LONDON FUNDS

Evening Post, Volume CXXVIII, Issue 135, 5 December 1939, Page 5

LONDON FUNDS

BUILDING-UP PROCESS

PRODUCE PURCHASES

TRADING POSITION

Inquiries were made' among commercial and shipping men to ascertain whether the British Government's agreement to purchase New Zealand's produce output would materially improve the position of our London funds. It was gathered that while the prompt payment by Britain for the produce as soon as it was on the ship in New Zealand would cause a speeding up of payments into x our coffers in London, the actual trading I position would not be improved unless the New Zealand Government adopted a policy of more lenient payments out of the London funds through the Reserve Bank. "The speed with which the money is paid into our funds in London means nothing," one man said, "if the rate of payments out of the funds and into trading channels remains the same." At the present time the British Government has agreed to take New Zealand's wool, meat, butter, and cheese, and it is estimated that as a result of the financial arrangements between the two Governments the Dominion should receive something like £5,000,000 more than last year's receipts. This is considered to be of little consequence in view of the heavy obligation to which these funds are already committed and of the fact that, as one merchant styled it, "the future is mortgaged for nearly twelve months." ■ ' MONEY ALREADY PLEDGED"We have given promises to provide exchange for nearly a year ahead," this commentator said, "and while.that state of affairs exists, the London funds can mean little or nothing. It is obvious that the money now in London is already pledged—otherwise the Government would be easing up on its system of deferred payments —and it is clear that, even if we do gain by a sudden increase in the amounts | going into the London funds by Britain's prompt payment for our produce, it really only amounts to a variation in the time at which the payments are made. It will not improve our net position except fpr the prices we will receive over and above those of last year." «. The opinion was ventured by the head of a large commercial house that the New Zealand Government is now faced with a great opportunity to place its house in order so far as the overseas position is concerned; but he added that the crux of the position was the Government's willingness or otherwise to curtail its own expenditure. It was clear, this man said; that the New Zealand Government had been spending too highly, and that this had been a contributing factor in [the heavy diminution of the London balances. It was expected that the arrears of import licences now held up would be overtaken by about June of next year and from that time forward importers would be able to j operate on a direct trading basis— ! within the limits, of course, as laid j down by the imports schedules. If this point were reached, it could be hoped that thenceforward some progress might be made to build up the London balances to a level at which we could meet our normal obligations and gradually bring trade back to its old volume and proportions. GOVERNMENT'S OPPORTUNITY. Such a desirable state of affairs was necessarily contingent, however, upon the Government's own policy of spending. "If the New Zealand Government has a genuine desire to, rectify the present situation," he saidA"it will now face the realities of the problem and cut down expenditure to a level which will allow a sound financial position to be re-established. A great deal will, depend upon its attitude on this point. I If it continues spending at the old rate, then we can see no hope of building up our overseas funds for a very long time to come." "The London funds do not belong to us in present circumstances," another business man declared, "and the earlier payment for our produce cannot mean anything more than being able to pay our English creditors a little earlier than-we otherwise would. Nor will the overseas balance belong to us until we have caught up on the arrears and established a basis of direct trading again—a basis upon which a man may go to his bank and secure accommodation straight away for the credits he needs. But if the Government maintains its own rate of high expenditure and does not do its part, then we will never build up our iLondon funds."