A CENTRAL BANK ?

Evening Post, Volume CXXI, Issue 83, 7 April 1936, Page 16

A CENTRAL BANK ?

MR. POLSON'S QUESTION

DANGEROUS INFLATION

Declaring that the Reserve Bank Amendment Bill in its present form would put into operation a policy of dangerous inflation, and that a corrupt Government could misuse its powers under it, Mr. W. J. Poison (Nationalist, Stratford) sought an. answer from the Government as to whether the Reserve Bank was to become a central bank o£QLState bank.... He expressed himself iiriavour of a system of managed inflation. Mr. Poison said he was one of the few members on his side of the House who supported the principle of State control of a central bank. It was a principle that had been recognised not only in Australasia but in parts of the world where central banks had been { established. He would be prepared to support the principle with his vote at; the right moment and when the opportunity came, but he was bound to say the speech of the Minister of Finance made him very uneasy. There was a great difference between political control and State control, and this Bill provided for political control. It put into the hands of the Minister the absolute control of the banking system of this country to do what he liked with. "It can mean that the funds of this country," said Mr. Poison, "can be utilised for any purpose, for any political party. I am not suggesting that the Prime Minister or the Minister of Finance ■ would > lend himself to this sort of thing, but the possibility will arise immediately the Bill is passed, and whatever Government we may have—we will not always have a perfect Government; the present one is not perfect—there will be a Government that will be prepared to make such' misuse of the credit of this country as I have indicated. The Prime Minister and the Minister of Finance have refrained from answering the question whether the Bank will remain a central bank or become purely a Government bank. I do not know why the Government refrains from answering that question. Jt would re-' move a very great deal of uneasiness. The Prime Minister: What do you mean by a central bank? Mr. Poison: I think the Prime Minister' knows what I mean. The Prime Minister: I know, quite

well, but does the honourable member know? Mr. Poison: You must give me credit for having studied the matter. The Prime Minister: You are imputing motives. Do not give us a lecture. NO MOTIVES IMPUTED. Mr. Poison: I have not imputed motives, and I am not giving-you a lecture. I am repelling suggestions that I know nothing about a central bank. The Prime Minister has asked for the co-operation of the country, and I suggest there should be mutual co-opera-tion. It would be in the spirit of cooperation to tell us just what the intentions of the Government are. Under the Bill they may be anything. Under the provisions ■of this Bill a corrupt Government could use the Bank for the purposes of bribery and graft. The Hon. H. T. Armstrong: A corrupt Government could do that without this Bill. Mr. Poison: No Government could do it under the old Bill. The members of the Labour Party have not only thought so, but have said so. Mr. Poison referred to an article written by the Rev. C. Carr (Government, Timaru) in the Labour weekly paper, in which' he declared that it would be the policy of the Government to issue through the State bank credit to those whom the Government approved. The Prime Minister: Is the honourable member going to vote for the Bill? Mr. Poison: I am not going to vote for that. I am asking the Prime Minister and the Minister of Finance to tell this House that that is not the intention of the Government, and that nothing will be put into this Bill to enable that to.take place. Surely the country is entitled to that. Mr. Nash: You will get your answer. Mr. Poison: The Government is taking power to control the whole of the wealth of this country, not only its exports, but its imports, and is it going to allow that Bank to be used in the way indicated in that article? lam asking for an answer. Ido not get an answer. lam entitled to say to the country "If they.do not deny it, beware of the Bill." Mr. Poison '.said he believed that members of the Labour Party had no individual opinion, that it was manufactured.for. them at the Labour caucus. "There is the opinion," he said, holding the paper aloft. "The Prime Minister refuses to say. that that is not correct. What other assumption can I take? If it is, then I say, 'God help New Zealand.' "It is time the people of New Zealand realised that the wealth of the whole of their exertions, both primary and secondary industries, is under the control of the Government. They have to dance to the tune this Government will pipe. When they wake up there will be a change in political thought. Public opinion will rapidly let the Government know what it thinks about it. : ' ' ' • ' : MANAGED INFLATION. "The Bill," continued Mr. Poison, "means definite inflation. I am. not afraid of managed inflation; I believe deflation is worse than inflation. I would not object to a reasonable amount along proper lines of control, by a board not subject to political influence. If this Bill contained a proposal of this kind I would have nothing to say against it. But the Bill goes further than that; and the'danger I have described is in it. The Prime Minister has reiterated that it is his job to provide the currency and credit necessary to give effect to the- will of Parliament. Is not the measure of our wealth what we get in exchange for the goods we sell? . If we have to get further credit than the value of those goods, is not that definitely and clearly inflation? ,;' "I say that it is a programme of inflation that must be dangerous, and must be disastrous to this country. New Zealand will have the shock of its life to find what is in the Bill." Labour member: You nearly got a shock. Mr. Poison: Many Labour candidates had a closer call than I did. He went on to say that the Government intended to brook no interference, and expressed the opinion that the directors should have the same rights as conferred on them in the original Act. . ' - He referred to the statement that the trading banks would require to lodge up to 20 per cent, with the bank. Mr. Nash: 26 per cent. Mr. Poison: 26 per cent. That is worse. What would happen if they were required to lodge 26 pep cent, of their deposits with a central bank? It would be fatal. He intends to control expansion by that means, by paralysing the trading banks. Mr. J. A. Lee (Government, Grey Lynn): You started off by saying you would vote for the Bill. Now .you, are climbing down. . . ; "MONETARY MANIPULATION." Mr. Poison: I said I would support the principle of State control, but not trade union control. lam not going to give an open cheque to the Labour Party or any other party. lam in great sympathy with monetary reform and reformers. But no successful plan of monetary reform has been tried in any country in the world. This is not monetary reform; it is monetary manipulation. This Government will go down in history as the "leap before you look Government."