Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image
Article image

Results of Dominion’s Import and Credit Policy A.N.Z. BANK CHAIRMAN’S STATEMENT

The Sixth Annual General Meeting of Australia and New Zealand Bank, Ltd., will be held in London on Wednesday, January 9, 1957. The following is an extract from the Statement by the Chairman, The Hon. Sir Geoffrey C. Gibbs, K.C.M.G. Overseas assets of the New Zealand banking system were reduced to an uncomfortably low figure last • December by the high level of imports which followed the removal of exchange control upon imports at the end of 1954, and by additional requirements to finance meat and dairy exports following the reversion to free marketing. These assets made a good seasonal recovery in the first half of 1956, and. at the end of September, were at about the same level as they had been 12 months previously. In response to more restrained demand, private imports were running at a rather lower level, although the reduction was not so great as had been hoped for. Nevertheless, adequate stocks of imported goods were held and it was felt that a continuation of current trends would restore a satisfactory balance in overseas accounts without recourse to direct controls. New Zealand’s record in gradually dismantling import controls in recent years has been outstanding, and although some difficult readjustments have had to be made in consequence, the move towards greater freedom is of major benefit to the communty as a whole. In recent months an examination of remaining import restrictions has been undertaken as part of a complete overhaul of the tariff system. Credit Policy In seeking to contain demand within currently available resources, the authorities have continued to favour over-all strategic controls, acting through the level of bank credit, the structure of interest rates and the composition of the national Budget, as against the tactical and piecemeal physical controls which had formerly dominated the economy. Budgetary policy, however, and the structure of controlled interest rates, did not lend adequate support to the policy of credit restraint, so that a greater burden was carried by the latter than need otherwise have been the case. Government proposals for steadying the bond market by official market operations may help to widen interest in

Government securities, and it is regrettable that, to this end, the war-time ban upon trading bank operations in this field has not been lifted. With tight control upon credit, there is no justification for this continuing restriction, as the Monetary Commission’s Report recognised. Under the very restrictive credit policy maintained through the banking system, bank advances and discounts were reduced by 10 per cent, in the 12 months ended last September. Trading Bank reserve ratio requirements have been adjusted from time to time so that the banking system would remain borrowers from the Reserve Bank at the penal rate of 7 per cent, per annum so long as bank advances remained above the officially • desired level. The reserve ratiq requirements were relaxed during the year to provide for progressive reduction in borrowing as the target for advances was approached. Even so, at the end of September banks had over &N.Z.56 million of their own funds frozen at the Reserve Bank without interest, and were compelled to borrow a further &N.Z.6.5 million at the penal rate to meet reserve requirements.

Access to the capital market remains closely controlled by the Capital Issues Committee. It is unfortunate that the policy of the committee has not permitted a greater proportion of indebtedness to the banks to be replaced by share issues to the public. Such replacement would have brought welcome relief to the banking system from the pressure of advances. Royal Commission on Monetary

The report of the Royal Commission on Monetary Affairs was in the main a strong vindication of the existing monetary system. There was criticism of some important details, notably a recommendation for more effective control of advances and a stressing of the need to provide the banks with more direct financial incentive to co-operate with the monetary authorities in a clearly defined policy. The commission also strongly advocated variable interest rates as a means of promoting a stable money system. It laid stress upon the need to give monetary policy full support by fiscal and other measures. The Government has expressed its acceptance of many of the commission’s detailed recommendations. —Advt

This article text was automatically generated and may include errors. View the full page to see article in its original form.
Permanent link to this item

https://paperspast.natlib.govt.nz/newspapers/CHP19561219.2.69

Bibliographic details

Press, Volume XCIV, Issue 28155, 19 December 1956, Page 13

Word Count
717

Results of Dominion’s Import and Credit Policy A.N.Z. BANK CHAIRMAN’S STATEMENT Press, Volume XCIV, Issue 28155, 19 December 1956, Page 13

Results of Dominion’s Import and Credit Policy A.N.Z. BANK CHAIRMAN’S STATEMENT Press, Volume XCIV, Issue 28155, 19 December 1956, Page 13