The Dominion. SATURDAY, JUNE 19, 1920. THE FINANCIAL OUTLOOK

Dominion, Volume 13, Issue 227, 19 June 1920, Page 6

The Dominion. SATURDAY, JUNE 19, 1920. THE FINANCIAL OUTLOOK

The record (laid beforo the Bank of ftew Zealand shareholders at their annual meeting yesterday was that of a particularly prosperous year, but in'spite of the satisfactory position disclosed, the note struck by the chairman ot directors (Mr. BeavjCHamp) in his survey of the financial situation and outlook is one of* warning. He makes it clear that in his opinion prudence and economy are now essential, not only in the interests of continued prosperity, but in order that a serious financial crisis may be averted. Conditions abroad as well as at home give weight to this opinion. An alarming state of affairs is developing, for instance, in the United States. Particulars given in late.newspapers from that country suggest that a disastrous crisis is imminently threatened as a result largely of the extent to which useful production, notably of foodstuffs, has been neglected and sacrificed in order to cater to the public demand for luxury and extravagance. A serious reduction in food supplies bulks large* l in the total problem raised, and this, in conjunction with the world-wide food shortage, possibly justifies a somewhat more optimistic view than Mr. Beauchajip took yesterday of tho immediate prospects of New Zealand primary industries. In any case, however, such conditions as are developing in the United States are apt to be in many respects far-reaching, and heavily emphasise the demand for prudent economy. In what he hr v s to say about higher lending rates for. money and the necessity of limiting and carefully scrutinising advances for the purchase of land and for other purposes, Mr. Beauchamp is, of course, dealing.with changes that have taken actual shape, though they have not yet reached their full development. The measures taken on these lines By the Bank of New Zealand, and elaborated by its chairman of directors yesterday, are simply those which commend themselves to all soundly-managed financial institutions when public and private borrowing and expenditure have been carried to somewhat extreme or reckless lengths. ' A stage has been reachcd_ in this country ,at which the policy of taking in sail offers the only obvious alternative to such a continued inflation of credit and extension of financial commitments as would invite possibilities of serious financial While higher lending rates will discourage doubtful speculation and tend to suppress public and private extravagance, it is unfortunately true that dear money tends also in some degree to handicap useful enterprise. In. view of the'existing position of export trade and the outlook in oycrsqa markets, it is distinctly possible that the Dominion may suffer/ some decline in the prosperity which is so conspicuously reflected in the banking and trade returns of the past .year, and undoubtedly the safe course is to concentrate on a policy of sound economy. As the Dominion is _ circumstanced, _ how- , ever, well-directed enterprise is quite as essential an element in such a policy as the elimination of ex-' travaeancc .and the avoidance of waste, though these in themselves aro vital. Iti is even more tri\i of this country than of most others that its developed wealth is vastly exceeded by its potential wealth in unoxploited or partly-exploited resources, and that a policy of cnter : ' prising development offers it infinitely the best means of solving its economic problems. With national resources, to develop, of which the hydro-electric sources arc a conspicuous example, the Government clearly would . not be practising sound economy if it attempted to confine its borrowing and productive expenditure within- very narrow limits. Even with money scarce and dear, sound economy demands that it should be made as freely as possible available in furtherance of such enterprises, but it is demanded also that expenditure should be so directed as to produce early and substantial returns, and this implies a bold departure from the practice and methods hitherto applied to tho prosecution of development works in this country, Somewhat similar considerations apply to the extension of private enterprise in primary and secondary industries. Even .with hard •times' very possibly in prospect, it is not more necessary to eliminate non-essential expenditure than to miake the most of available resources in enlarging the scale and scope of useful production. _ The only real dangers to the continued prosperity of this country are in slackened effort, and wasteful extravagance. Making good use of their opportunities its people will undoubtedly overcome such difficulties as threaten to. arise in .the near future.