WELLINGTON NEWS

Hokitika Guardian, 10 December 1929, Page 6

WELLINGTON NEWS

CONDITIONS THERE AND HERE. (Special Correspondent ) WELLINGTON, Dec. 9. Eeonoinic conditions both in Australia and Now Zealand must be giving bankers a. certain amount of anxiety, lor those conditions cannot by any stretch of imagination be regarded as satisfactory. The cond'n tions in Australia are particularly discouraging, for money is relatively very dear. Ln order to tide over financial stringency pending being able to float a new London loan, the Commonwealth Government has made a further issue of £5,(XX),000 Treasury ibilLs in London at an average discount of £5 7s (id per cent per annum, the effective interest rate being £5 11s 3d per cent. On September Ist last £5,000.000 bills for twelve months were placed at an effective interest rate of £6 11s per cent. Hie Commonwealth Government has a 5.f per cent loan for £1(>.OCO.OO) uow before the Australian public which will close on the 10 th in A, During the first week the subscriT ions totalled about £700,000 and if 'be loan is to be fully subscribed the '-fo °f subscription must he However, the Commonwealth G > eminent will get its money as the issue Ims been underwritten. As soon as this loan is out of the way, several of the largest public bodies in Australia will be coming on the maret, for loans aggregating £5,000,000 at least, and financiers are wondering where the money is to come from, oven at. the higher rates of interest which have now to he paid.. Lendeis are said to be alive to the situation and are acting very conservatively. An illustration -of this is seen in the experience of one first-class Ay Council which required a loan 0 £35 000, and although the Council was’prepared to pay 61 per cent for the money it was unsuccessful It was handicapped by the foot that during the year the New South Wales Government imposed a new tax of Is 6d to 2s in the £ on the iritete,t received by life offices, the concerns which invariably take no such issues. ’ When the present £10,000,009 issue of the Federal Government is completed steps will have to_ho Aaken for the conversion of £!O,/00,000 of 6 per cent maturing in Australia on March 15 next. Furthermore £5,000,000 Treasury bills will mature in London at the end of next : June, an d a further £5,000,000 at the beginning of September. But this is not all between now and the end ol 1930 there are State loans of approximately £35.000,000 maturing in Australia and during that period the national income from exports is expected to contract by £30,000,000 or more. The: loan expenditure of the Commonwealth and States during the period will be £13,000(000 less and the country is saddled with increased taxation. Hero then are all the ingredients for making a first-class depression from which Australia cannot escape.

banking trend IN N.z

In the monthly bulletin for October issued by the "Alexander Hamilton Institute from Melbourne, the general conditions in New Zealand are dealt with. The bulletin observes that there has been a marked demand for money for transmission abroad,""a fact revealed by the decrease in deposits, especially for those not bearing interest, ,and a marked increase in loans. Nominally the September quarter is rather a quiet one so far as banking movements are concerned, but it may be that the circumstances can be explained from a point of view quite in keeping with the trend in New Zealand economic conditions. The trado balance is now undoubtedly a favourable one, coupled with which fact there has been a considerable improvement in the general well-being of the , community, despite many circumstances which are not so bright- as they might be.

For some months there has been a tendency for the import side of the Dominion’s overseas trade to increase at a quicker rate than have exports, and doubtless large orders have been placed abroad accompanied by remittances, for the forthcoming season. And the bulletin adds: “It should be again emphasised that a complete recovery in the economic position of Nmv Zealand is hampered to a large extent hy the state of the country’s finances,' a fact which is indicated clearly enough hy the adverse movement in the exchange rates on London. In view of certain banks’ reiterated statements that they have plenty of funds available for investment, it seems strange that a slight demand on their allegedly ample resources should impose such a strain. As, however, four of the six banks are Australian institutions, and therefore representative of a class which has placed the most stringent conditions on Australian importing owing to their depleted reserves hotli here and in London, no very great stretching of the problem is necessary to conclude that the New Zealand business of the same hanks is scarcely as easy as it could be. The necessity of shipping funds to London draws attention to the very close relationship which the cash reserves of the hanks hear to their other attractions.