RESERVE BANK

Greymouth Evening Star, 19 August 1943, Page 2

RESERVE BANK

EXPANSION* OF CREDIT

WELLINGTON, August 18. The amount of immediately available purchasing power in New Zealand increased by £167,000,000, or 123 per cent., between the outbreak of war in September, 1939, and March

31, 1943. This is shown in the annual report of the Reserve Bank, which includes the following table (the amounts being given in units oi £1,000,000 N.Z.):— L . ’ ’ Sept. March.

The report says that the increase in money is due to two main causes, receipts from overseas in excess oi payments overseas, and expansion oi bank credit. The former- accounted for £28,500.000 of the increase, as shown by the rise in the Reserve Bank’s sterling exchange from £5,300,000 to £22,200,000, and the rise in the trading banks’ net overseas assets from £3,300,000 to £14,900,000. Expansion of bank credit during period totalled £36,200,000, including an increase of £18,300,000 in the advances and investments oi the Reserve Bank, and of £17,900,000 in the combined advances and investments of the trading banks. The trading banks’ holding of securities ™ ai n W7 Government, rose by £26,600,000, while their advances fell by £B,7UU,°°“The diversion of productive capacity, resources and manpower to the war effort has inevitably resulted in a reduced supply of goods and services available for civilian use, says the report. “At the same time, 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. In another part, the report says that the total of notes „ March 31 was £6,245,699 higher than at March 31, 1942. “The expansion of notes in circulation is not confined to New Zealand, and is mainly attributable to the war,” says the report.

1939. 1943. Coin held by public 1.5 2.3 26.1 Notes held by public 13.4 Govt, deposits in Reserve Bank 1.8 15.6 Other demand liabilities in Reserve Bank .3 .4 Demand deposits in trading banks 37.4 77.1 Total 54.4 121.5