A STATE BANK.

Lyttelton Times, Volume CXIV, Issue 16352, 23 September 1913, Page 3

A STATE BANK.

ITS ADVANTAGES TO NEW ZEALAND. TO HELP THE SMALL MAN. .(By J. 11. Macdonai.i>.) The statement made by Sir Joseph Ward in Parliament that the country is much in need of a system of agricultural banks is..a good one, and the matter is one that deserves not only earnest but urgent consideration, far anything that could facilitate and assist tho dominion's basic industry of production from the soil would bo of great economic value to tho community. The system of agricultural credit banks ill operation in Europe to which Sir Joseph referred is founded mainly upon co-operative principles in communes o" localities containing families long established there. This makes co-operation so very much easier. Tho conditions in the dominion, however, are considerably different. The population is thinner and it floats about so much that difficulties would be encountered in making efforts to acclimatise such a form of banking, and these points open up tho question as to whether it would nob be better for tho State to undertake the business. There is another phase of the'dominion's sj?stem of,credit that might at tho sarao time be deserving of consideration, and that is the provision of accommodation for small traders generally. The incorporated banks cater primarily to the monied section of the community and do not care much to bother about financing small men, although these hanks derive large profits from the aggregate credit balances of their small customers. ,

Still further, there is another aspect of the question of banking, which if considered might lead tho people of Now Zealand to decide upon the advisableness of establishing a State bank to serve several purposes. With tho numerous Government Departments in New Zealand—two of them, the Savings Bank and Advances to Settlers Office, banks in themselves—there is no other country more adapted for the establishment of a State bank than New Zealand. It would pay to run such an institution to conduct tho large banking business attached to the administrative departments alone. The Post and Telegraphs, Savings Bank, Railways, Insurances, Customs, Laud and Tncome Tax, Territorial, Advances to Settlers, Public Trust and other departments, are constantly paying ill and paying out, subject to all sorts of bank commissions and exchanges, the moneys of tho State. The total annual revenue of the dominion is somo £10,000,000, and it is an uncritical eye that could not detect a source of profit and l saving for tho country in handling this amount alone. The Government usually has over £1,000,000 lying at credit with the Bank of New Zealandj non-interest bearing, and tho banking profits on this and on the bank note issue of close on £2,000.000 and on the accounts of the various departments of State should reach.well over £IOO.OOO a year. But emphatic importance need not bo attached to the profits that a State bank could earn in pursuit of the above duties, neither need the probable profits of any kind of banking transactions be the primary consideration, for, being a State concern the interests of the. community would be its objective. Its profits would be displayed moro in a negative way, in giving a fillip to enterprise and production. Certain profits would, however, have to be accumulated to form a reserve fund, or the bank would never facially appear a success.

There seems to be a need for a bank or somo form of credit giving for tho small farmer and small trader, and the devising of it should add very greatly to the agricultural and industrial production of the country. At present the man with the .greatest wealth gets money the cheapest, i. 0., the more one has got the easier, can he earn still more. The speculator, merchant, manufacturer, or monopolist worth £IOO,OOO in property or other securities can go to a bank and get a large loan on his securities at 5 per cent or o£ per cent. Tho small farmer or trader, worth in stock, property and so forth, say £ISOO, has to pay for say £7OO, if ho is lucky enough to got it, quite 7 per cent to 9 per cent interest. The still smaller farmer or trader has to pay even a higher interest. Take a Crown lessee for instance. If sold up he might be worth £3OO. He can get nothing from a bank and has to wait a necessarily long time to arrange for a loan from the Advances to Settlers Office. He may want tho money urgently, to buy stock to consume feed brought on by good rains or n dozen other reasons, and he has to resort to a money lender, who will charge him a very high rate of interest as well as a substantial fee for arranging the loan. Perhaps between interest and fee he will havo to pay nearly £2O the first year for the £IOO that the wealthy man can get for £5 or £G.

There is no general desiro in New Zealand to manufacture large capitalists—they have got a way of doing that themselves—but it should be desirable to make as many of the population as comfortable and as independent as possible, and some form of Stategiving credit to the small industrial arid producing sections, conducted quite independent of the Bank of New Zealand, will do far more to attain this end than any other scheme the- writer can think of. There are some who think the banking interests would suffer. Quito otherwise, as their legitimate business would increase enormously as it did after the inception of the State Advances scheme. There is on enormous annual toll collected from, the population by way of interest. The net annual profits of the chartered banks run between £750,000 and £1,000.000. These profits are earned from gilt-edged feeurities and may in a sense be regarded as profits gained by accommodating capitalists who in turn make it good many times over from the public's purse. There are financial and discount companies, merchants,, agents, professional and amateur money lenders, who can get what extra capital they want from the banks for o per cent or 6 per cent, lending it out to the smaller man at often very high lates of interest. The basic principle of a State bank could bo to help the small man towards increasing his industry and production, and it should bo the means of increasing the population of the*coimtry fro:n that quarter where its increase can most bo expected.