MONEY RIDDLE.

Auckland Star, Volume LXVIII, Issue 234, 2 October 1937, Page 7

MONEY RIDDLE.

STATE SUPPLY. MYSTERY MILLIONS. COME FROM POST OFFICE. USEFUL SAVINGS BANK. (By 11. T.D.) WELLINGTON, this day. After the presentation of Mr. Nash's second Budget there should at least be one thing clear, and that is where the Government lias been getting its money. The answer to this riddle has kept anxious financiers guessing here for months past. And the answer has been so simple that the wonder is it was not evident all the time.

The mysterious millions, of course, have come from the Post Office. This is clearly revealed by the statement in the Budget which gives the increase in the total of public debt domiciled in Xew Zealand as £7,784,000, "of which £5,013,979 represented Departmental investments and the balance issues to the. public in connection with the purchase of the Southland Power Board undertaking" (this involved approximately £1,500,000) "and the cancellation of shares in the Reserve Bank and Mortgage Corporation." To this is added the revealing sentence that "no public issue was made to meet Public Works expenditure which was financed from internal resources."

Xow it is quite obvious that only one Government Department has five millions to lend, or anything approaching that figure. For the most part the funds of State Departments are rigidly controlled. The Public Trust Office, of course, has a constant growth of assets under its control, and though the_ bulk of these is in the form of existing investments, there are realisations front time to time, and undistributed money is always added to the common fund

of the office unless the will precludes this course. But the office has neverj been able to turn over £.1,000,000 in a single year to any Administration. The Public Works Department has little in reserve apart from its liydro-electric department, which has around £1.000,000 invested, which money was collected under the provision of legislation demanding the creation of such a fund. This money is safely invested where no Minister of Finance can get at it. The State insurance undertakings, it appears, have been pursuing a course independently of the Government, and the Government Life Insurance Department is finishing its current financial year with all its money out and working on an overdraft.

Post Office Savings Bank. | Inevitably, these facts throw one back' on the Post Office and its useful Savings Bank. And here there have been spectacular advances. There is the authority of the Postmaster-General for stating' that latterly the Savings Bank deposits have been rising by half a million a month. At Duncdin, on August 2, he revealed that the excess of deposits over Iwithdrawals for the June quarter was £464,185- In May the acting-Prime Minister said that the deposits in the Post Office Savings Bank were £5,149,000 higher last March than they had been in, March, 1936, and within reccnt days Mr, Savage, when answering Opposition criticism, cited an increase in workers' savings, in all savings banks, apparently, of £10,000,000 since the 10 per cent cut had lieen restored. Xow Government bonds have always been the chief source of investment for the Post Office Savings Bank funds, and the major part of their immense assets of £50,000,000 has long been placed at the disposal of the State.

But though the Government has found its way here for the large sums it needs to put through its ambitious plans of public works and public buildings, it is undoubtedly troubled about the general situation of public finance. The aspect whjch is causing Mr. Nash concern is the refusal of the banks to advance largej sums to local bodies at the low ratesj of interest which the Government has set for these loans. Within the last few days the Otago Harbour Board was rebuffed when it sought £40.000, the fifth issue of a £350,000 loan, for .'{o years at 3J per cent.

The Labour - controlled Wellington Hospital Board, with its ambitious,

scheme for a £000.000 new hospital which may cost .C 1,000.000 by the time it is equipped, had to obtain a £oso t ooo loan from the Government Life Insurance Department, which for sonic reason has been shrouded in secrecy. This is the real issue behind tho vague statements of the Prime Minister that "complaints have been reaching him from all over the country" that the banks are not providing the service which the country lias the right to expect, and that if they do not provide this service, then "the State has the right to step in" and furnish it. Banks Display Reluctance. Tlie banks are understandably reluctant to advance money at from 3 to 3i per ■cent for a term of 30 years, especially at ia time when the Government is taking credit to itself for the fact that export lvalues are rising and is admitting that living costs are rising, too. What the depositors think about this determined move to keep down interest rates on their money no one has even speculated upon.

However, it appears to be a vague intention of the Prime Minister, if not of the Minister of Finance, to take over the Bank of Xew Zealand in all its operations unless there is some easing of the position over local body loans. This course naturally has the support of the extremists in the party, who would like to see all financial institutions nationalised. But at present there is definitely no decision on the matter, though the Government is feeling the irritating realisation that it is not yet all-powerful in the financial field and not completely equipped to deal with a lenders' strike.

Tn their recent overtures the local bodies who asked that since they were unable to obtain loans elsewhere, the Government should create a special pool] from which advances should be made, has led to nothing for the simple reason that the Government has not yet discovered where it could obtain the money to do such a. thing. In any ease it is not considered to be a function of the central Government to supply local (bodies with funds, especially when it I needs what money it can obtain for its I own large plans.

Nor docs the Government sympathise with the attitude of investors (with whom the banks may be classed) that it is desirable to exercise all possible eare just now when placing - inev. so as to ensure the safety of pii 'cipil. Under Labour, it appears, all investments are to be regarded as safe. i