ANNUAL MEETING

Hokitika Guardian, 15 June 1934, Page 2

ANNUAL MEETING

BANK OF NEW ZEALAND. • l . v> ,■ ’ . j- *‘fj 4 ‘ y " THE' CIJAIRMAiS’S 'ADDRESS. • ,'y "is/ 1 The v/iiuiuqf. meeting ;'of'; /shareholders o ti th e-’ 'liattk' '*of,dtfe >vhZe jland*' w«s . li'elil to-day" y;. ,w '• ! r ...... .... • p/a j * f | ■■ * * "5 ,’' *» , y' ) rjrt Before formally..,moving the, adoption of the report ■and bahinoe. sheet, 1 shall take the opportunity 6f commenting ,on any .‘items which call'for special m^ptipn,At ■V .T'.v.yj' • ! ahei reserve fund;—These reirnfiia' the. pmQ .as ( last y£ar. On , July 19 '• ' 1 thi's; '4 l ' 1 per 'renf/A'guaranteed stock, amounting to £529,988 10s 6d '.will- 'fall' ■dug and will “he. 'repaid by the r>f> hki from rtfs London.'Tespufpes. .: ; _ Nofi%\ in ‘ circulation.—A. clecreasfo oi j£79.598^ 1 | r i rf .s^Q.w.’nv., wc£k>y...axenagiy 61 the Circulation for the year was £3,735,0C v ' ~}_■.. . ; I', Dept^^—These increased by j81,75-M-755.hTile greater portion of the incrca||gii^.dhyfixc.dr,,deposits. fiovernnjont balacpes hiQ Tbss bv £593,609. The Hepasiia. of all the banks have .shown Mton.yd'wable increase during thq year, i|nd fWtecfeii&Hd'this :int(ttcr is' made (n mother part of my report. dtifel; losJj.Ci. f ]i]ierc : i's’.'a dfiireaae |f £21,238; • . f; ! .Ooin, casli-balances 1 ahsl deposits With bankers-shows a decrease of, £706,136. , Money, at,, call and 'short notice, Government securities, and other securities in 'Loudon, hive decreased by £2,103,050 • :. 1 h - ' ■

Bills' rtceiy<kbie/in , in transit.—This itcrn 'shows dp increase of .£852,359, : due 'mainly- to the. higher prices obtained for woo] during ; the past Reason.. '■ r- -N /. New - Zealiuid ■ .'securities lieid in .the .Dominion And -.Australia, show ;an’ .incre'ißC of- ,'£sj£!6i ;556, • due mainly to •; ah iiicfdai'b'd' holding of Treasury t biltd. . r , ’ .■'■■■'■ ; AilsWali.ah .? Govbrfinidnt; securities show ah indrOrjdo -hi,* £59.'/Gj J 4fel> «? Advances' and bill.s -dis,c*ountod are less .by £2,709;527,; but' it vshbiild - N - bo meintibned ■ that' • IbhtjH;' ' to l , tiip, State Against BiSchjirgecl, iSoidfers’Settlement Mortgages ikr* included lihder this heading/ otherwijsb A hiUch • gteafci* • dreduction would lie fdiowri. .•■ ■ ••• Dividend.—The dividend, on . all classes. of shares will be payable in .Wellington to-mbiTow,. land*. a : t / 6ur .various brandies oh receipt of .advicq: I quite ariticipate' ‘ thait ’tiiql-sp. not riiieitj v intcrested in v \ he : wblf>re of file Batik, m'iy policy of the Board in'decidingto rfecbmiriend the payment’ j>f.j h final of 5 per ceiit., ■ niiikinh .10 per; oeiit. for tih*post ..finqacjal .year.,;' ■. ■ board; of , -term %of • Office of Mr It, ,W. jflibb-i. One o f the t\Vo rep.rese’jt'ulives'’ of ;thb ordinary shareholders, mcpirid in.-Ylarch last, and hb waS. re-elfecfed' to the'

pos it ion. . , p ; • . The; ter of. lit 1 George. Elliot n” 1 Sir Bobert A. hdettrpn expired in 'March Hast,- jfjid Both ' have been vc-nUpoiiited by the Government for a further pefiod of'three years from Ma~"h 3.1. 1934. Tour Bbard/hbs'done me the honour of unanimously electing me chairman for the cilrrent year,. As successor to Sir Herirv Bueklotoq tbo Board appointed Mr F. AV. Dawson, who has filled with distinction many high .offices in our service. Wo are satisfied that he will worthily up-, hold the high traditions of his predecessors. At this stage I should like to place on record our appreciation of the loyal and efficient, services rendered by our staff in New Zealand, Australia, Fiji, Samoa, and London. All sections have done 1 splendid team work during the trying times through which weliavo been passing since, the financial and ;

