MONEY SUPPLY

Evening Post, Volume CXXXVI, Issue 43, 19 August 1943, Page 4

MONEY SUPPLY

LARGE INCREASE

New Zealand's money supply has increased since the outbreak of war in September, 1939, by £67,000,000, or 123 per <sent, states the annual report of the Reserve Bank of New Zealand.

This large increase is explained as being due to two causes. First is the receipt of payments for the Dominion's exports in excess of payments which had to be made overseas, which accounted for £28,500,000 of the expansion, and secondly, the expansion of bank credit during the war period. This amounted to £36,200,000, including an increase of £18,300,000 in the advances and investments of the Reserve Bank, and one of £ 17,900,000 in the combined advances and investments of the trading banks, whose securities, mainly Government, have risen during the war by £26,600.000, while their advances fell by £8,700,000. The report says that while the diversion of productive capacity, resources, and man-power to the war effort has inevitably reduced the supply of goods and services for civilian use, the supply of money has been substantially increased. "The maintenance of economic stability, therefore, depends to a very important extent, not only on the avoidance as far as practicable of any further expansion of bank credit, but also on the transfer of a large proportion of immediate spending power from the public, to the Government for war purposes."