RESERVE BANK BILL Opposition Condemns Exemption Of Firms

Press, Volume CIII, Issue 30603, 20 November 1964, Page 14

RESERVE BANK BILL Opposition Condemns Exemption Of Firms

(From Our Parliamentary Reporter) WELLINGTON, November 19. Strong criticism of the Government’s intention to exempt finance companies, hire-purchase firms and stock and station agents from the control of the Reserve Bank was expressed tonight by the Leader of the Opposition (Mr Nordmeyer) during the second reading debate on the Reserve Bank of New Zealand Bill. He said these concerns operated in a way which did not always work to the benefit of the country. They should have to guarantee reserve in the same way as did the trading banks.

Mr Nordmeyer said that it was the intention of the Gov- : eminent, as expressed in 1 clauses 37 and 38 of the bill, i that the Reserve Bank should 1 have power to deal with finan- ’ cial institutions which, in effect, carried out banking : activities. These would include ; stock and station agents and hire-purchase firms. “It was thought when the bill was introduced that these firms would be controlled by the Reserve Bank,” Mr Nordmeyer said. “There is nothing more dangerous than borrowing short and lending long.” He reminded the House of one occasion when stock and stations agents had found themselves in difficulties because of a sudden fall in overseas prices. Farmers required their money back, and stock and station agents had to draw on the banks at a time when others were being cut down. “It has been stated in the press that pressure has been brought to bear on the Government, and that these clauses will be dropped,” Mr Nordmeyer said. “Last night the Minister did not say this —but he did say that because banking was not the principal business of these firms, it would not come under review. “It seems fair that if the Reserve Bank can say to trading banks: ‘A certain portion of your profits will be deposited with the Reserve Bank’, then it should be able to say the same to these firms, which, after all, are quasi-banking institutions.” Take-over Bids Referring to take-over bids, Mr Nordmeyer commented: “It may be that the method outlined in the bill is the best method of dealing with the problem. I have my doubts. The bill introduced by the member for Riccarton earlier in the session had a better way. It was his view that decisions of this nature should be left to an independent authority of five persons.” There was still a case for development capital to come into New Zealand, he said, but everything demanded on certain factors. There was no real value, for instance, if an overseas company bought its way into a hire-purchase company. “I believe New Zealand should work to the time, not far distant, when we shall develop our natural resources out of our own capital, and not rely upon funds from overseas," Mr Nordmeyer said. He asked the Minister of Finance (Mr Lake) why the Government removed from the Reserve Bank Act the provision that the Governor and deputy-Governor of the Reserve Bank should have a background of banking experience. It seemed the Governor should be a man of actual banking experience.

The under-Secretary for Finance (Mr Muldoon) said Mr Nordmeyer, as Minister of Finance had introduced a similar measure on October 21, 1960, when it was given a first reading. It was given a second reading on October 26 and the House rose two days later. That had been an important bill, almost as important as the present one, yet it had been introduced only a week before the House rose for the General Election. The Labour bill sought to empower the Minister to make representations regarding the management of the Reserve Bank and the conduct of its business. The present bill retained the power to tell the bank what policy it should carry out, but not how it should conduct its day-to-day business. Mr Muldoon said Mr Nordmeyer had questioned the Government raising loans and then paying the proceeds to the Reserve Bank. But this procedure took surplus money out of circulation, reducing inflationary pressures, and had no effect whatever on Reserve Bank lending to the State. There was £l3O million of New Zealand investment in Australia alone, which gave some indication of the cushion behind New Zealand even if no more were invested there, Mr Muldoon said. However, the Government needed the taxation from current earnings on overseas investment. Borrowing Justified The Opposition had attacked internal borrowing but what was this other than ; another aspect of savings? ' How could use be made of ' people’s savings if no-one . borrowed them? How could . the P. 0.5.8. and the trustee I savings banks invest their depositors’ savings with the

Government to good purpose if the latter were not a borrower? Mr Muldoon said the Government had found stock and station agents completely cooperative and there was no reason to introduce additional forms of control. “A prominent man, if we believe the newspapers, has had his say ahead of considerations which gave rise to the bill,” said Mr R. J. Tizard (Opp., Pakuranga). Mr Tizard then referred to the movement of Wright, Stephenson and Company Ltd.’s shares during the period in which discussions were going on with the Government on the bill. Fluctuations in price fitted in with “pressure that was brought to bear.” Increases in the price of the shares while the discussions were going on amounted to a total of £257,000. “We can’t see why the Government changed its mind,” said Mr Tizard. “Is it any wonder members on this side of the House think the Government is just playing with the problem. These institutions are able to subvert the Government and banking policies.” Sir Leslie Munro (Govt., Waipa) said the Government could answer these “slurs” of Mr Tizard as could the chairman of directors of the company. “Surely any representative of such a substantial company is entitled to make representations to the Government,” -said Sir Leslie Munro. “Stock and station com- : panies would be put i” an imi possible position if put un- ' der reserve ratio control, ! and if it would put them in i such a situation surely the ! Government is entitled to ! heed their requests.” The debate was interrupted : by the adjournment.