(economic blizzard bvortbok us, in common with the rest '* of • the world,

: jl shall now briefly review the banking position in the Dominion. The banking return the March quarter of all b'anks operating in New Zealand revealed an increase in the free deposits or currentaccount' balances, of more than. £4,000,000 for the j year’^bringing.the.to'tal.;to over £21,j OOd'boO. The' time or : fixed deposits liiiye.continued to expand; which is 0; inevitable in a period of . commercial <Tepressiou. !l L’> J O' I v'/ ’• { The total of the deposits shows an [' abnormal increase. On the other hand, thp advances and discounts have deI creased for the year by nearly £7,000,COO, leaving the exceptionally large . excess of deposits ‘.oVer advances of ■ njoro than £19,000,000. ■ ’ I ’Tbe‘’decline of' bank advances by [ approximately £7,000,000,' as compared with last year, has been materially contributed to bv the raising of'the exchange rate on London from j. J&jjSX cenlito.2s .per cent. ; m ( .Tt is with pleasure that f”turh to another of our important industries, wool. Wool had been falling steadily since the season of 1827-28, and during the‘three seasons previous .to the current season the average price was exceptionally low, but steady. By various devices, but principally by withholding supplies from the market, values were prevented from declining still further. ' This welcome improvement 'appears tojiave been due partly to an increased demand, and partly to drought conditions in Australia and South Africa causing great mortality in sheep. The substantially Higher prices realised for H’ool probably saved us from further economic troubles. ' . EXCHANGE RATE ■ You will expect me, no doubt, to make some reference to the exchange rates, the alteration of which in January, 1933, from 110 to 125 (to £10() sterling) has been the subject Of considerable controversy. • The Bank’s view regarding adjustment of exchange rates to meet variations in the price of produce was abated from this chair at the annual -ipfedting in 1932 and. again in 1933, and it is therefore unnecessary for me to repeat what was then said. I will merely summarise the present position. It will be recalled that the Government, believing that the most satisfactory manner of helping the primary producer in' his difficulties was through the exchange rate, as had been done in Australia, raised the rate fl-om. 110 to 125. At the same time, to ensure the co-operation of the banks, the Government agreed to take over the surplus. London funds arising from the Banks’ New Zealand business. It may.be assumed that the Government and their advisers 'anticipated that importers and others having payments to make in London, would accept the position and continue to operate . normally. vSuch, however, has not been the case, for the belief has,been widely held that the exchange rate must have some relation to the balance of trade, that the 125 rate was unwarranted according to this priheip’e and therefore could not be maintained. The uncertainty regarding maintenance of the rate, whether justified o’not-, bus been most unsettling, and has naturally given importers and others a good deal of anxiety in the conduct of their business. Tam afraid that some of the trade which should rightly go to our best customer—Great • Britain—is being diverted to Austra- . 1' ’

The Government have given an assurance that the rate will remain at its nresent figure until at least the end of the present produce season. The Reserve Bank will commence business on August 1, and as the determining of exchange rates is one of its functions, the continuance or other wise of the present rate will be one of the difficult problems it will have to solve., 1

MONETARY SYSTEM h 1 1 ; VvY-. . ■ ■ ,v , The Government during last session e set up a Parliamentary Committee to g consider monetary matters. The Corner mittee’s report will be awaited with interest. ,s A feature of the present depression s is the number of people who, without 1 . anv> fiualificution for the role, have become ardent monetary reformers, a' ; It .is ■ necessary, i n order to preserve a sense of perspective, that we should _ look. back now and then to the years . following the war. What do wo find? e; A world which, according to commonf sense standards should have been poorer as a result of the war, lived as ,7 if the war had in fact made it richer. . In New Zealand our national debt . has increased approximately £1.34,000,r 000' since 1918, and local body debt i over £36,000,000. The good sense of the community must lead it to realise >' that to an individual who has lived on borrowed money, or to a. nation that 7 has lived on borrowed money, there - must come a day of reckoning. It is > inevitable, and I ! do not see how 3 'a people can blame the monetary • system for its consequent trouble, any ■ more than an individual can blame the , monetary system for his difficulties. ; The same good sense of the public should -also make it disbelieve in i schemes which promise an easy way 1 out. The people of New Zealand will, i I am sure, firmly refuse to regard seri- ■ ously fantastic and rjdiclulous scheme which promise much without cost, and will choose rather to follow the example,of the Mother Country, which squarely faced its difficulties and is making steady progress toward recovery. THE RESERVE RANK i The most important event in' banking , circles has been the establishment of a Reserve Bank. Our view regarding the necessity for such an instituion in our small Dominion' has already been made plain at previous annual meetings, and I do not propose to make any further comment on that aspect of the matter. Parliament.having decided that a Reserve Bank should be established, the Bank of New Zealand will co-operate in every way possible to serve the in- ; terests of the Dominion. The Reserve Bank is to commence operations on August 1 next. The Government accounts, which for So many years have been kept with the Bank of -New Zealand, will be transferred to the Reserve Bank, but we do not consider this will have any material effect on the earning power of this Bank. Thb right of note issue will vest in the Reserve Bank. To redeem their existing issues, the trading Banks will have to purchase Reserve'Bank notes. The Banks have also to maintain balances at the Reserve Bank equal to 7 per cent of' their free deposits and 3 per cent of their fixed deposits. Altogether for notes and deposit, the Bank of New Zealand will have to find for payment- to the Reserve Bank aporoximatoly £7.060,000. Of this amount about 1J millions will be pro vided by «ur gold holdings, and the ■balance by repayment of Treasury Bills out of funds to be remitted from London through the Reserve Bank. Tt will, no doubt, occur to you that the transfer of this large amount into’ non-interest bearing assets will affect the profits of this Bank, particularly as the greater portion is now invested in New Zealand Government Treasury Bills. The loss of this income will certainly -affect our profits, especialy if the present conditions cf a low level of advances and high level of fixed deposits continue, but as -a substantial set-off there will be a saving of note tax (4} perc *ent) and cost of maintaining our note department, which together have been costing us over 6 per cent on the awounj of out notes

