MONEY AND MARKETS

Evening Post, Volume CXI, Issue 26, 1 February 1926, Page 7

MONEY AND MARKETS

LOWER YIELD FROM EXPORTS

ESTIMATED AT TWELVE MILLIONS

CONTRACTED BUYING POWER,

The call of the moment is for economy—strict ana ' sti'ingont economy in all departments of the . State in particular. This was the conclusion drawn by Sit Harold Beauchamp to-day from a review of the trading and financial conditions of the Dominion. In his address es chairman of the Equitable Building and Investment Company, he said:— It is probable that this year attention will bo focussed on money an-i markets, and there are indications that the economic condition of tho country will necessitate very careful handling. It is my opinion that money in New Zealand will be both saaiv.e and dear, and I incline to this view because of the mohtetary movements in London and New York. Tho advance in the re-discount rate, of the New York Federal Reserve Bank from 3} per cent, to 4 per i'ent., though primarily intended to eliminate speculative features iv American Stock Exchangee, must have an intlumico on the monetary situation in London. A year ago/ when the re-duscnuut rate of the Federal Reserve Bank of New York was raised from 3 per cent, to 3$ per cent., the Bank of England :found it necessary to raws its discount rate from 4 per cent, to 5 per cent. That was early in Mareli last year, before Britain had reverted to the gold standard, and may have lmtl some relation to that event. However, it is important to bear in mind that New York now dominates the world's money markets, and London cannot act independently of New York as Bhe was able to do prior to the war. The Bank of'EngJaad rate may not bo raised as the result cf . the movement in New York, but it will certainly prevent any reduction in the rate. Furthermore, there is evidence that With the embargo on the issue of foreign and colonial loaus removed there is bound to be a big rush of borrowers on the London market. rORBION LOANS BUSHED. Two foreign loans, one for a million and another fof four millions, were rushed by eager investors; while the Queensland loan of £2,500,000 and the South Australian loan of £1,900,000 failed to attract investors, for the underwriters were left with 68 per cent, of the Queensland loan and with 03 per cent, of the South Australian loan. The two Australian State loans carried 5 per cent, and s;'e on the trustee li«t) bat the two foreign loansd issned carried 7* per cdrit, and this id what attracted investors. It is apparent that Dominion loans' must compete with these foreign loans, tod it is obvious that a 5 per cent rat* ii ineffective. Underwriters cannot be expected to nurse the bnlk of colonial issues just for the pleasure of doing so. The Dominions borrowing in London must-expect to pay something more than 5 per cent. by way of interest. tftie rate* ruling in New Zealand must bear tome realtioa to those ruining in the World '» monetary centres. We know that those borrowing from the Advances Department must pay higher rates than were current last year. Loans to workers now bear 6J per cent.; on loan* Other, than for redemption of mortgages, 6J per cent.,* oh loans for redemption of mortgages, 61 per cent.; and on loans to local bodies, 6 per cent.—all subject to rebates 1 On prompt payment, but plus ■inking funds. . Loans for buildings on a 36£ years' term will involve the payment of 6} per cent., assuming prompt payment. The bankign returns for the past quarter show that tho process 6f leaning'On the banks tt> a greater extent than usual has begun, and the advances show an" increase of £2,617,975, while the deposits have increased by only £1,353,----863. The bankruptcy returns are also adverse, for there were approximately. 669 bankruptcies last year, or 15 more than in 1924, with farmers again in the lead. . * A ORB A* LOSS OF INCOME. When we review the state of the produce markets we have to realise that wool, frozen meat, butter, and cheese are all realising lower prices than a yea* ago; and so far as wool and meat are concerned this drop is j most pronounced. I estimate the loss of • income, owing to the decline in market values, at approximately £12,----000,000; and wool and meat will be responsible for about three parts of the total. Because of this the margin between exports and imports will be Very narrow,- and unleßS the Govern-, ment. and local bodies borrow largely outside of the Dominion tho demands on the banks will be very pronounced. With the contraction in the value of our exports the people Will have less opportunity of saving; consequently there' Will be less ndw capital available t6 meet the increasing demands of borrowers, many of whom will be obliged to go without or greatly modify their demands. With a' shrinkage in the spending power, domestic trade (•Will contract, and that will mean a certain amount of unemployment. Tire call of the moment is for economy —■ itricfc and stringent economy in all departments of the State in particular* It would also be Very helpful if. ♦ho State interfered less in commercial affairs. Control Boards, pools, and embargo are not conducive to expand-* ing business. After all, it is on tho efforts of thd individual that the prosperity of tho country depends, aiid not on Government control of industries and. embargo on. imports. With the certainty of there being trying times before us, it is very distressing to find labour growing restive. If there is one industry iv the country that is in a. parlous condition it is that of meat freezing. Most of the freeziiig companies made heavy losses iv the past season, and to-day mutton itnd liimb arc selling at 15 to. 20 per cent, below the rates ruling last year. But this is not all, for, owing to the adverse climatic conditions, less fat stock will be available. The sheep farmers thus stand to lose on price and- quantity. With these conditions ruling there is a demand for increased Wages on the part of slaughtermen. The industry cannot stand any more burdens, aud it is to be hoped that the men themselves will realise that their demands just How are quite UlitdaS6nable.

A loud speaker with three tell moutha, each 40ft across and 110 ft high, is being built in Germany.