A WORD OF WARNING

Evening Post, Volume CXXVIII, Issue 46, 23 August 1939, Page 14

A WORD OF WARNING

EXPANDING CREDIT

LIMIT SOONER OR LATER

"There are welcome signs that j thoughtful people are beginning to realise that credit cannot bs stretched almost indefinitely without endangering financial stability/ said Mr. J. L. Webb, chairman of the Commercial 1 Bank of Australia, at the recent annual meeting of the bank in Melbourne. "There can bs no doubt that easy mo-ey. within proper limits, and an enlargement of the basis of credit, can assist in bridging over a period of emergency. But credi stretching cannot, in the long run, cover increased financial commitments which are of .1 character adding to economic strength. Sooner or later, the requirements of sound finance are inexorable. "Generally speaking, we have passed through a particularly anxiou. period, and have overcome many adverse factors remarkably well, in spite of the many shocks administered in recent months. WASTE MUST STOP. "Increased taxation appears inevitable, and will call for sacrifices from all classes of the community. Faced with huge outlays on unproductive armaments, there is the greatest possible need for avoidance of all unnecessar?/ expenditure in other directions I Wasteful expenditure—and undoubtedly there is a great deal —must be ruthlessly abolished. "Recent reports from overseas indicate that the enormous expenditure being undertaken by the Governments of Great Britain and the United States is influencing a marked revival in the internal trade of those countries, and it is not unreasonable to hope that its effects will be felt, before long, in the primary producing" countries of the Empire, where a rise in prices or primary products is long overdue. NEW ZEALAND'S POSITION. "The fall in New Zealand's overseas fluids necessitated the introduction of exchange control in December. 1938," said Mr Webb. "After the experiences of the past six months, there is every indication that th/ 2 initial difficulties of operating the system have (been overcome by the joint efforts of the Reserve Bank of New Zealand and ! the trading banks, who are co-opera-ting closely with the Dominion Government." Drought and low prices affected Australia, but the Central Bank replenished the liquid resources of the trading institutions and enabled them to continue to render liberal assistance to all types of industry. Introduction of a substantial amount of overseas capital played an important part in the growth of the Australian secondary industries and also in keeping internal conditions at a comparatively high level. "The directors propose to continue the present policy of extending reasonable assistance to credit-worthy borrowers, consistent with the amount of resources available." Mr. Webb concluded.