Bank of New South Wales

Hawke's Bay Tribune, Volume XXI, Issue 302, 5 December 1931, Page 13

Bank of New South Wales

Financial Year Reviewed

CHAIRMAN’S ANNUAL ADDRESS.

SELECTED PARS FROM ANNUAL REPORT.

At the ordinary general meeting of the Bank of New South Wales, held at the Head Office, Sydney, on Friday, November 27th, 1931, the chairman, Mr. Thomas Buckland, president of the bank, moved the adoption of the report and balance-sheet. The following interesting paragraphs are chosen from his address.

Liquid assets are greater by £6,300,000, cash items having increased £1,220,000, and Treasury Bills, both British and Commonwealth, £6,150,000. Short call in London, due by other banks, and investments, each show decreases of no great moment. Our investments stand in the balance-sheet at less than market prices on the balance day, September 30th last. Municipal securities are higher by about £200,000 but are not quite as high as on September 30th, 192 < ’. The decrease in Government funded securities, £626,000, is partly in Australian and partly in New Zealand issues. • • • The Increase in premises, £200,000, represents a reasonable proportion of the amount expended on this and other buildings during the year, a substantial sum having been written off in accordance with our traditional policy. The balance-sheet total, £BB,028,000, is some £1,209,000 greater than last year. Contingent liabilities, £2,082,000, are lower by £326,000—a further evidence of reduced turnover. This item largely reflects the increase or decrease in external trade. When this amount is added to both sides of the balance-sheet the aggregate exceeds £90,000,000, nearly equal to our aggregate of two years ago. < The success in budgetary reform attained during the past year, though an excellent basis for complete success during the next two years, is as yet insufficient to ward off completely the danger of inflation. "The price of liberty is eternal vigilance.” Nevertheless the past year has been a reversal of the direction of change. We have turned the corner. The committee co-opted by the Loan Council Sub - committee found that the deficit for 1930-31 was likely to reach £31,000,000 and that the deficit for 1931-32, if the drift were allowed to continue, would be £39,000,000. It is to the credit of the Governments of Australia that the danger inherent in such a position was not lost upon them. The reports of lhe loan Council Sub-committee and of the co-opted economists and under-treasurers were made the basis of a plan of financial rehabilitation signed by all the Premiers on 10th June, some three weeks after the presentation of the experts’ report This plan embraced the following measures: — (a) A reduction of 20 per cent, in all adjustable Government expenditure as compared with that of the year ended June 30th, 1930, including all emoluments, wages, salaries, and pensions paid by the Governments, whether fixed by statute or otherwise, such reduction to be equitably effected. (b) Conversion of the internal debts of the Governments on the basis of a 22j per cent, reduction of interest. (c) The securing of additional revenue by taxation, both Commonwealth and State. (d) The reduction of bank and savings bank rates of interest on deposits and advances. fe) Relief in respect of private mortgages. Such bold proposals called for a great effort, the maximum effort which the Conference considered it expedient to ask of the public. Yet it was calculated that there will still remain, after such additional economies had been made and taxes levied, a total deficit in all Government accounts for the pear 1931-32 of Lorn thirteen, to

fifteen million pounds. This dedeficit, it wa« held, could be covered for a time by borrowing within Australia. The provision of such cover on sound lines, it must be emphasised, presupposes the steady consummation throughout the next three years of the balancing of all Government Budgets. • • • The Premiers’ Conference Plan has been much criticised. It did not profess to be more than the first instalment in a three years’ drive for budgetary equilibrium. It was a plan to stop the rot and to set going a rehabilitation of Government finances. As such it opened the only possible way of regaining control of the Australian currency. It did not profess to be a complete plan of economic reconstruction. One may, indeed, question whether Governments are competent to complete on planned lines a task that calls for varied and unforeseen individual initiatives. • • • It must always stand to the credit of Australia that by a courageous facing of the position her people have gone more than those of almost any other country to meet the present world-wide crisis and to prepare a basis of finance and industry upon which they can, if rightly led, take advantage of the first opportunities to recover. The suspension of the bank’s obligation to sell gold was, as the London "Economist” put it, an "acceptance of the inevitable” rather than "a deliberate act of policy.” But the blow may yet prove to be one from which Britain may recover by an adroit use of the opportunity of industrial readjustment which the search for a fresh unit of currency provides.

