WELLINGTON NEWS

Hokitika Guardian, 16 December 1925, Page 4

WELLINGTON NEWS

BANKING MATTERS. (Special to “ Guardian.'’) WELLINGTON, December 11. In all the banks in New Zealand it is only the Bank of New Zealand that holds meetings of shareholders in the Dominion, a.s all the other institutions have their headquarters outside of New Zealand. Consequently when the Bank of New Zealand shareholders meet as they do twice a year, in December and June, we get from the Chairman an interesting review of the financial and economic conditions of the country. Last week at the half yearly meeting, the Chairman. Sir George Elliot, lightly took the opportunity of replying to the wild and grossly exaggerated statements made by candidates, particularly Labour supporters, during tlie election campaign in respect io tlie Bank of New Zealand. One Labour candidate was quite serious in stating that in addition to dividends, one original share in the Bank of New Zealand was now worth .£1(532. There were oil.ooo, original shares and at the value stated they would now ho worth £81,090,0(10 which on the face of it is absurd. flic ordinary capita! of the Bank of New Zealand to-day is £3.750,000 lor which the shareholders have actually paid £5.513.573. Some people seem to think that joint stock companies commit something in tlie nature of a crime in paying dividends. These people fail to realise that capital must lie remunerated if capital is to he employed in industry, trade and commerce. And money, like water will find its own level. If we in New Zealand impose an artificial chock on the earnings or remuneration of capital then capital will go olswhere, for capital knows no frontiers, no creeds, no nationalities. \y,. tried to peg down the mortgage rate, at least the Government tried to do so. to something like 5 per cent, and soon discovered that it was unable to meet all the demands. Private capital could not accept 5 per cent and now most, of the large insurance companies are abandoning that form ol investment, while ihn-c who are prepared to lend require practically a 50 per cent margin on a very dose valuation. Private capita! has ! unit'd to the Stock •Exchange in New Zealand nod some have gone to Australia to find suitable investments. Taxation of banks too was a subject of criticism. The hanks do not pay an income tax, but pay a levy on their assets and liabilities in lieu of income and it is based on the

assumption that a hank makes 30 per cent: profit upon its total assets and liabilities. AVo wonder how many companies. traders and private Individuals would like to he assessed lor income tax on tlie same basis. CURTAIL BORROWING. There is no doubt that New Zealand as well as Australia has been over borrowing. and we are likely to have some difficulty in raising money in London ill the near future. This was referred to by Hie Chairman of the Bank of New Zealand, who expressed the opinion that if is doubtful if Colonial Governments can look to London with any confidence io supply their monetary wants for some time to come. America is making a bid to take London’s place in this matter, but while tile Customs larilf of the United States is prohibitive it would be unwise for us Io borrow in America, because of tlie difficulty of paying interest, which ultimately must lie paid in goods. In financial circles tlie difficulty of raising loans is rattier welcomed anil Sir George Elliot said that this difficulty aviy prove a blessing ill disguise, "if thereby a brake U pul on borrowing.' 1 .Much of the recent expenditure of local bodies, he contends lias been unwarranted, and hydro-electric reticulation schemes, especially those serving scattered populations, must for many years lie a burden on the ratepayers, lie also thinks there lias been unjustifiable expenditure by Harbour Boards “desiring to encourage overseas shipping upon harbours win:re the total export trade of the district served would not. if tiie produce could be held up for a war. eomplefely fill one average-sized ship." Curl ailment ol loan expenditures desirable, and it we do not take the course of limiting expenditure we • will have to do so by force of eireimi- j stances. The Prime .Minister has publicly acknowledged the need for a go- j slow policy in borrowing, al the same: time i> is necessary to complete the I more important works now in hand. 1 *' i !:e mi -e tie taxpayers will feel (he) pinch. The financial nut look is by gen-1 era I consent regarded as unfavourable, I and it may be I hat New Zealand in the i future may have to depend upon her | own resources. If that is so then it is j the duty of the people to practice econ- j omy and save as much as possible in , order that Ih" savings may lie used lor’ ihe dcvel"|imcnt of the count iy.