TRADE CREDITS

Evening Star, Issue 23325, 22 July 1939, Page 14

TRADE CREDITS

TEMPORARY RELIEF ONLY PROBLEM OF MEETING TRADING BANKS' LOANS EXTENT OF ENGLISH CONFIDENCE IN NEW. ZEALAND GOVERNMENT A drop in the bucket." That summarises city opinion of the British credits granted the New Zealand Government as announced by the Prime Minister yesterday. It is generally conceded that the £5,000,000 for Government imports will be mainly for defence purposes', while the £4,000,000 credits will be earmarked for the benefit of private traders.

The restricted amount of the grants surprised some, but was expected by others. It was understood that the Minister of Finance was seeking more, which he probably would have obtained under certain conditions. But financial opinion agrees that the comparatively low total reflects the British concern at the New Zealand Government’s policy. “ Where do the banks come in? ” is a pertinent question to which no satisfactory answer has yet been found. It is known that the Government owes a considerable sum to the private trading banks in this country, provided by them to finance first half-year commitments. Just how much that_ debit is has never been' stated, but it is acknowledged to b® a considerable sum.

As the £4,000,00 is provided as credits against purchasers only, the banks cannot be. paid off with that grant. The £5,000,000 is presumably for defence (although no public statement to that effect has yet been made). It is unlikely, t therefore, that the banks will continue to “ carry ” the country under conditions such as have prevailed earlier this year, and they must be paid sooner or later. So far as trade Is concerned, the £4,000,000 will not go very far, although, as importers acknowledge, it is better than nothing. The Dominion’s Lopdon funds have remained at a very low level since the beginning of the year, and no substantial additions will be made to them until the export income develops. Butter and cheese exports will provide the first substantial addition to the Reserve Bank’s sterling holding, but that does not occur until next October, while the December wool sales will not exercise their influence until January. Interest payments must be continued in the interim, while imports will still need to be financed. . NOT VIEWED WITH SATISFACTION. “ No true New Zealander can regard the outcome of Mr Nash’s mission with satisfaction,” said Mr P. O. Smellie, president of the Dunedin Chamber of Commerce. “ When it is remembered that the imports for this year were required to be cut by £18,000,000 to maintain, the level of sterling funds, and that the reduction during the first five months of May was only a little over £500,000, it will be realised that the relief is only a temporary measure, and that there is likely to be very little easing in the import restrictions,” Mr Smellie continued. “It is certain that our internal economy will require adjustment, and one of the problems we must face up to is increased production, particularly of exportable products. I believe that an appeal for more production, encouraged by appropriate Government action, would meet with a wholehearted response. “ The real meaning of the terms has to be read betwen the lines, and the statement by Mr R. S. Hudson, Under-Secretary to the Board of Trade, and also the annual report of the Reserve Bank of New Zealand, just published, should be studied to get a clearer perception of the position,” Mr Smellie concluded. “ The implications in Mr Hudson’s remarks are particularly arresting in their bearing on the marketing of our primary products.”

"WILL NOT GO VERY jFAR.” r{ At first sight it would appear that only £4,000,000 will be made available for imports, but it is impossible to pass very much comment on the loan agreement until certain- points have been made clearer,” said Mr C. V. Smith, president of the Dunedin Manufacturers’ Association. “ Under this £4,000,000 heading, therefore, must come imports of raw materials and machinery for manufacturers’ requirements, and in view of the expansion which has taken place recently in secondary industries, one would' suggest that it will not go very far. Whether or not the present advance will see the country out of its difficulties or whether it is merely a stopgap, remains to be seen. “It is difficult to see, therefore, how there can be very much, relaxation of the present import restrictions for some considerable time to come,” said Mr Smith. “In fact, unless our export prices rise considerably, it would be unwise to free imports from a certain measure of control in view of the necessity for building up a sufficient fund to pay for the advances just arranged and meet the increased interest bill.”

bearing burden of replenishment.

“In regard to external _ trade. the farmer is at present subject to an outstanding justice, in that, while he has not been the only or chief beneficiary in the dissipation of the sterling funds, he is compelled, by the commandeer of the sterling proceeds of his produce, to bear virtually the whole burden of replenishment,” said Mr J. C. Begg, giving the point of view of the primary; producer.. “It seems entirely improbable that Mr Nash’s arrangement will provide for sufficient lattitude of free trade to rectify this, and restore the actual value of New Zealand f”rrency to the nominal value of 125 per cent., on which deficient basis the exporter is at present saddled with the equivalent of an export tax of 10 to 15 per cent.,” Mr Begg concluded.