ADVANCES ON OVERDRAFT

Press, Volume LXXXIV, Issue 25588, 1 September 1948, Page 3

ADVANCES ON OVERDRAFT

REVIEW BY BANK OF NEW ZEALAND OVER-SUPPLY OF SOME GOODS <P ™2 August 31. Rank S K T aSe 1 ~ th . e ad vanees of the ° f New _, Zealand to customers for the year ended March 31, 1947 was substantial and was caused by the rebuMffiv" 1017 ® fading and the •dorV^ S « Up ,2 f depleted merchandise list vAa/ ter th / war ’ but th e increase ♦ho year was due to other causes said TW. nUal ’V°f t of the directors, oart L°° k , part in the latter rini t £ lu 4 ' an , d early ln 1948 and. was ‘.J 16 . volume of imports which I 0 ™ 5 / ‘?, at peri °d and which vv, aJm , ost all importers to lean ♦! eavily J on their bankers to enth? S° od s to be landed. i-T“e fear that the relative import licences would be cancelled if goods S^ r n%i not « de J lve^ ed in 1947 induced Pecial efforts by English exporters , s j lp P ers ’ and goods were disirL an alm °st embarrassing quantity, it appeared evident tfcat mere was at present some overstockV? some lines of merchandise, though basic materials were still in short supply. Overstocking might possibly cause some trading losses to those involved, but these should not oe serious, and the present abnormal position should adjust itself in the course of time. "Sudden Strains” The high price of goods, particularly imported goods, called for larger capital resources, and the recent experience was a reminder that the banking system could be subjected to sudden strains. Referring to the Reserve Bank’s control of advances, the report said it was designed to avoid the use of bank credit for purposes which would more suitably be financed by loans or capital L rom other sources. The operation of the policy had not hampered ordinary trading business, but it had been much misunderstood by the general public. That it had not prevented an increase in advances was obvious, but without it advances might well have been higher. ' Such a policy must be reasonably flexible if it were not to force hardship on certain people, and the Reserve Bank had administered the policy with every consideration.