THE TASK OF THE BANKS

Evening Post, Volume CX, Issue 131, 1 December 1930, Page 8

THE TASK OF THE BANKS

British bankers in general have a reputation for reticence,/but in quite recent years many of them have felt compelled by force of circumstances to break the traditional silence and do some plain speaking. A notable instance df this is the speech of Mr. Thomas Buckland, chairman of the Bank of New South Wales. In addressing the shareholders in this old-established institution, he used clear terms to express the seriousness with which he himself, and his feflow-directors in particular and financial authorities of Australia in general, regard the trend of events in the Commonwealth. As a rule the annual speeches of the heads of the banks are not the spontaneous utterances of whoever happens to be in the chair at the time, but are usually a composite expression of the views and opinions of the Board of Directors and the high executive officers, and every word is well considered before it is set down. Mr. Buckland's speech was obviously composed with the utmost care, and may be taken as addressed to a far wider circle than the shareholders of the Bank of New South Wales; moreover, it was no doubt based upon banking experience in Australia as a whole. If, as he said, more than half of the advances of the Bank of New South Wales are "wrapped up more or less in the great primary and exporting industries," it would be correct to say that this applies to all other banks in Australia and in New Zealand—possibly more so in our case, where manufacturing industries are of much less dimensions than those of the Commonwealth. Therefore the heavy falls in the prices of the products which both' coun- ! tries export, and which are their main sources of wealth, are reflected in the jvolume of deposits and advances of the banks. At present in both countries the deposits on latest returns exceed advances, but the margin is exceedingly fine; in the case of the Bank of New South Wales, conservative as its policy may be, the excess being about 10 per cent. But it is apparent to all who have been watching the bank returns of Australia and New Zealand that the banks have the situation well in hand; in fact, they had it so more than a year ago before the falls in the values of all that Australia and New Zealand produce came with such dramatic suddenness. Mr. Buckland's speech 'indicated three main reasons for Australia's present difficulties—and practically all he said can profitably be taken to heart by New Zealand. Those reasons were the severe fall in prices, the difficulty of further borrowing outside Australia, and the obstruction to readjustment of costs of production to i^resent values of commodities raised by "well-meaning but short-sighted men in high places." To overcome the first difficulty is beyond the power of Australia and New Zealand, singly or together, and no "stabilisation" schemes or other empirics are likely to succeed in face of the operation of the inexorable law of supply and demand. Not until the supply is reduced and the j demand expands can better prices be looked for; but it must always be remembered that prices can "improve" beyond the power of the buyer to pay. To find the point of balance is the urgent need of the moment. Australia's' difficulty in borrowing abroad is not to be minimised, but Sir Otto Niemeyer suggested that progress in that direction was possible. He put his advice in three words-—"balance your budgets." That is what some in power in the Federal and State Governments seem disquietingly reluctant to do. And yet they are slow to understand as Falstaff realised, "I can get no remedy against this consumption of the purse; borrowing only lingers it out, but the disease is incurable." And so it is—if budgets are not balanced. But far too many "well-meaning but short-sighted men" (not peculiar to Australia) seem to be convinced that the only cure for Falstaff's complaint is more and still more taxation. So they call in the Tax Commissioner and the Comptroller of Customs, who may so apply their system of monetary phlebotomy as to leave the patient almost lifeless* if indeed he is ever able to recover from the treatment. The operation, no doubt, will be successful, but what of that if the patient dies? Mr. Buckland was restrained if outspoken. He could have said much more, and that pointedly, on the pass to which politicians have brought Australia—and not only Australia. But bankers are supposed to be indifferent, to politics. So, apparently, were the people of Australia, lulled by the maintenance over the past few years of remunerative prices f01; all that they exported. Government squanderings were a drain on the system, but when they were accentuated and aggravated by drastic reductions of income, then politics took on a graver appearance than ever before, and inferentially, if not directly, the chairman of ihc Bank of New South Wales calls special attention to them. It is obgnous" from their published returns

that the banks of Australia and New Zealand have the situation well in hand, but their present task is onerous and is likely to be so for some time to come, calling for caution, firmness, sound judgment, and conservative use of their resources. Their position is analogous to that of the man at the wheel. They are endeavouring to steer Australia financially on a safe course to prosperity; they have the resources and the skill to do this, and no doubt will do it if unhampered by "well-meaning but short-sighted men" in high places.