‘Dilemma Of N.Z. Monetary Policy’ Discussed

Press, Volume C, Issue 29435, 10 February 1961, Page 13

‘Dilemma Of N.Z. Monetary Policy’ Discussed

(NJC. Press Association^—Co-pyny nt i LONDON, February 9, ■ “The Times” Weekly Review drew attention today to what it described as “the whole dilemma of monetary policy in New Zealand.”

Dealing with bank advances and their relationship to the country’s overseas reserves difficulties, it said: “For too long it has been merely a policy of holding bank advances steady while every other sector of the economy, financial and otherwise. expanded rapidly. •'The authorities have persisted In the belief that the trading banks should not increase their meagre holdings of Government securities. “Hence the whole of the increase in assets has been frozen in non-interest bearing statutory deposits with the Reserve Bank ‘This is a most explosive situation, and hardly one that invites whole-hearted cooperation from the banks.’ the paper said.

The review also criticised aspects of amending legislation “rushed through the House in the late hours just before the defeat of the Government in the General Election.”

Referring to changes which reduced the independence of the Reserve Bank and “reduce it to what is, in effect, a sub-section of the Treasury." the paper said: “The loss to the public of the independent voice of the Governor and possibly of the impartial assessment of economic trends and application of monetary policies is cause for regret “A further retrograde step was to grant absolute power to the Reserve Bank over trading bank interest rates, distribution of assets and lending policies."