RURAL CREDITS

Dominion, Volume 20, Issue 256, 28 July 1927, Page 7

RURAL CREDITS

THE FARMERS’ NEEDS r POSITION EXPLAINED Tuesday night’s session of the Dominion Conference of the New Zealand Ear- . mers’ Union was devoted to the discussion of rural credits. ' Mr. D. Dickie (Gore) moved: ‘'That Parliament be asked to pass legislation giving effect to the short-term loan proposals in the Rural Credit Commission’s report.” In moving the motion, he said that the legislation introduced last year had given the ■ Rural Credits Branch of . the State Advances Department power to issue debentures to the public. It had long been felt that there was room for a shorter term Joan to enable farmers to buy stock and improve their farms. Air; If. S. Bowen (Poverty- Bay) wanted to know- if the bonds proposed to be issued were State guaranteed. Mr. R. D. Duxfield (Auckland) said the bonds would have something in the way of a State guarantee. Mr. Polson Reviews the Position. Mr. W. J. Polson said the question of an agricultural bank was very much misunderstood. The scheme evolved by the New Zealand Commission embraced the best features in rural credits in some twenty-six countries, in establishing sueb a scheme, it was necessary to proceed cautiously. When the scheme had been established, the limit of loans could be extended. Legislation had been brought down with regard to intermediate credits. What this embraced he could not say. The Commission found that conditions in other countries did not differ so very much from those in New Zealand. The State Advances Department in New Zealand held in their vaults securities to the value of one hundred million sterling. The officers of the State Advances Board were doing their best tor the producers of the Dominion, and they had the confidence of the people of this country. They, therefore, thought it was wise to ally themselves with this board. Some criticism had been levelled against the Commission for. fixing the limit ol advances at 66 per cent. He was convinced that they would have been on unsafe ground if they had fixed the limit df the loan at 75 per cent, of the value of the land. ' Bonds issued by Treasury. Mr. Polson went on to explain the system of rural credits in the United States. The Commission had been ad- ■ vised by farmers in the States to cut out the association. The Commission had considered fixing the Limit of the loan at 4110,000, but eventually decided upon 417000. With regard to the query us to whether the bonds were State guaranteed or not. he could tell them that the bonds were issued by the Treasury, and were absolutely in the position of a Government cheque. He was afraid that so much pressure would bo brought to bear upon the Government that it would set up a board of bankers or quasibankers and hand the whole business over to'them. There was no reason why the New Zealand Government 'should not ■stand behind the bonds. They were standing behind the Bank of New Zealand to the extent of half a million. Other countries guaranteed the bonds for agricultural banks. Until the thing was absolutely established and understood, there would be necessity for a State guarantee. He felt that the commission had not received the sympathetic treatment. they bad a right to expect. They ■ had suggested that the Government should lend half a million , free of I interest, but nothing of the kind had been granted. The commission’s scheme followed the American system. The short-term system, on which the New Zealand scheme was modelled, was working very satisfactorily in the United States and Canada. Air. Cox, a member of the New Zealand commission, who wag a banker, believed that the banks in New Zealand would be only too ready to follow the practice’ of the American banks in connection with rural credits. They had a Warehousemen’s Act hti the United States, which enabled goods stored in a warehouse to be advanced against, and the commission had advocated this practice should be followed here. The commision found that agricultural bank bonds in Denmark and South America were seling freely. If was a question whether it would be necessary to borrow abroad, and in this connection the rate of exchange was against borrowing from America. It was evident that the cities could get as much money as they wanted, but ( rural securities were not at present in favour. If the Government would face , the position, he believed they would get a great deal of capital in New Zealand. He believed that a great, many ;honds could 'be sold in Australia, the . United States, and even in Great Brit- , ain, if some arrangement could be come to to get over the exchange disabilities. J

Bonds to be Issued Immediately. In the establishment of the board they had provided for three fanners’ representatives. It was essential that boards should be appointed who would have the confidence of .the lenders. He understood that the Government was going to issue the bonds immediately, though the securities were not in the safe yet. He was very glad that the Government had agreed to this, as the farmers wanted the money. He could tell them that they had already received applications for loans totalling a and had actually approved loans to the extent of half a milion. The point was what kind of bonds the Government was going to issue, and whether they .intended to guarantee security? Some Questions. Mr. J. H. Joll (Havelock North) asked if Mr. Polson was satisfied with the progress which had been made so far. Mr. Polson said that if they had started with a flourish of trumpets, they could have lent a great deal more money. Mr. H. M. Rushworth (Bay of Islands) asked if the Bank of New Zealand’s long-term mortgage scheme would have , any effect on the sale of bonds. Mr. Polson said that the action of the Bank of New Zealand in raising the rate of interest would unquestionably have an effect upon the sale of bonds. It had been said that it was not the Government’s place to interfere with the banks, but the Government had not hesitated to come to the rescue of the Bank of New Zealand when that institution was in trouble. The Government had stood behind the Bank of New Zealand to the extent of four millions, and had placed it in the very strong position it was in to-day. Beyond Political Influence. Mr. Rushworth asked if it was not desirable that the Rural Credits Board should not be placed outside political influence? Mr. Polson said, it was as impossible for any member of the Government to influence an officer of the State Advances Board as it was to make Niagara run the other way. Voices: It has been done. Mr. Polson: Well, all I can say it is not being done now, I am convinced that the officer’s of the State Advances Department are men of the highest probity. . Commission’s Recommendations Wanted. After a lengthy discussion, Mr. Dickie withdrew his remit, and, after a number of further motions and amendments had been withdrawn, the following Auckland remit was carried: "That in the matter of the Rural Credits Branch of the State Advances Department, we urge that the recom-. mendations ■of the Commission be carried out in’ their entirety and that the sale of bonds bo pushed with the utmost urgency. We also urge that a second farmers’ representative bo appointed to the board.’’