Money supply up — Reserve Bank

Press, 7 May 1983, Page 24

Money supply up — Reserve Bank

PA Wellington Provisional figures ■ released by the Reserve Bank monetary and credit aggregates in the year to March 31 show that the money supply (Ml) grew 3.7 per cent and the more broadly defined money supply and selected liquid assets series (M 3 rose 10.5 per cent, compared with the corresponding period last year. When seasonally adjusted, the monetary aggregate growth rates rose quite strongly in the final six months, after a period of slower growth in mid-1982. Ml (seasonally adjusted) grew 3.4 per cent in the March quarter, and 2.7 per cent in the December quarter, and the corresponding growth rates for M 3 were 3.3 per cent and 4 per cent. Private sector credit grew 2.8 per cent in the latest year, compared with 30 per cent in the 1982 year. The Governor of the Reserve Bank, Mr D. L. Wilks, said that these figures were somewhat distorted because the trading

banks’ six monthly interest charges had affected the 1982 figure. Normally this effect did not occur until April. Mr Wilks estimated that the 1982 and 1983 figures for private sector growth rates would have been about 26 per cent and 6 per cent respectively, were it not for this timing distortion. Nevertheless, the slowdown of credit growth has been sharp. The seasonally adjusted figures show that credit growth was strong throughout 1981 and the first six months of 1982, averaging nearly 6 per cent a quarter over that period. The rates for the following three-quarters have been up 1.6 per cent (September, 1982); down 1.2 per cent (December, 1982); and up 0.5 per cent (March, 1983). Mr Wilks said turnaround in the monetary aggregate growth rates in the final six months reflected a strong increase in liquidity which, in the absence of any policy action, could have been used by financial institutions to support strong lending

growth when demand improved. This risk was the principal reason for the public debt policy measures introduced in March, which included the launching of the new Kiwi Savings Stock Government debt instrument, he said. In another policy action, all the major lending institutions are being advised that the maximum rate of lending growth that will be considered acceptable by the authorities is 1 per cent a month, after allowing for the normal seasonal patterns. Growth near this rate would be somewhat faster than had occurred during the last three quarters. . Mr Wilks said the Government was committed to holding monetary and credit conditions firm, so as to ensure that the gains in reducing inflation being achieved under the “freeze” would be maintained. Conditions were being monitored closely, with a view to further policy action being taken should it be necessary, he said.