AUSTRALIAN BANK FUNDS

Press, Volume LXXIII, Issue 22081, 1 May 1937, Page 16

AUSTRALIAN BANK FUNDS

HEALTHY INCREASE

EFFECT OF GOOD EXPORT SEASON

For the first time since early in 1934 the liquid resources in Australia of the 10 trading banks thaw a definite and substantial increase. The March quarter aggregates of the banks' Australian business indicate that the export season has resulted in,the replenishment of cash holdings and a substantial rise in deposits. The banking position, as a result, is now mucn easier than at any time during the last two years and a half. ■■ . Compared' with returns for the December quarter, fixed deposits with the banks have increased, by £5,990,114 and current accounts ". - £9,872,743. Both increases are due primarily tc the lift in export income. • The movement in current accounts in the export season is always a reflex of the primary producers' returns, •and it is probable that a great deal of the addition to interestbearing deposits has come from the same source. . The cash resources of the banks impose certain limits upon their ability to, lend. The fall in cash items has caused a good deal of concern, and the combination of a decline in cash and an increase in advances led to some restriction of banking activities. The position has been improving for some months, and the quarter's figures give the banks a much brighter outlook. Cash has increased and advances have been repaid, and although deposits have risen, the ratio of cash and Treasury bills to deposit liabilities has increased from 18.69 per cent, in the December quarter to 20.71 per cent, in the March quart*. •. The movements mentioned are, of course, largely seasonal. During the current quarter, when'export receipts ebb and the demand for accommodation increases, there may be some alteration. But, at the moment, it may be said that the lending ability of the Australian banking system has received a decided impetus. The increase in liquidity and the general easing of tension in the banking system should encourage those who feared a further hardening of interest rates. It justifies to some extent the opinion expressed by the Cpmmonwealth Bank board that there does not now appear to be any necessity for a continued upward movement of interest rates. It may also be held to justify the slightly lower rate offered on the new Commonwealth loan.