The Press THURSDAY, SEPTEMBER 28, 1972. Cash in the bank

Press, Volume CXII, Issue 33033, 28 September 1972, Page 16

The Press THURSDAY, SEPTEMBER 28, 1972. Cash in the bank

The nation’s coffers have never been fuller than at present, even allowing for the fall in the value of money. Official overseas reserves total nearly $BOO million, compared with barely $5OO million a year ago and a mere $260 million on the eve of devaluation in 1967. These reserves have been built up by surpluses on overseas trading and, to a lesser extent, by official borrowing and overseas investment in New Zealand. The increase in overseas reserves is reflected in the internal money supply. Current accounts in the trading banks at the end of August totalled $754 million compared with $628 million a year earlier, while interest-bearing deposits totalled $595 million compared with $417 million. The banks’ advances, however, fell $l4 million in the same period.

Some of the increased liquidity of the banks’ customers has been brought about by a change in the system of collecting income tax from companies, requiring subsisting companies to pay a tax instalment in September. But no such consideration applies to the savings banks’ customers — predominantly householders and other small savers. In the three months ended June this year their deposits exceeded their withdrawals by $39 million, compared with only $ll million in the same period of last year. Details of contributions to superannuation funds and of the payment of life assurance premiums are not regularly published, but occasional statements from directors of individual superannuation funds and life offices indicate substantial increases in these forms of savings. In the last 12 months retail turnover has increased by nearly $2OO million; and spending on new cars—more than half of them bought for private motoring—has gone up about $6O million. But these increases in spending account for only about half the increase in private income in the same period. Even allowing for the progressive effect of income tax, John Citizen is spending a smaller proportion and saving a higher proportion of his income this year. Bankers are now seeking authority to make personal, unsecured, loans to reduce their excess cash holdings; but people seem to want to put their money in a bank rather than draw it out.

The average housewife is spending less money in the shops now than she was two years ago, allowing for price increases in the meantime. Her husband’s wages have gone up 40 per cent in the last two years; perhaps her housekeeping allowance has not gone up in proportion. Or perhaps husband and wife have agreed that, while unemployment is rising, they should put aside more of the family earnings “ for a rainy day ”. Whatever the underlying reasons for this restraint of household expenditure—a fruitful field, incidentally, for investigation by social scientists—its effects on the economy are apparent. Retailers, manufacturers, and other businessmen are not encouraged to expand their activities by taking on more staff or building new premises.

But if the economy picks up next year, the behaviour of both consumers and business firms this year will appear perverse. The wage-earner who did not lose his job may regret not having bought a new car when he had the chance, despite the comfortable feeling engendered by a bigger bank balance. The manufacturer who decides to go ahead with his deferred building plans will probably find that building costs have risen further—and that building contractors all have waiting lists of clients. And it is most unlikely that the country’s banks, finance houses, and insurance companies will be more eager to lend money than they are today.