CENTRAL BANK FOR N.Z.

Press, Volume LXIX, Issue 20957, 11 September 1933, Page 11

CENTRAL BANK FOR N.Z.

1 Uooinent on Minister's - ' Statement ipRESS OPINIONS PROPOSAL COMMENDED IN LONDON Kricui' TO Vxirr," i-rmss -ibSVL'tATiorr, ' Kew Zealand./ (Received September 10, 9.20 p.m.) LONDON, September 9. ijjje chief London newspapers tave prominence this morning to the statement by the Rt. Hon. J. G. Coates (Minister for Finance) about the proposed reserve bank for New ~. gland. The statement comprises a precis of the explanatory articles bout the reserve bank which have been offered to the New Zealand press. Commenting editorially, the city editor, of "The Times" says that the Minister put forward cogent arguments for the establishment of a reserve bank in New Zealand. The essential difference between the functions of a central bank and those of a commercial bank was that the former exercised general control and supervision of credit and currency conditions, while the tatter's business was to collect deposits from and make loans to its customers. Commercial banks worked competitively and must therefore be regarded primarily as trading and profit-making institutions. A central bank acted as banker to the Government and to the commercial banks, but its chief function was to act as the noteissuing authority, to control credit in the nation's interest, and to maintain the stability of the currency, which was the foundation of all contractual relations. , Because of the delicate problems arising from time to time, it was desirable that the administration of a central bank should be independent of politics, and that its policy and practices should be national and not sectional. It must, therefore, be guided primarily by the financial and economic welfare of the country as. a whole. Its business was not to make profits over and above what was required to remunerate the. capital employed in j*i and to prevent it being a burden •fe the taxpayer. Business Advantage. The advantage of reserve banking from a business point of view was ; that.it centralised the surplus cash resources of the banking system, and thus provided a mobile fund to be used in case of need. The editorial concludes: "New Zealand's monetary standard for many years has been the sterling standard, the chief factor in regulating the volume of credit, in New Zealand having always been the amount of London balances. As the Minister rightly points out, the prosperity of the Dominion hinges 1 to a great extent on events in Great Britain, and therefore New Zealand I cannot be indifferent to her monetary policy. These facts cannot be disputed, and one of the chief advantages of a reserve bank would be that it would enable New Zealand to act in even closer co-opera-tion with this country." The "Daily Mail," in a leading article, says: "That the importance of proper central bank facilities for carrying out a considered monetary policy is fully recognised in New Zealand is apparent from the decision of the Government to proceed with the bill for the formation of a duly constituted reserve bank. To be effective, monetary control must be centralised, and with its own centra] bank the Dominion will be in a better position to co-oper-ate in any international monetary action to raise prices, while it wili also be able to assist in the flattening out of unnecessary trade fluctuation." The editorial concludes with the statement that New Zealand's latest step will be watched with sympathetic interest in the . city. NECESSITY FOR BANK PUTTING MONETARY POLICY INTO EFFECT "My experience as Minister for Finance has shown me that in order to carry the Government's policy l "to effect we must have a central b ank," declared the Rt. Hon. J. G. Coates during his address at Akaroa °n Saturday. , A great many alarmist statements «M been made about the bank, he fw. and one man had gone so far l S i? say tilat if; would mean bloodSfll,i Tne reserve bank was to be «rabl»hed to put into effect the dietary policy laid down by the Other proposals were * «ote Issue and Currency Board 5* a State Bank; but neither of jse fulfilled the proper functions BI a central reserve bank. .Mand, India, South Africa, and tantt' all had tneir reserve flfc. -no. the establishment of such nank was being investigated by a c °mmission in Canada.