RESERVE BANK LENDING

Press, Volume XCIX, Issue 29189, 27 April 1960, Page 21

RESERVE BANK LENDING

Change In Form Of Statement

A change in the form of Government borrowing from the Reserve Bank became effective this month. The change is in line with recommendations by the Auditor-General (Mr C. J. Atkin) in his last report to Parliament and affects several items in the weekly return qf the bank. In the week ended April 6 the bank’s advances to the State (for purposes other than marketing) fell from £ 42.6 m to £2.3m, a drop of £ 40.3 m. In the same week the bank’s investments in New Zealand rose £ 34.5 m to £71.3m. Before this change, the State’s borrowings from the bank by way of Treasury Bills and overdrafts were included under “advances to the State.” “Investments in New Zealand” formerly comprised the bank’s holdings of Government securities in New Zealand —acquired either by open market operations, or by direct purchase from the State. Mr Atkin’s Report In his report, Mr Atkin said the amount of money borrowed by the Government from the Reserve Bank from time to time was not shown in either the Public Accounts or in the figures issued periodically by the bank. “Current transactions are therefore not ascertainable from the published figures and a change in the method of setting out the facts is necessary if the public is to be fully informed,” he said. “The simple solution suggested last year . . . would have clarified the position in the published figures. Current Government borrowing, all of which could be done on overdraft . . . would be shown each week under the heading ‘Advances to the State.’ On the other hand, when the Public Account was in credit, as it was in March, 1959, this would also be shown clearly.” Comment by Governor

A Wellington report says that all the bank’s holdings of 1 per cent, three-month Treasury bills have been exchanged for 1 per cent. Government stock. The change was purely technical, according to the Governor of the bank (Mr E. C. Fussell). Mr Fussell is quoted as saying that the change did not indicate any alteration in Reserve Bank lending policy, nor in Government policy on the use of Reserve Bank credit. “The change does, however, make for greater clarity by putting in a separate category longer-term Government borrowing from the Reserve Bank,” he said. Shorter term borrowing, the day-to-day advances to the Government in anticipation of revenue, would now all be made by overdraft under the heading “Advances to the State” (for non-marketing purposes). Mr Fussell added that previously, only a relatively small proportion of the advances in anticipation of revenue were made by overdraft. The change became effective from April 1.