THE H.B TRIBUNE THURSDAY, SEPT, 11th., 1924. BANK EXCHANGE.

Hawke's Bay Tribune, Volume XIV, Issue 235, 11 September 1924, Page 4

THE H.B TRIBUNE THURSDAY, SEPT, 11th., 1924. BANK EXCHANGE.

The lengthy Press Association message we have to-day with regard to the Prime Minister’s statement on the important question of London bank exchange does not throw any fresh light upon the subject. The only thing new in it is the intimation that, as Minister of Finance, he is on Saturday next to meet our principal bankers in conference with a view to devising some means of bettering the position. It will be very distinctly feathers in the caps of our financial authorities should they discover any really effective solution of a problem which seems to have puzzled all the money-changers of both the Old Country and Australia. The hope of anything of this kind emerging seems, however, to be only very slight, unless it be that they have something up their sleeves in the way of communications from headquarters in London of which, we have so far heard nothing. Those interested—and everyone who has, or expects to have, produce to sell for export is really concerned—will have noted from last week’s and this week’s cable messages that the situation in the Commonwealth instead of improving as the result of recent proposals has in fact grown worse, Australian rates having within the last few days gone up another 5s per £lOO against the exporterFrom this and from Sydney newspaper comment made available by last night’s mail it is to be gathered that the negotiations between the trading banks and Commonwealth Notes Board, which has control of the issue of paper currency, have not yet reached any satisfactory conclusion. As has more than once been mentioned, this question of currency seems to be of considerably greater influence on the situation in Australia than in New Zealand. But it will be noticed from the Wellington telegram that Mr. Massey accepts it as a matter of course that the adoption of any remedy hitherto suggested will involve an expansion of our own note issue. Having this in view, it is worth while referring to what is being said in the Sydney press with reference to the like movement in Australia. On this point the financial writer of the “Sydney Morning Herald” said, just a week ago, that, though additions to the note issue had been proposed, they had not yet been arranged. Agreement, it appears, has been come to between the Notes Board and the banks as to the form which the issue will take, namely, a loan of the notes to the banks ; as to the amount, which is not to exceed £5,000,000; and as to the date of repayment, which will be June 30th., 1925, for £3,000,000, and July 31st.. 1925, for £2,000,000. The matter upon which no agreement has yet been reached is the rate of bank interest to be charged the banks for the use of the notes. The Notes Board is asking 7 per cent. In the present determination of the banks they will not pay that rate, as on margins now ruling between their buying and selling rates of exchange on London they would suffer considerable loss. They have made to the Notes Board a proposal regarding interest, to which no reply bad been announced in Sydney at the time of the writing now quoted They are quite willing that the rates should be penal on notes not reI turned by due date. They will not

pay a penal rate during the stated I term of the loan. Until the matter of interest is settled the loan cannot be said to be arranged. What may have transpired in the interval since the foregoing was first written we cannot ,of course, say, but it is obvious that no decision providing any immediate substantial relief has been reached.

By way of further explanation another Sydney note, in apparent extenuation of the attitude assumed by the banks, goes on to say that the position with regard to the proposed additional issue of notes is very similar to the position in November, 1922. The circulation was then about 52 million, and the banks had asked for an increase of notes temporarily to enable them to finance export. As to-day, so then the Notes Board offered an addi tional issue at a rate of interest which the banks considered usurious, ,and accordingly they declined to take advantage of the offer. “A cable received from London,” this note concludes, “intimates that the anticipatory announcement of an arrangement this week, made from an inspired source, has had th® effect desired by the inspirer. The importers in London believe that all is now plain sailing*, and that the rioEes will be issued to the. banks. If the banks do not accept the notes the blame will naturally be laid on them, not on the Notes Board.” The position is, of course, different in the Dominion, where the banks issue their own notes under certain statutory restrictions based mainly on their holdings of coin and bullion. For this privilege they pay a set percentage on the amount of the notes in circulation. It remains to be seen whether, in order to meet the present emergency, it will be pro posed to exceed the limit now imposed, and, if so, upon what terms the banks will be allowed to do this. At present it would appear as if the exchange position in the Dominion was somewhere about one per cent., or a little more,-better than in the Commonwealth. As we read the respective bankers’ quota tions, on a demand draft on London the Australian exporter just now receives £96 17g 6d for £lOO, while the New Zealand exporter gets £9B. As before hinted, this may possibly operate in favour of the market for our crossbred wools as against that for Australian merinos. But it may well be that as our export season advances this advantage, if there really is any, will gradually disappear.