EASY LOCAL RATES

Evening Post, Volume CVII, Issue 143, 21 June 1929, Page 11

EASY LOCAL RATES

UNEMPLOYED MONEY

RESULT OF EXPORT

SURPLUSES

CAPITAL SEEKS OUTLETS

As Sir George Elliot, chairman of the Bank of New Zealand, sees it, the Dominion is in easy street to-day. Speaking- at tlio annual meeting of the bank this morning, in referring to reduction, in the rate of interest on deposits and overdrafts of J per cent, last July, he said it was a:simple matter to reduce interest rates and so lessen deposits; but it was not so long ago banks in New Zealand were compelled to raise rates in order to retain and augment their deposits and notwithstanding the present excess, it would be inadvisable to make any alteration in the rates now existing. The majority of people are lenders, not borrowers, therefore care must be taken that deposit rates are not. reduced to a figure that would divert, money in large quantities to other'countries for investment where, at the present time, a better rate on equally good security is obtainable; money can be easily and. inexpensively .transferred from one country to another. He directed attention to the rise> in the Bank of England discount rate in February last! by 1 per cent—a good thing for the i Bank of New Zealand individually, because it has a large amount of funds invested in British Treasury bills and: other short-dated investments in London. But the rise referred to, while, benefiting lenders, had an. opposite effect on borrowers; consequently, for! the first time in history, New Zealand local bodies are finding it cheaper. to raise their loani in the Dominion than abroad. Recently, he said, a number of 5J per cent, issues had been placed !on this market'at par with-little or no [flotation expenses. The ' supply of money • available for loan on mortgage against good security is; greater than the demaSML-- The ruling rate for such loans is ''6- per cent., though occasionally a little- less" is accepted for particularly choice business. WHAT ±HE DOMDrtON OOOTiD DO. Sir George was gratified to note that Sir Joseph Ward as Prime Minister and Minister of Finance had made it clear that it was the- intention of the Government to check Governmental interference with- business carried on by , private enterprise. : It was to be hoped aiao that, in the readjustment of taxation he foreshadowed, Government and municipal trading concerns would be required to pay rates and taxes on a basis similar to those paid by other traders and financial institutions in the community. "If these two matters are rectified," said the chairman, "a longstanding grievance will be removed, the burden of taxation will be more equitably. distributed, a greater confidence '•will be engendered, and an impetus will be given to the industrial life of the country:" .. He congratulated the Minister of Finance' on the successful flotation of the two loans which he placed on the London market last January.: One for £7,000,000 was new money, the other for £12,510,000 was for conversion of! part of the * per cent. Consolidated Loan of £29,000,000 maturing on Ist November next; The cash loan was raided at 4J per cent^at 95, due 1948-58, and th'efconversion loin on practically similar, terms. ;In view of the present outlook of the London 1 money market a somewhat* higher rate may have to be paid on the conversion' of the balance'of £11/12,000,000 of the maturing loanj but there should be little or | no difficulty in raising some millions of the amount ia' the".Dominion at a cost approximating that' in London; '- OVEROROWDED I|?I)TXSTRIES. After referring in detail to the ex-ports-and imports of the Dominion, Sir George Elliot reminded his "hearers.that many reasons had been recently brought for\vardta account for; the present; easy monetary conditions. Although there might be some truth in them, the main explanation of the.matter, he said, lies in the fact that, at th« moment, there is little outlet for ! capital in new industrial enterprises." If you consider the condition' of the trades and industries that you are connected with, you wUI come,toCthe conclusion that most of them are- overcrowded, competition being out of all proportion to the business offering; few are working to their full capacity, many, burdened by excessive exjp*ense;s, are just' making both ends meet.. Difficulty in finding investments" has forced the price of local ( first-class-: stocks-:and. shares up. to. _ a figure that: shows "but a small interest I return, and ,has turned .public .attenjtion. to 'local 'body ' debentures ! and Govemn^ent bonds-that arfe now offering—eloqutent testimony to-our y export surplnses- synchronising: ,with the halt in. industrial fexpansion; IS THET COTTNTIHr OVERBANKED? "Notwithstanding the fact. thatthe export value of^our primary ; products-is satisfactory, farming is.Jiot; developing at the pace one -w.ould expect. "Farmers state thatj notwithstanding the number of .persons unemployed/it -is most-diffi-cult to obtain, efficient labour at .anything like'-''the wages they can afford to pay; developmental work accordingly is being retarded. ; • ■> ; ; - ■■ Under: existing conditions our bank 'has too great a-capital and reserves for the' business offering/ The legitimate demah d: for banking •: facilities has not kept pace with tho increasing capital arid reserves of the institution, and it is evident New Zealand at present is overbanked. "What is the remedy for such a state of affairs? Would the imposition of a larger and more widespread Customs tariff effect desired improvement? There is no doubt such a course, would | for a short time boom secondary industries, but the last state, of these industries would probably be worse than the first, for, jtheeost of living would immediately increase, and the great primary industry, on which the Dominion depends, would be seriously affected. ..-'■• ■'. ■-'•; .•".•-. "OVERBUILT CITIES:" '' .; . "For an/increase in her population, I for an improvement in Uier secondary industries, and for the filling of offices and warehouses in her somewhat over- ] built cities, New; Zealand must surely look to an" increase of her exportable primary products.' The imposition of the graduated land tax has limited the acquisition by individuals' or companies of large blocks of .second-class proved areas. There are,, in New Zealand, great blocks of unimproved lands, areas that, :uuder. present i conditions, no , private individual or group of individuals can-handle-with any hope of financial -success. - Government might take into < consideration the question of exempting irom taxation for a period of years certain second-class-unim-proved lands at-present lying idle. Theidea' is no doubt open to' dritieism, but it is an idea that might, well lie tried in certain areas for; the encouragement of settlement, so vital 'a necessity, to the well-being and advancement of the Dominion. "Successful land settlement is the foundation, on which- New' Zealand rests. Nothing should be loft undone' by the_ Government that may in any direction fostej primary industry. The Minister of Lands has an enonnons field for theaxhibitjoufrf «bp^aad«a«cg^. jie