PROPER USE.

Auckland Star, Volume LXVII, Issue 138, 12 June 1936, Page 11

PROPER USE.

BILLS OF EXCHANGE. RESERVE BANK REPORT. ESTABLISHMENT OF MARKET.

(By TelegTapli. —Parliamentary Reporter.) WELLINGTON, Thursday. Discussing tlic use of bills of exchange, the annual report of tlic board, of diiectors of the Reserve Bank of New Zealand, presented to the House of Representatives by tlie Minister of Finance, the Hon. W. Nash, to-day, states that although a bill market was a useful adjunct to the financial structure of any country, it was not desirable to attempt to force the use of bills upon the trading community unless tliis means of financing transactions could be proved to have special advantages. While such a market in New Zealand might be regarded as a highly desirable objective, its complete establishment did not appear to bo capable of immediate realisation. Nevertheless, the board was of tlio opinion that all practical steps should be taken to promote such a development, and that the proper use of bills should lie encouraged as much as possible in reducing the rate of discount to a level considerably below that of the trading banks' overdraft rate. "One object of the board was to create conditions in which producers, manufacturers and merchants would have the opportunity o' testing whether the balance of advantage for them lien in the use of bills discountable at a relatively low rate, or in the more flexible overdraft at a higher rate," states the report. "In recent years the use of Treasury bills has been extended very considerably in many countries, and it is not unusual for such instruments to form the major part of the contents of the portfolios of dealers in bills. In those countries Treasury bills provide a Useful and economical means of financexpenditure of a temporary nature, I and the board is of the opinion that 1 .recourse to this means of borrowing, if, kept within reasonable bounds, would lot only lie convenient and economical for the State, but would in addition assist to develop a bill market. ' "However, it is considered that' the issue of Treasury bills should ordinarily he restricted to such extent as is necessary to cover expenditure incurred during certain periods of the year in the I anticipation of revenue or other receipts' to be received later, and to such further strictly limited amount only as can be 1 outstanding without risk to the ' ' -ci.il structure."