EVIDENCE TO BANKING COMMISSION

Press, Volume LXXII, Issue 21707, 14 February 1936, Page 13

EVIDENCE TO BANKING COMMISSION

USE OF TREASURY BILLS DISAPPROVED

(Received February 14, 1.35 a.m.) MELBOURNE, February 13. Continuing his evidence before the Banking Commission, Mr L. J. McConnen, chief manager of the National Bank of Australasia, claimed that the diversion of funds to the savings banks had reduced the cash reserves of trading banks, and the savings banks in turn had allowed a large part of their funds to lie on fixed deposit at the Com-, monwealth Bank to the exclusion of the trading banks. He said that in a country like Australia the scope for influencing price levels by banking policy might be regarded as limited. From the point of view of liquid reserves it would be undesirable to extend the use of Treasury bills. Any renewals of that policy might have an adverse effect on public confidence in the financial situation. However, should it be found desirable to increase the cash reserves to the trading banks to meet a continuance of the present drain it would probably be preferable that some instrument other than Treasury bills should be used —in which event the instrument should be far removed from the political sphere.