iii' circulation—an expensive privilege iu these times of low interest rates. The gold held by the trading Banks jsVto be handed over to the Beserve Bank in exchange for . . .notes of an equivalent nomin'al amount. For every sovereign',a- -lteserve .Bank- £1 note will be "received. You 'are', aware, .from newspaper report*, of the Bahk’s strong opposition; to tlio proposal that; their gold should he taken over at practically half, its market value, and' you. will readily Umdeystan'd thatwo regard the'‘matter with disappointment-and a strong sense of injustice.

The Reserve Bank, which is to receive £1,01)0,006 from the Government for its General Reserve Fund, free of interest, is also to be exempt from < taxation, and it will thus he in a vory advantageous position as compared with the trading banks, which have paid both note tax and income tax. ' general outlook. “ We' are new m the fourth year of economic depression, and, while lack of confidence and a feeling of uncertainty still largely prevail, signs of a gadoid mpvement towards recovery are, fortiilately,': not wanting. The credit tm this improvement, small though it may be, is attributable to Great Britain. tV, ns an Amoricao business man remarked, .“Engl-nd has pulled herseii out of the mire by the aid of. her own bootstraps. ” •M«n of experience know theft in ,ab human' affairs no slump or boom. m» rise iptr Jail, .neither depression i>er prosperity can be continuous and 'without stay ; depression follows prosperity, and depression is followed by prosperity, or neither would exist, aud the descriptive terms, therefore, would be meaningless. The regiers of finance and trade, like the phenomena of nature, are equally subject to a rhythmic order. There is a contagion of hopefulness, optimism and confidence, as well ,as of depression, pessimism and fear. England has started' the contagion of optimism, which we can all hope will soon spire:.d throughout the world. I taow beg to move the l adoption of the report and balance-sheet. THE SECONDER. Mr William Wa J 'son in seconding the. motion said I have pleasure in sec-| ending the motion for the adoption of : the report and balance-sheet. . Naturally, owing to 'the bstablishment of the Reserve B nk and yofir institution being deprived of the Government business and the note issue. ,as well rvs a. large .amount of its fund 1 * being irequjred to be on deposit without interest while bearing heavy Income tax, some of you may be undei* apprehension as to its future. Saving of expenses, may, however, ba-lati’cc my loss incidental to the removal of the II Government account, and it would be decidedly difficult at the present low rates of interset to recover the costs of a note issue bearing a special tax n? per cent, besides income tax and price and manipulation of tile notes. Apart fro.m' these considerations, which may he termed minor in comparison, you have the great inherent strength of the Rank which ,at this juncture, deserves some notice. Forty years ago the head -office of the . Rank of New inland was removed from London to Wellington. Arrangementis were then m’de by which the ( Govenr.ment .at the time assisted the Bank by an endorsement f.-> whi-h the endorsers i.r’ways bed ample security. .. and have since received in cash and appreciation of shares several f«m°s ■' value of the sum endorsed- To the • G 'Board;....and staff of that day nursf Be • given the credit of laying .oewre four- 1 . dat ions on which their successors have wisely and laboriously built so that now -mi have the and strong'.h referred to by the chairman in connection " ith the dividend. After their severe lessorts in the early nineties of 1 fit century rro't banks in the Brit'eh Empire, including this Bank, ad enter] c s system of small or no dividends, writ- _ ,ing down. assets, land building, un re- 1 serves, until they acquired the strength which has enabled them to reward shareholders and stpc.d firm in the '.o’ T ’ 3 ye-rs. It' would not b?, correct t n imagine that the condition .and stand. 91 ing of this institution lias been bf might ~ c* about by profit’s mlade in New Zealand only. • • ' A I consider that, with capable direct- " '■•rs and continuation of a staff of of- 11 puch rs the Rank has r<vv. if 1' will hold its own through good times w iand bad as it has done in the past forty years.-. A v