The Dominion SATURDAY, JANUARY 19, 1924. THE CALL FOR CAUTION

Dominion, Volume 18, Issue 97, 19 January 1924, Page 6

The Dominion SATURDAY, JANUARY 19, 1924. THE CALL FOR CAUTION

Uneasiness has been caused in some quarters by the position disclosed in the banking returns for the last quarter of 1923. The figures relating to advances to the customers of the banks show a very substantial increase as compared with the previous quarter, and also in comparison with the, corresponding quarter of 1922. For the purposes of easy comparison the totals may be set out as follow: —

It will be noted that, taking the five quarters, the deposits were highest and advances lowest in the June quarter of 1923, and that since that date deposits have progressively shrunk and advances increased. Compared with the September quarter deposits in the December quarter shrunk by a little over £1,000,000, while advances and discounts increased by some £3,400,000. Between the June quarter and the December quarter an excess of deposits over advances of £3,900,000 was changed 'to an excess of advances over deposits of £3,300,000, a swing over in the position of the accounts of the banks in the six months of about seven and a . quarter millions. It so happened that the State revenue accounts for the nine months of the financial year ended December were published about the same time as the banking returns, and showed a growth of Customs revenue for that period of over £1,000,000. Not unnaturally the increase in the bank advances and the increase in imports indicated by the Customs returns have turned the thoughts of cautious people back to the slump days of two years ago, when over-importation played so prominent a part. It will be recalled that during the period of depression in 1921-22 the resources of the banks were taxed to their utmost to meet the needs of their customers. In June, 1921, the bank advances reached the record figure of £54,000,000. Over-importation and extravagance associated'with the post-war boom period were followed by a period of financial stress which imposed a heavy strain on the banks, and which should have taught the country a sharp. lesson. To some it now appears that'‘in the return of better times that lesson is in danger of being forgotten. There is nothing in the banking returns or in the import figures to giye rise to any cause for alarm. There is good reason, however, for noting their trend, and for the exercise in consequence of a proper share of caution. 4 Broadly speaking, the position of the country may be regarded as giving sound grounds foq satisfaction. The recovery in wool values has lifted a heavy burden of anxiety from the sheep-farmers of the Dominion, and the whole country has been sharing in the benefits following on the easing of the financial stringency. In spite of the effects of a long spell of dry weather on pastures and crops, dairy farmers generally speaking may still hope for a fair average season, and the prospects in other directions are fair. It is desirable, however, that it should be recognised that the improved times do not warrant any lapse into carelessness or extravagance either in private or public expenditure. On the contrary, there is still ample reason for the exercise of care and caution in order to ensure that financial stability which is essential to sound and steady progress. During the war years and the years immediately following New Zealand, in common with practically the whole world, drifted into spending habits on a scale far beyond its means. We still have to pay for that extravagance. Last financial year the Government set an example of economy which enabled it to report substantia!savings in the rate of departmental expenditure, and this year the figures for the, nine months to the end of December show that still further savings have been made. These economies were practised .under pressure of absolute necessity, but they should have been made in any case. It is wholly desirable that this policy of prudent administration should be strictly adhered to. There are signs in various directions of increasing demands being made on Ministers for public expenditure in a variety of ways, and there appears to be a tendency to a loosening of the purse-strings. Essential expenditure cannot be avoided, but it may be hoped that Mu. Massey will return from his travels overseas more strongly convinced than ever of the need for care and caution in dealing with the finances of the country in the immediate future. The Dominion is making a good recovery; the outlook in many respects is distinctly encouraging; but there is no justification for any slackening in the effort to keep public expenditure at the lowest possible level compatible with efficient service and sound development.

Discounts Deposits. and advances. * £ December, 1922 41,104,419 43,431,016 March, 1923 43,465,816 42,521,573 ; 45,682,952 41,711,274 September, 1923 43,938,836 42,826,728 December, 1923 42,830,177 46,229,394