IDLE GOLD

Evening Post, Volume CIX, Issue 57, 8 March 1930, Page 12

IDLE GOLD

EXCHANGE POSITION

"NATIONAL EXTRAVAGANCE?"

"Evening • Post," Bth March.

A holding, by the banks trading in New Zealand of coin and bullion to the value of over six arid a half millions against a note issue of about the same amount or even less is described by Dr. Neale, secretary of the Auckland Chamber of Commerce, as "a piece of national extravagance." He grants that the public should ■u.-ouder why the financial situation in Australia should affect that of New ZeaVnd, -but b<\ explains Sljat all the coimjtxsrcial banks operating in New Zealand do also a substantial Australian business. The same London balances are used to finance exchanges with both' countries and conditions affecting the Australian trade balance, if adverse, will absorb wholly or in part any accumulation of London balances arising from a favourable trade balnce m the case of New Zealand; and vice versa. Since the Ist February there has been am adverse movement of the New Zealand-London exchanges, so much so tliat were gold available it Ivould pay to secure it from the banks and meet external obligations by exporting it. Unfortunately for the importers; but Dr. Neale points,out that as bank notes are made legal tender.it is not possible to obtain gold, from the banks, in this way, though such,;a'-right to obtain gold for export fronlthe banks existed before the war in New Zealand, and is now conceded in Britain (as regards gold in certain .quantities) and in other countries. . . ■ Dr. Neale contends that a gold 'reserve of £6,600,000 in 'a country with a note circulation of less than £6,300,000 is a piece of national extravagance. Interef* on! £6,600,000 at 0 per cent, is- £396,000 per annum, which indicates- the: cost or that'gold: reserve to the people :of ■ New Zealand. The idle funds in the hands oi the banks could be shipped to London and employed there, under present conditions, to much better advantage than in New Zealand." . .„ , ■"The sooner' the position is darined by statutory action instead oi being perpetuated by renewed Orders-in-Counc the better it will be for all concerned/ stat*s Df, Neale.- He 'remarks that ex-perience-in, other countries shows that, generally speaking, a gold reserve of 30 per cent, is adequate to, meet all, likely claims by' iote-holders. If some regulation were introduced in New Zealand similarto that operating in BntanW bywhich gold can be obtained from the banks in tairlv iarge quantities, the posiST could be still further _'reduced S^n^B^-^^----hKf« sto be. taken to^ecure a greater measure, of mdependencem New Zealand exchanges unless «m»w provisions in regard, to shipping gold were * would *oVbegetter for New Zealand to rely for r %£°VB& 3 &b^be seriously affected by" circumstances opersmmm AW Zealand's' standpoint' is «ot Tivle Matters merit exhaustive lnvcsli^--son° at ?"e 'hands of an expert comm.ssion." ■'.•... ■ ' ■ ■ :■