Labour Begins Battle Against Savings Bill

Press, Volume CIII, Issue 30478, 27 June 1964, Page 3

Labour Begins Battle Against Savings Bill

(From Our Parliamentary Reporter)

WELLINGTON, June 26. The Opposition today declared its intention to fight legislation to permit trading banks to operate savings branches.

When the Private Trading Banks Bill was introduced to Parliament, the Leader of the Opposition (Mr Nordmeyer) said the measure would be bad for the trustee savings banks, bad for the Post Office Savings Bank, and bad for the economy as a whole.

For these reasons, the Opposition would vote against its introduction, he said: and he called for divisions which resulted in the bill being introduced and given a first reading by 35 votes to 30.

For two hours, the House argued the effect of the bill on total savings, the transmission of profits by the trading banks abroad and the future of the present savings banks.

Leading the attack on the bill, Mr W. A. Fraser (Opp., St Kilda) said he very much regretted that eleventh-hour appeals to the Government to reconsider the question had fallen on deaf ears. He felt the move was “absolutely unnecessary and unwise.”

“We would take Issue with the Government over the idea that it will increase savings,” Mr Fraser said.

Australia, he claimed, was worse off as a result of introducing the change the Government was proposing. Mr Fraser asked why the move was necessary when a lot of areas were not served by trustee savings banks. It had been said it would bring competition and revitalise savings, but this could have been done by just removing the 25-mile limit on existing trustee banks. He wanted to know why the Government had not mentioned the proposal in its 1963 election manifesto. “The Government has no mandate to bludgeon it through the House, and it is acting against the interests of the country and against the wishes of the majority of the people.” Effect In Australia The Under-Secretary for Finance (Mr Muldoon) said trading bank savings branches had been established in Australia in 1955. As a percentage of the gross national product in Australia during the seven years to 1955 small savings amounted to 1.4 per cent. But they rose to 2.1 per cent in the next seven years.

In New Zealand during the first period, they came to 2.1 per cent but dropped to 1.7 per cent in the second seven years.

“These figures are one of the main reasons for the move as our savings do not compare favourably with Australia’s,” said Mr Muldoon.

It was an essential economic move to increase the small savings of the nation. Mr S. A. Whitehead (Opp., Nelson) claimed the move was being made for the

wealthy people of the country. Trustee savings banks should be extended.

P. 0.5.8. Growth

The Minister of Internal Affairs (Mr Seath) said provision was being made for extension of trustee savings banks. “They are not being stopped.” Mr Seath maintained that the establishment of new savings outlets did not stop established savings institutions from growing. The Post Office Savings Bank had continued to grow after the introduction of the trustee banks.

Mr M. A. Connelly (Opp., Riccarton) said the situation in Australia had been entirely different when the move was made there. ’ The Commonwealth Bank had been in the savings field. Savings in New Zealand were half as great again under the present system as in Australia. “We're getting a better rate of growth here and we could do better without this move.”

Not more than 10 per cent of the profits created by the trading banks’ proposed venture would go overseas, said the Prime Minister (Mr Holyoake). The Bank of New Zealand handled about 45 per cent of all banking business in New Zealand and it could be expected to handle a similar proportion of savings. The trading banks domiciled overseas had a proportion of New Zealand shareholders, and of the profits going overseas as dividends to shareholders, a considerable proportion would be ploughed back into the banks.

These profits going overseas would also now be taxed by the Government.

Savings Compared

Mr N. V. Douglas (Opp., Auckland Central), said the average saving a head in New Zealand was £199 compared with £124 in Australia, and they were better pounds, too. “The entry of trading banks into the saving field will not add to the level of savings in this country.”

The Minister of Housing (Mr Rae) said the only profits the trading banks would make would be on handling charges. Seventy per cent of the money, on which 3 per cent interest would be paid, would be lent to the Government at 3| per cent.

The balance would enable the banks to make long-term •loans for such things as housing and capital assets for industry. Possible Profits Mir R. J. Tizard (Opp., Pakuranga), said that, over four years, the Post Office Savings Bank had paid interest of 3 per cent, lent the money at 3i per cent, and made £2.2 million. “That doesn’t sound like ‘no profits’ at all.” If the Post Office could make a profit like this on 0.5 per cent, then the trading banks could expect a healthy profit, he said. The Minister of Agriculture (Mr Taiboys) said that there was a conflict between Opposition arguments. Mr Douglas had developed the theme that there was a certain quantum of savings which could not be exceeded. Mr W. Nash (Opp., Hutt) had emphasised that trustee savings banks had not affected the Post Office Savings Bank. Figures covering the time during which trustee savings banks had been operating indicated that the latter view was correct. Between 1955 and 1964, there had been a growth of 192,000 in the number of trustee savings bank accounts, which had increased by £66 million. In the same time, there had been 480,000 new accounts in the Post Office Savings Bank, and an increase in savings money of £152.1 million, said Mr Taiboys. Mr Holyoake was utterly incorrect in trying to. claim that 90 per cent of the profit from savings operations by the trading banks would be retained in New Zealand, said Mr N. E. Kirk (Opp., Lyttelton).

The pattern of dividend payments was three to one in favour of overseas shareholders, he said, and in the

case of' the National ; Bank only £1 in £4 was paid out in dividends in this country. The Year Book showed that the Australia and New Zealand Bank, the Bank of New South Wales and the Commercial Bank of Australia had, in aggregate, greater capital resources than the New Zealand banks and handled the greater part of New Zealand’s business in overseas transactions. Sir Leslie Munro (Govt, Waipa) Said he favoured competition for the savings banks and that the current accounts in trading banks at present frequently remained inert. “Every trading bank In the United States has a savings branch in its premises,” he said. The Opposition could not object to the Bank of New Zealand, which a Labour Government had nationalised, operating a savings branch. “The real objective of the Opposition is to nationalise all banks.” “Retrograde Step” Mr Nordmeyer said that Mr W. G. V. Fernie, of Christchurch, whom no-one could say was a member of the Labour Party, had echoed what many people had said about this measure as a retrograde step. “Mr Fernie, as a member of the Economic and Monetary Commission, earlier advocated that this should be done, but he did this without the knowledge that the Government would increase the number of trustee savings banks. “The Government has completely killed off the case for private banks operating savings branches,” he said. “I suggest that even now the Government should reconsider the whole question; otherwise, the trustee savings banks will not have a real opportunity to increase savings in this country.”