CENTRAL BANKS

Hokitika Guardian, 1 December 1933, Page 6

CENTRAL BANKS

functions of the institution

Although, the Commonwealth Ba. n k of Australia is not formally constituted as a central, bank, says the Melbourne Argu & , it performs central banking functions, it- holds the balances of the trading banks, controls the note issue, manages. the external exchange position, and provides credit' for Governments chiefly by discounting Treasury bills. Like the Bank of England, with its unwritten central banking constitution, it probab-ly.-exercises more power than it would if its operations and functions in that respect were confined, within an Act of Parliament. •

Th'e Prime Minister of New Zealand (Mr Forbes), in introducing the Central Reserve. Bank Bill to Parliament, said that it - was the function of the State to prescribe the monetary system and the duty of the reserve bank to operate that 6 ystem. Bankers questrun whether thg application of such a broad definition might not be distinctly harmful in. particular circumstances. It is conceivable- th a t a political party under sectional .pressure might seek to introduce a monetary policy not in the of the whole community. It would, be the. duty, of the central bank | t'O jpqey'ent the operation of policies deemed to be unsound. This is a principle to which effect "has been given on important oec.asion s by 'the of the Commonwealth .Bank. “The stand made By the Commonwealth Bank of Australia in 1931 .against the borrow practices of the Commonwealth and the States Governments,’’ said “The Times” weekly edition in a recent issue, “will probably beeome historic in central banking history.”