PRICE OF MONEY

Evening Post, Volume CV, Issue 140, 15 June 1928, Page 8

PRICE OF MONEY

"Intense competition" was thi> determining cause of the advancr in the bank overdraft rate by one-half per cent, in May, 1927. Sir George Elliot, as chairman of the Bank of New Zealand, to-day explained to shareholders how the associated banks felt it imperative to make the rate for deposits more attractive to the public and the rate for advances, or overdrafts, a little higher for their clients. This was due not so much to the adverso overseas trade balance at the end of 1926 of! £4,600,000 represented by excess of imports over exports; it was not so much the fact that, public indebtedness to the banks in form of advances exceeded deposits by £5,----272,000; but it was due in the main, according to Sir George Elliot and Mr. William Watson, a director of the bank, to the combined pull exerted by the Government and private trading corporations on unemployed funds which in the ordinary way would havo found their way into the banks and been available for financing industry, trade, and commerce. The Government, realising the psychological effects that a rise in the overdraft rate would havo, endeavoured to -dissuade the banks from making any change in that direction. Indeed, but for this, the advance in the rate might have been made earlier than 9th May, 1927. Mr. Watson, however, showed how far the Government could go, and how far it wont in this matter in so far as the Bank of New Zealand was concerned; and he described as "correct" the attitude of the Government aS. outlined by the Minister of Finance to Parliament when the action of the banks was under its consideration. The satisfactory trade figures and the turning of a public debit to the banks into a substantial credit —represented by" excess of deposits over . advances —would indicate that some ease in the price of money is about due. The reply of the banks to this suggestion is that the matter will be considered all in due time, and that time is for themselves to fix. They havo, of course, to consider the accession to their fixed deposits made since the rate was raised, money taken for terms. They appear to ask for breathing time. But with the improved trading and banking figures which the end of tho first half of the year ought to show, a return to a 6* per cent, minimum on overdrafts would havo a decidedly good moral effect on the Dominion and confirm tho great improvement that it has made, notwithstanding the temporary slackness in trade and employment.