The Dominion THURSDAY, MAY 7, 1931. PROPOSED CENTRAL BANK

Dominion, Volume 24, Issue 188, 7 May 1931, Page 8

The Dominion THURSDAY, MAY 7, 1931. PROPOSED CENTRAL BANK

It is announced that the report oi Sir Otto N.emeyer on Ke Zealand’s currency and banking system con tarns as its ma m feature a proposal for the establishment of a central for the Doranon to control currency, credit and the exchanges. This broad e jt*oi the details of which have not yet been disclosed, is in accordance with well-informed expectations, and indeed was anticipated Col X S ce S °ho e weve e r, a th°e report “recommends that the whole fabric of New Zealand banking should bejecast, and tures from present banking practice should be made,. it ts that the whole matter will require very careful discussion and con sideration before decisive steps are taken by Parham . therefore to be hoped that no important legislation will be .rushe through as a matter of haste or emergency merely on the financial expert, without the fullest consideration of its applicabil tj to local circumstances, practices and traditions. Sir Otto’s grasp of. financial principle is not questioned, but after all he is an official of a central bank, operating in a financial environment quite different from our own. It may or may not be the case that his brief visit to the Dominion was not of sufficient duration to enable him adequately to take into consideration t. modifications that might be necessitated by local conditions. The initial presumption at the moment is in favour of caution. This country is crossing a deep and uncertain ford at the mome , and it is proverbially dangerous to swap horses while crossing a stream. It-is the almost invariable rule that the by-products of farreaching legislative, changes tend to crop up ini unexpected places;, and this is a special risk in times of financial difficulty like the present. Such unexpected difficulties, and particularly a failure of co-ordination between new machinery and existing institutions, might damage our oversea credit and local recuperative power. The case for proceeding Cautiously is overwhelming. . ' . ~ . < • a It is not suggested that no alterations in New Zealand s bankin and currency system should be made, nor can the alterations propose in the report be discussed at this stage, for the simple reason that details of such proposed innovations have not yet been released. Admittedly our banking and currency legislation is in an anomalous position at the present time, as a result of the accumulation of wartime measures that have never been adjusted to peace-time conditions. It is also necessary to cope with the problem presented by tne depreciation of our paper currency in terms of sterling, and to take adequate measures to guard against adverse financial influences emanating from Australia. . What we are contending for is careful consideration ot tne issues when the proposals are made known in detail, and the undesirability of hasty legislation. Sound banking, as . experience proves, is in the main not the result of good or bad legislation, but the product of prudent and cautious banking methods in the hands of men of business sagacity and judgment. The presumption is against further expensive overhead if it can be avoided. After all, we have waited a long time for the settlement of this problem, and can easily wait a little longer until it has been fully discussed by the interests affected. It is particularly undesirable that the solution should become a party matter. In the meanwhile, the Government should take the earliest opportunity, of releasing the full text of Sir Otto Niemeyer’s report so that it can receive the study its main recommendation warrants.-