The Evening Star SATURDAY, JUNE 12, 1926. TIGHT MONEY.

Evening Star, Issue 19274, 12 June 1926, Page 6

The Evening Star SATURDAY, JUNE 12, 1926. TIGHT MONEY.

Fbom inquiries made within a necessarily limited time there appears not to be unanimity of agreement with one statement in the chairman’s speech at yesterday’s annual meeting of the Perpetual Trustees, Estate, and Agency Company. Referring to the rate of interest, Sir George Fenwick stated: “ The money market continues to show a hardening tendency, snd money for investment on first mortgage securities is not over-plentiful. The demand is, however, perhaps even stronger than it was a year ago, and in consequence the rate of interest remains very firm at 6 per cent. It has not been possible during the year to meet all demands made upon us in this connection, some of which have come to us from tho North Island.” It appears that at present the experience of soma of those with whom moneys are placed for investment is that they are having some difficulty in finding an outlet for it, and in some cases such funds are accumulating. Thera is no doubting tho veracity of this evidence, but in tho main it must be regarded as the exception which proves the rule. There may perhaps be some distinction made between town and country properties on the part of would-be mortgagees, and it is to be assumed that the reference at yesterday’s meeting was principally to agricultural and pastoral land as securities. In the main there appears to be ample corroboration of Sir George Fenwick’s statement that “ the demand for money for mortgage purposes has exceeded the supply right through the year, and there are no evidences of a change in this respect, notwithstanding the large amount of State and Public Trust moneys that are available.”

The fact is—and it should be admitted and faced—that there is yet a great deal of cleaning up to do in the matter of farm finance. Deflation is in progress, and it is not a pleasant process at any time. It is the reaction after a boom, and it is at ouce being hastened and made more unpleasant by the fall in prices of our staple primary products, which contributed to the dominion’s adverse trade balance and the consequent tightness of money. Matters certainly are not so bad in the South Island as in the North, but the fact of a neighbor’s heavier stress does not eliminate one’s own. It was stated that the Perpetual Trustees’ policy is to prefer to invest available mortgage moneys in South Island securities as

being more stable and less highly priced lands than those of the North Island. Only last week there appeared in the ‘Now Zealand Mercantile Gazette ’ a significant article entitled ‘ Walking Off Farms,’ in which it was claimed that the fact that scores of. farmers in various parts of tho North Island have walked off their farms defeated is a matter that should bo made the subject of inquiry. The writer summarises the main reasons fop this defeat as tho high or inflated value of farm lands, involving heavy mortgages, and holdings beyond tho physical and financial capacity of the holders. The decline in the values of farm products experienced this season has found out the financially weak and incompetent farmers, and as there is every probability of prices remaining low, and even going lower, ho ventures to prophesy that yet more farmers will probably walk off their farms .defeated. He says that what the farmers need just now more than cheap money is cheap land, and they cannot have both, for cheap money means dear land. It may be remembered that on the recent publication of the Bank of Now Zealand profits for tho year a correspondent wrote to us complaining of the cupidity of the well-entrenched banking monopoly in New Zealand (though not in those exact wprds), and suggesting that tho time was ripe for a lowering of the bank rate of interest on advances to customers. It is, however, unlikely that there will in tho near future bo any lowering of that rate or of tho outsido rate of interest on mortgages. Many of those who are in close touch with our primary industries are content that this should be so, for it might interfere with the process of deflation which they believe necessary in the beat interests of the country. There has been in many directions only too much evidence of the prevalence of the gambling spirit, and there is the possibility that the availability of cheap money would only cause a recrudescence of it. There is also another factor at work, and that is tho current fashion among investors of preferring to put their money into gilt-edged investments rather than into trade or industrial shares or lend it on mortgage. It is not confined to New Zealand. We see it in the preference for debenture issues of local bodies. In Britain one f ■ ;,s it in the tremendous rush for Lae Now Zealand Government loan and the Government of India loan just floated. This tendency is understood to be regarded with some concern, fo. there is the danger of the funds normally required for trad© and those for industrial expansion being thereby curtailed to a degree which may be seriously felt by both trade and industry.