Ml supply grows in June year

Press, 20 August 1984, Page 31

Ml supply grows in June year

PA Wellington The money supply (Ml — cash and bank deposits) grew 11.5 per cent in the year to June 30, while the more broadly defined money supply and selected liquid assets series (M 3 rose 15.5 per cent, the Reserve Bank said yesterday. In seasonally adjusted terms, Ml rose by 0.9 per cent over the June, 1984, quarter after a fall of 2.3 per cent in the March quarM 3 recorded slower growth than in the March quarter, growing by 2.0 per cent in the June quarter (seasonally adjusted) compared with a growth rate of 3.7 per cent in the March quarter. In contrast, the bank said, private-sector credit increased 5.5 per cent (seasonally adjusted) in the June quarter, compared with an increase of 2.7 per cent in the March quarter. The growth in private sector credit in the year to June was 21 per cent compared with 15.5 per cent in the year to March, and only 3.3 per cent in the year to June, 1983. Domestic credit, the broader credit aggregate which incorporates all the lending of the financial institutions, including that to the Government, grew 17 per cent in the year to June compared with 15 per cent in toe year to March. However, the seasonally adjusted growth rate of domestic credit has fallen in each quarter since Decem-

ber, 1983. The bank’s governor, Mr Spencer Russell said that the seasonally adjusted M 3 growth rate of 2 per cent over- the quarter had been lower than might have been expected, because of the foreign exchange outflow which came after the announcement of the snap election. This outflow continued until the election in midJuly, but was then rapidly reversed. The reversal should be reflected in the July monetary aggregate statistics, he said. The reduction in toe M 3 growth rate arising from the. foreign exchange outflow was partly offset by toe rapid increase in private sector credit Low overdraft interest rates, resulting from regulation, facilitated increased utilisation of overdraft facilities, and while a large portion of the funds borrowed would have been to purchase foreign exchange there was also some scope for funds to be redeposited in money market instruments at higher interest rates. This may have had the effect of boosting measured M 3. In spite of the unusual influences present over the June quarter which had resulted in some distortion of the figures, the general conclusion that monetary and credit aggregate growth rates were excessive continued to hold. The strong public debt sales stance adopted by the present Government should begin to have an impact over the rest of the year.