The depreciation of the pound has created a margin of profit for British industry which it has sorely lacked throughout the w’ war deflation. The unit in which costa of goods for export are now stated has been lessened relatively to the currencies in which they are sold. Unless this new margin of profit is wiped out by reckless finance at Home or by hostile tariffs abroad, it should make practicable an industrial revival in Britain, compensating, perhaps, more than fully, any loss of financial business by the City. An active export industry is, in any event, an essential basis for the role of an international creditor country. If, on the other hand, the policy of resisting attempts to stampede a fall in the present rate of exchange with sterling is clearly announced, purchases of London money will at once increase. Some importers are at present holding off in hopes of a fall. Importers generally will buy London money more freely as the purchasing power of the country districts grows. Their activity will give a needed fillip to the revenue from indirect taxation. • • • Like Britain, Australia has been driven by the weight of her commitments off the gold standard. To return towards it, against the current of events in our biggest market, would be to attempt just sueh a task as has, between 1925 and 1931, proved too great even for Britain’s financial strength. To steady the purchasing power of a particular currency in terms of a group of commodities (selected by whom?) is a task in which no country has yet achieved success. Great Britain, with her pioneering tradition and her elaborate equipment for financial leadership, is more likely to attack and to solve that problem than any

other country. And she is still the scene of settlement for most of our trade. • • • The number of unemployed throughout the Commonwealth is still about 380,000, and the problem of absorbing them into permanent employment can only be solved by measures consistent with increasing profits in industry. The diminution of that figure will gauge our recovery, and it will come, both to Australia as a whole and to the communities in different States, in proportion as public policies either restore or avoid preventing the restoration by others of the reward and incentive to enterprise. # • • Costs must be reduced in order to bring the prices of manufactured goods, together with the charges for transportation, distribution, and marketing into closer adjustment with the prevailing level of raw material prices. • • ♦ Speaking generally it may be said that the seasonal prospects are good, and that the year past has been favourable from a primary producer’s point of view. Over such a wide area as is covered by the productive lands of Australia there are usually to be found isolated portions where the rainfall has been insufficient to yield a full return, but at present these portions are small and are offset by the increased yields of produce in the more favoured areas. • • • The bank is ready to support private efforts to resore industry and employment. The condition upon which this can be done is that such propositions are sound and profitable. Without fulfilment of these conditions any support given would entail loss, and be to the disadvantage of both the de positor and the community. • • • We can look, therefore, to some relief during the current year from reduced rates paid for fixed deposits and from the reduced scale of salaries operating throughout the whole service, but on the other hand, following our policy of doing all we can to bring about recovery, the reduction of rates of interest on advances must reduce considerably the profitearning capacity of the bank until such time as the lower cost of deposits and salaries becomes fully effective in restoring the margin between income and expenditure. While it is imperative that reductions in taxation should be brought about at the earliest possible moment, it would be unwise to expect any relief in this direction during the current year. • « • Unfortunately some of the Australian State Parliaments have taken upon themselves the function of attempting a control of interest rates. Legislative interferences in interest rates cannot show discrimination. Such reduction can only be on a flat rate. This creates serious injustices. It penalises the far-sighted lender who has made an effort to assist his borrower in the crisis, while the harsh and inconsiderate lender escapes lightly. • • • It seems to me that we can look with confidence to an early recovery in those States which have kept their legislative interference to the barest minimum, while this State will be standing by weighed down with unemployment and excessive Government expenditure owing to a refusal to recognise the reduced capacity of the public to maintain sueh expenditure. • • • Attempts are frequently made to place the whole of the responsibility for the present depression at the door of monetary policy. It has been stated that the banks have deliberately brought about the present crisis, the suggestion being that banks somehow profit in periods when trade and industry are depressed. It must be ap parent, however, that banking business suffers along with the business of the general community.