RESERVE BANK YEAR

Evening Post, Volume CXXI, Issue 138, 12 June 1936, Page 8

RESERVE BANK YEAR

The annual report of the Reserve Bank covers the period before the institution was converted into a Government institution. There is, therefore, no reference to the changes effected by the legislation of the session, and the facts and comments must be read with this in mind. One fact which may impress the public is that a profit of £98,012 was made, of which the State received £73,000; but people who are inclined to view this as a justification for the establishment of the Bank must remember also that the Government has lost almost all (it will eventually be all) its note-tax revenue which averaged about £250,000 a year. The Reserve Bank now has the sole right of note issue and pays only the cost of management. The funds it acquires by this means, with the trading bank deposits and the Government account are balanced by its holding of sterling exchange in London, from which the greater part of the income of last year was J derived. j

It is interesting to note the increase during the year in the Bank's holding of sterling, in spite of the sale of such funds to the Government to provide for the redemption of part of a London loan. Interesting also, as having a bearing on future central hank policy, is the evidence of easy money conditions in New Zealand.

I In the easy money conditions which prevailed, the report states, the board did not consider that any useful purpose would have been served by the [expansion of central bank credit in I the Dominion to any appreciable extent; nor did there appear to be any need for contraction.

There was, in fact, ample credit for use by satisfactory borrowers. This fact will, we trust, be borne iix mind when the Government considers any plans it may have for the expansion of credit. If credit, being ample, is still further expanded, the result must be artificial, inflationary boom prosperity.