleled in the history of the country." Within the past three years they have granted 'extra accommodation to the amount of £70,000,000, and yet the situation has not been radically altered. The explanation, of course, is that capitalists, having no confidence in existing conditions, decline to invest their wealth reproductively, and while immense hoards are accumulating on deposit in the banks, the commercial and industrial world is starving for lack of funds. The only possible cure is the restoration of industry and trade to a point at which they will show "a margin for the living of the producer and for the maintenance of solvency"; and that point cannot be reached so long as the governments of Australia persist in maintaining the policy that they formally renounced when they adopted the Melbourne Agreement.