THE H.B. TRIBUNE MONDAY, AUGUST 22, 1927 BIG SAVINGS BANK DEPOSITS

Hawke's Bay Tribune, Volume XVII, Issue 212, 22 August 1927, Page 4

THE H.B. TRIBUNE MONDAY, AUGUST 22, 1927 BIG SAVINGS BANK DEPOSITS

gOME reference was made on Saturday last to Sir Joseph Ward's criticism of the present Government's 1925 plan for the gradual extinction of our National Debt, and the conclusion was ventured that the present Minister of Finance had shown it was at least an improvement on that introduced by Sir Joseph himself in 1910. In the course of his speech in the Budget debate, however, the Liberal ex-Finance Minister touched upon a minor point with regard to which he seenjed to be on much sounder ground, and on which we have seen no reply from the present Minister. This had reference to the action of the Government in raising from time to time the maximum limit of individual interest-bearing deposits in Post Office Savings Bank until now it had reached the very substantial sum of £5.000. There can be no gainsaving that when this institution was first established it was not in any way contemplated that it would ever become th)

receptacle of interest-bearing deposits of any such magnitude. Its primary purpose was the encouragement of thrift among the smaller people, more particularly among wage-earners, with the object in view of enabling them to accumulate their savings in safety, and at the same time enable them to get some moderate rate of interest to help swell the accumulation. It was no doubt also the thought of the founders of the institution that so soon as the individual accumulation had reached an amount sufficient to serve some useful purpose, such, foinstance, as the acquisition of a home, it would be put to that purpose and the money would thus be set free again for circulation. As money came to lose some of its purchasing value, there was justification for making a corresponding increase in the limit, but to think cf such a sum as £5,000 in connection with the "savings” of any such individual as was originally in mind is entirely out of the question. The fact of the matter, of course, is that when we come to the lodgment of such an amount as this we can think only of a capitalist of some consider, able substance who has money for which he cannot at the moment find any permanent investment. In the ordinary way he would have left it with his banker either at credit on current account or on fixed oeposrt, and there it would have swelled the banker’s resources for the accommodation of his customers requiring advances. When it goes into the Post Office Savings Bank it becomes practically available for little else than for assisting Government finance, and thus loses a great deal of its liquid and generally fertilising character.

It is probably due quite as much to the increase in the interest-bearing limit allowed each depositor as to any rapid access of thrift in the community that the aggregate of deposits in the Post Office Savings Bank has during a period of ten years gene up from 25| million to 49 million sterling. That the custom of resort to this institution for the deposit of substantial amounts is still rapidly growing is shown by the fact that, while as at 31st March, 1922, there were some 12,250 accounts each showing a credit over £6OO, four years later there were just on 15,000 of such accounts. The official YearBook, from which these figures are taken, does not analyse the accounts beyond the £6OO mark, but they are quite sufficient to show that from being a mere profitable depository f or the people’s modest savings, the Post Office Savings Bank has to a very material extent virtually become a borrowing agency for the Government, and (this greatly to the detriment of the lending activities -f the trading banks. How far this position will be corrected by the belated decision of the latter to accept short-dated interest-bearing deposits remains to be seen. But it will probably he found a little difficult to counteract the habit that seems ro widely spread of going to the Post Office Savings Bank with loose money waiting for ordinary investment.

It may be worth while noting that Sir Pember Reeves, speaking at the recently held annual meeting in London of the National Bank of New Zealand, made reference to this same subject. He said that the very marked reduction in the deposits held by the trading banks was "largely due to the competition of the Government Savings Bank, which offers unusually attractive terms u o depositors and now holds some 49 million, or 3 million more than the joint deposits of the trading banks." In such circumstances, he added, no further explanation was needed of the action recently taken by the trading banks in raising their terms both for deposits and for advances. There would seem to be little other recourse for them than to enter into a competition with the State Savings Bank in this respect, for, although this method of getting money for State purposes can scarcely be approved, it would manifestly be very inconvenient for the Government to discontinue it now it has become so well established —at any rate, at such a time of financial stress as the present. While oh the subject of deposits with banks of issue it may be worth noting that, while as at 30th June last the aggregate of advances in the Dominion exceeded the deposits by about 4} million sterling, in the Commonwealth there was an excess of deposits over advances amounting to somewhere about 33 million. Il will thus be seen that in Australia, taking the States all round, the trading hanks have not had their resources anything like as badly strained as in New Zealand.