ECXHANGE AND CURRENCY.

Hawera Star, Volume XLVIII, 30 June 1924, Page 6

ECXHANGE AND CURRENCY.

BRITISH PROPOSAL FOR CENTRAL BANK. The Australian Government does not propose to abolish the State note issue, as suggested by the acting-chairman of the Bank of New Zealand, at the annual meeting on Friday, but is adopting the British. Treasury proposal to the Imperial Conference of a central bank of issue for each Dominion affected by the exchange difficulty. A new method of settlement of oversea exchanges was explained bv the Federal Treasurer during his speech in moving the second reading of the Commonwealth Bank Bill. Reports of to 1 ’ ?. a , r^e P a £ e ’ s speech, made on June tT’ i no *' rea °h the Dominion until the date of the annual meeting of the Bank of New Zealand. Several schemes have been devised for a settlement of the difficulty of making remittances from London to Australia and New Zealand and vice versa, and of the hampering effect of fluctuating exchanges. Mr J. F. Darling’s scheme for Empire currency bills was not favourably" received by the Imperial Economic Conference, the British Treasury pointmg out that it would be ineffective, because control of currency could not operate satisfactorily unless, ’at the same time, they had control of credit. Sir James Cooper, deputy-chairman or the British-Australian Wool Realisation Association, nut forward an alternative scheme. That part of it referrin S to Australia has been adopted by the Commonwealth Government, namely, that the Commonwealth Bank should be allowed to fulfil its proper and original function. The Treasurer, m his speech, stated that'it was proposed. that the bank would become the pivot of Australian banking—a bank -of issue, deposit, discount, exchange and reserve, instead of, as experience had shown, merely a Government institution in competition with private banks. In regard to New Zealand, Sir James Cooper proposed “that the Dominion Government, regardless of its holding in the Bank of New Zealand, should insist on the Bank of New Zealand allowing perfect freedom likewise of exchange operations throughout the Dominion.” As for both, he suggested that they should give proper control facilities ‘ for the purchase and sale of Australasian exchange in London. The British Treasury accepted this scheme, as coinciding very closely in principle with its own.

The British Treasury’s scheme, proposed the Central Bank in each Demmion affected as most likely to re--move the serious impediment now involved in Imperial trade by the difficulties in remitting money and the fluctuations in sterling exchange. The Imperial Conference decided to adopt a proposal by the Prime Minister of New Zealand (Mr Massey) that the matter he referred to a committee, representative of the Dominions, “to consider the difficulties which had arisen in regard to exchange between certain parts of the Empire and between such parts and the United Kingdom.” Such committee has not yet been appointed. The need for the Central Bank had, said the Federal Treasurer, been, suffiraently clear before the war, and its necessity had been emphasised by war experience. For many {months past it had been impossible to transfer to Australia either all the monevs realised by the sale of Australian produce overseas or the moneys which were being raised abroad for Australian development. Not only had the exchange difficulty liecome acute, but ■money was so tight that it was hard to get advances from the banks for most desirable purposes. Even moneys in the hands of private persons were not available for ordinary investments to the same extent as usual, because the State Government had been forced to borrow on the Australian market for necessary developmental purposes, instead of going on the London market, as they would have done under normal conditions. Incidentally, there had been a great increase in the rate of interest’ payable for , Government loans. There was. no banking body which could be considered representative. Instead, Australia had a number of banks which, though loosely associated for some purposes, scarcely could express a corporate opinion. Chiefly mindful of their own interests, which, was but natural, they could have no such regard for the public welfare as was undoubtedly required. The important functions of banking could properly be performed only with the guidance and control of a Central Bank. Decision and settled policy were essential.

The Bill is still before the Federal Parliament.