BANK OF N.S. WALES

Greymouth Evening Star, 3 December 1929, Page 12

BANK OF N.S. WALES

PRESIDENT’S ANNUAL REVIEW. The address of the President of the Bank of New South Wales,< Mr Thomas Buckland, in moving the adoption of the report anil balance-sheet at the annual meeting of shareholders, is of 1 particular interest on the present occasion. Mr Buckland (whose speech by the way, was composed and printed before the Budget proposals of the Commonwealth. Labour Government were brought down a few days ago) traverses the trend of events in private and public finance in Australia and issues a note of warning which must command serious attention in this Dominion as well as in the Commonwealth. '

itlr Buckland, in moving the adoption of the report and balance-sheet, reviewed the main items and compared them with last year. There was evidence of the marked drop during recent years in the prices of our staples, of the continuation of drought conditions in many districts and of increasing costs and the lack of continuity affecting industry and commerce to the disadvantage of all. Continuing, he stated: Deposits, £66,056,000, show a small increase of £1,541,000. This taken with the like experience of other banks is. evidence of the slowing-up of our national progress, and a lower capacity to provide for the development of the many and varied industries of the community. The drain on local funds, as the result of borrowings by Governments and local authorities, appreciably affects the accumulation of deposits. This in turn reduces the funds available for advances, and for that private enterprise upon which our progress and wealth mainly depend. Without a steady and appreciable increase in deposits year by year the banks cannot extend their support to the development of the community. The banks cannot create credit except by resorting to inflation with its painful aftermath. This leads me to the point I wish particularly to stress. The people as a whole will bring about their own undoing if they pursue the policy of past years with its extravagant and often unreproductive expenditures. Such policies with their reduction of output —not necessarily the value of output—must bring hard times and force upon us a lower standard of living. When these are combined with a serious fall in the prices obtainable for our chief staple, wool, and a considerable reduction in the quantity of another, wheat, due to adverse weather conditions, the outlook is hard indeed. The figures of the balance-sheet give full support to the position thus outlined. Advances have increased by £8,074,000, making a total of £59,427,000. When taken with the comparatively small increase in deposits this is a striking testimony tb the way in which our customers have found it necessary to lean upon us during the past year.

In view of the serious fall in the prices of our staples over recent years, there must follow an appreciable fall in the values of our lands and other assets of the community. Your directors therefore feel that the prudent course is to conserve the resources of the bank. It is proposed to ay the usual dividend at the rate of 10 per cent per annum, but not to pay a bonus on this occasion. The shareholders have had the benefit of four bonuses in succession, or, in other words, have received in four years dividends which would in the ordinary course be paid over a period of five years. Before leaving our immediate affairs it is desirable that I should draw your attention to the burden taxation is becoming in our own particular case: The bank has paid £350,086 douring the year. This is an increase of £55,741 on the amount paid last year and of £79,019 on the year before. Taxation now represents a charge of £4/13/4 per cent on our capital, a charge which in two years has risen somewhat over 1 per cent.

REDUCED AUSTRALIAN EXPORTS. The reduction in the quantity of our chief exports due to the drought conditions which have prevailed oyer many parts of Australia, coupled with the continued fall in values, is having the effect of decreasing Australian funds abroad. It would be very unwise to attempt to correct the present position by placing an embargo on imports generally or on specified imports. To do so would in the first instance damage our good trade name, then create injustices among the trading community according to the way in which different sections are placed with regard to their external commitments and further expose individual traders to the risk of damages for breach of contract, etc. On the othei* hand, should prohibition of imports become effective, we should lose our Customs revenue and ultimately be unable to sell abroad our surplus products—wool, wheat, etc.

As against this question of restriction of imports, we have certain sections of the community who have resorted to, or wish to resort to, artificial means of controlling the realisation of their produce. I do not think that any such artificial tampering with the course of marketing wil in the > end achieve the objects aimed at, but the serious aspect of the case, from ourl point of view, is that those who have sponsored such schemes have apparently overlooked the question of finance. How is it possible for us to carry over a considerably extended period the product already harvested, or shorn, while at the same time we are called upon to finance the growing harvest or clip? In times when money is plentiful it might be possible to go a long way towards achieving this object, but in a period when our loads are already heavy it is very doubtful .whether our financial resources will enable such schemes to be carried through without denying the necessary finance to those in need of it for the current season’s requirements. Therre is another aspect of this question. It is unsound for the producer to become a speculator -in his produce. It has been suggested that proposals are being considered to extend the note issue. It is a feature of any elastic currency system that It should be capable of extension to meet the seasonal requirements of the community from time to time, but it is a very different matter when, either by design or otherwise, reduction in the percentage of gold backing occurs apart from seasonal requirements. If by design, such a movement, when divorced from the genuine trading requirements of the community, becomes inflation, bringing about higher prices with an increased cost of living, which bears most hardly on the workers and those on fixed incomes. Any such inflation would increase the burden which is already a heavy

one upon our exports, and consequently our primary industries; while on the other hand it would encourage imports. Another effect would be the continued drain of gold until.no doubt resort would be had to an embargo on the export of gold. The Australian note would then become incontrovert-

ible and the doors would be flung’wide open for inflation in its worst form. The proper means to check any such drain would be to raise the interest rates and so preserve the common measure of value we have to-day with all other coinmercial countries. ? Another proposal is that all borrowing by Governments and local authorities should be restricted to the Commonwealth and that no loans should be raised abroad, a policy with which I agree. To adopt this policy, however, would restrict all developmental work in Australia to such proportion of the amount of the annual savings of the

- Australian community as could be attracted to investment m such loans. To borrow beyond this would create inflation,: which has been referred to above, in connection with, the note issue. In a partially developed country .such as. Australia it is necessary for a time that capital in addition to the savings of the community should be • attracted from outside to. enable important schemes of development work to be carried on. To refuse. absolutely ■ to accept capital from abroad would be

to. slow up our. development suddenly and limit it to our own capacity to undertake it. The latter is the more desirable course, but having pursued such a policy of external. borrowing for many decades, to turn round now and limit borrowing to the funds available in the Commonwealth would be to increase unemployment far beyond the conditions-now obtaining. Our borrowing policies in the past

have contributed materially to our unemployment problem. The scale of borrowing has meant inflation, with rising prices and disordered trade. With our arbitrary system of wage fixing this policy meant higher and yet higher wages. We cannot have continual and general rises in wages and keep the costs of production within economic limits.’ Taxation on capital will indirectly affect the wages of labour, and so far tend to lessen the productive power. Taxation is.also'a feature of - the costs of production.