WELLINGTON NEWS

Hokitika Guardian, 13 July 1928, Page 4

WELLINGTON NEWS

MONETARY CONDITIONS. (Special to “ Guardian.”) WELLINGTON, July 11. Tlie Associated Banks when approach, eel by the Minister of Finance to reduce their overdraft rate, some weeks ago, promised that if the June hanking returns gave indications of a continu- | a nee of the favourable features disclosed by the March banking returns, they would reduce the rates, and this has been done, and the new rates both for overdrafts and deposits took effect as from Monday last, July 9th. It must not ho assumed that the banks have yielded to any pressure that may have been exercised Ijy the Government, for the banking returns now published show quite distinctly that a reduction was inevitable, for the banks were for the second quarter in succession in possession of a surplus of funds. Compared with the June quarter of last year the free deposits exhibited an increase of £615,883, the totals being £2.3,399,145 against £24,741,262. This was a trifling expansion compared with the fixed deposits, which increased by the huge sum of £5,810,884, the totals being £27,539,988 against £21,749,101. The free and fixed deposits aggregated £52,947,133 against £46,490,360 last year, and were about £1,500,000 greater than in June, 1925, which was a year of prosperity for the Dominion. There is a striking feature about the deposits that is worth noting. Until this year the free deposits always have exceeded the fixed deposits and in June, 1924, the total of the free deposits was £28,336,700 aiid the fixed deposits only £19,292,553, and the disparity was shown in the three following years, but this year the free deposits amount to only £25,357,145, while the fixed deposits total £2/,589,988. The tremendous growth of the fixed deposits is not altogether a favourable indication for it goes to show that those holding funds prefer to let the banks invest the money rather than risk in engaging in enterprises themselves. It shows a lack of confidence which is very difficult to understand.

Bank advances exhibit a shrinkage of £4,995,497, the totals being £14,249,501 against £49,244,998 a year ago. This contraction may he said to be directly due to the increase in the overdraft rate. The advances are now lower than in any of the past two years, but substantially greater than in 1925 and 1924, The discounts at £1.177,454, are substantially less than in any of the five previous years. The total of hank loans to the public, that is the aggregate of the advances and discounts amounted to £45,42G,950 against £50,753.106 in 1927, and

£48,714,741 in 1926. Taking the deposits on the one hand and the advance’s on the other the deposits exceed the advances by the huge sum of £7,520,178, while for the June quarter of 1927 the advances exceeded the deposits by £4,262,740. Thus it will he seen that the.people have repaid the hanks this sum and are now in credit to the amount of £7,520,178, so that in twelve months there has been an improvement of £11,782,918. The excess of deposits over advances this year which is shown at £7,520,178, is only slightly less than the excess shown in 1925 when it amounted to £7,527.866. The inference from this is that in normal periods the banks cannot find investment for the whole of their surplus and this is a difficulty that the proposed new hank will have to face. When times are hard and difficult there'is a rush to the hanks for

accommodation but not so in norma times. The note circulation amountec to £6,492,109 as against £3,557,00: last year, a shrinkage of £154,893, am tho total is very much loss than ii 1926 or 1925.

The spending power of tho community, arrived at by taking the free deposits am! note circulation, amounted to £31,789,254, as compared with £31,325,264 in the June quarter o? 1927, so that there was an improvement to the extent of £480,990, hut the total is very much less than n\ 1923, when it amounted to £34,442,051, T„ ( l in 1925. when it totalled £37,391,057, so that although the spending power of tho community compared with three years ago lias contracted by

£5,601,803, tlie cost of production continues at the 1925 level and most goods and services have not varied in prices since then.

It is this that is causing the unera ploy men t problem to he so difficult There is no doubt the economic condi-

lions have imprtived but tl;e improvement is less titan was expected, judging by the trade figures. Tile exports for the twelve months ended June JOth last totalled £55,019,285 and the imports £13,-107,942, the excess of exports amounting to £12,121,343, while m the previous year the excess was only £998,605, conditions therefore should he much better than they arc.