Banker Suggests Inflation Causes

Press, Volume CIII, Issue 30419, 18 April 1964, Page 3

Banker Suggests Inflation Causes

(New Zealand Press Association) HAMILTON, April 17. “New Zealanders are conditioned to think inflation largely stems from bank advances. There are many causes of inflation, but it is not always politically expedient to apply the correct remedy to some of these causes.”

Telling this today to the annual conference of the Associated Chambers of Commerce, Mr A. H. Cameron (Hutt Valley) said: “The panacea for our recurring economic ills has regularly been to speak ominously of again tightening up overdrafts, on the assumption this will ultimately ease, if not cure, the immediate problem. “It has been an easy and not unpopular excuse.” Mr Cameron was supporting a Hutt Valley remit that the Government be asked to allow greater freedom for the operations of the trading banks, in the interests of the business community.

As a bank manager, he said, he was one of the many who suffered from a feeling of frustration with the declining position that had been forced on trading banks by Government controls and policy. Other Factors The most important factors leading to inflation were;— 1. Overseas borrowing, particularly if used to bolster deficits caused by consumer expenditure on imported goods. 2. Government expenditure financed by Reserve Bank advances. This was a tempting method of finding easy money, but had been used with discretion for some years. 3. Hire-purchase lending, which was still in its infancy, but was expanding rapidly under many guises. At present it was almost uncontrollable. 4. Institutional lending. Lending by insurance companies, building societies, and finance companies, was being

expanded at the expense of trading banks because they were not subject to controls.

“There is little doubt that the activities of these organisations can contribute their share to inflation,” Mr Cameron said. The remit was carried.