MAIN OBJECTS.

Auckland Star, Volume LXIV, Issue 252, 25 October 1933, Page 9

MAIN OBJECTS.

CLEAR ADVANTAGES. EXECUTING GOVERNMENT POLICY. MINISTER'S DEFENCE. (By Telegraph.—Parliamentary Reporter.) WELLINGTON, this day. "The Reserve Bank of New Zealand will be an organisation or machine to give effect to Government policy," said Mr. Coates in moving the second reading of the Reserve Bank of New Zealand Bill in the House late yesterday afternoon. The Minister explained that the objects and. value of an organisation of this kind were: (1) The control of monetary policy. (2) Strengthening and co-ordinating the existing banking policy. (3) It should provide cheaper credit for the community.' (4) It should show a saving to the taxpayer. Mr. Coates said that, in his opinion, the establishment of a reserve bank did not in any way conflict with the various currency schemes which had been put before the House. On the other hand, he believed it to be a definite essential of any currency scheme. He read cablegrams, received from the United States and South Africa to show that reserve banks were really machines for giving effect to Government policy. The four objects which he enumerated indicated clear and definite advantages which did not at present accrue and which would benefit the community as a whole. The Same Fundamentals. Mr. D. G. Sullivan (Labour, Avon): The bill is completely in line with Sir Otto Niemeyer's scheme. The Minister; Fundamentally it is. Mr. Sullivan: And the phraseology is also. The Minister: There is no fundamental difference between the bill as now amended and the bill which was introduced last year. There are amendments, but the fundamentals are the same.

Mr. Coates dealt extensively with tlie reasons for having shareholder capital in the bank. The reserve bank, he said, should have the complete confidence of the country, and it was essential that it should have the con-, fidence of the trading banks, because they would help to provide the credits. The bank should be free from political control, and it was desirable that the share capital be spread as widely as possible. Mr. Lee: Why not among the whole of the people ? The First Investors. Mr. Coates: All the people have £1,000,000 in it. The case for share capital is almost unanswerable. It plants the roots of the institution widely through the country. He added that in to-day's mail he had received three applications for one share each. Mr. Lee: There's one born every minute. "I'm sorry you can't be serious just for a few minutes," retorted the Minister. "I won't keep you any longer than I can help." Commenting on suggestions that it would be easy for overseas financial interests to buy up shares in New Zealand, thus obtaining control of the bank, the Minister said that if Parliament thought that that would be the outcome, it could say that no shares could be held outside the Dominion. The fact that shares were spread throughout the country would give confidence to people of every shade of political thought. He also stressed the advantages of the bank's business being reviewed annually by shareholders. Mr. W. J. Poison (Coalition, Stratford) : Isn't monetary policy the State's function ? The Minister: Yes, and this is the machinery for carrying it out. He added that a further safeguard was the fact that the bank's annual report would be submitted to Parliament. Parliament Paramount. Mr. Sullivan: How could Parliament's opinion affect the bank? The Minister: Parliament still has the matter in its own hands, and it can alter legislation. Parliament is paramount, and cannot be overridden. Mr. H. M. Rush worth (Country, Bay of Islands): Can it break a contract? The Minister: That's done almost every year. The State is paramount, and no one can question that for a moment. Mr. Coates said that the organisation of a central bank would make it possible for the trading banks to play a fuller part in assisting the economic organisation of the country. Working in conjunction with the reserve bank, it should be possible to provide ample and cheap credit in times of low prices. The bank would also be a powerful factor in negotiating credits for the Government. In boom times the bank would play an important part in controlling speculation. It would control credit to such an extent that it would, not be easy for people to indulge in wild speculation. In times of stress it could take a hand and loosen credit.