THE BANKING POSITION.

Manawatu Standard, Volume L, Issue 112, 8 April 1930, Page 6

THE BANKING POSITION.

Government banking enterprises in Australia have not been of such assistance to the general* public as to warrant their extension. Taking the Commonwealth Bank, for instance, established by the Labour Government under the Fisher Administration in 1911, its deposits on the 30th June, 1927, amounted to £72,863,855, of which £44,212,050 was held in the Savings Bank Department, which, prior to 1911, was under the control of thevPost Office. Its advances to the public for trading and industrial/ purposes Amounted to £17,043,767, while it was holding £52,904,863 in Government and municipal securities, so that Its advances on the latter account were more than two-thirds of the similar advances made to its private customers. On the other hand the joint stock banks, out of ' their deposits totalling £270,211,653, had made advances to their customers amounting to £251,255,949. The New South Wale's, Victorian, Queensland, and even the South Australian banks had accommodated their customers to a much greater extent than, the Commonwealth Bank, the advances made in these States'by the private banks being as follow: New South Wales ... £91,213,825 Victoria 75,668,659 Queensland ... ... ... 31,929,661 South Australia 18,447,113 The Commonwealth Bank, which was doing business all over Australia, was meanwhile confining more than two-thirds of its business to Government and municipal bodies, so far as its advances were concerned. With the passing of the Labour Government’s amending legislation of the last Parliamentary session, the Commonwealth Bank has had the right to commandeer all gold coin and bullion held by the banks and to hand, them in return Australian notes, of which it at present controls the issue, to the face value of the gold thus obtained; but, as the notes are not negotiable abroad, the banks can Only issue credits bn London or other centimes to a very limited extent. The step taken by the Commonwealth Government in thus restricting credit abroad may have been both necessary and desirable. But it does not appear either necessary or desirable to place the further restrictions on the banks that this Central Reserve Bank Bill contemplates. Labour Governments unfortunately hold curious ideas upon the economics of banking, and any departure on their part from accepted banking principles invariably defeats itself. . In experience it was found necessary to the successful working of the Commonwealth Bank that its management should be conducted on similar lines to those on which the joint stock banks were conducted. It has been successful, it is true, bet it could never have attained the success it has experienced but for the fact that it carried the Commonwealth Government’s account from the day it opened for business, and was able, to work on the large balances of Government moneys transferred to it by the other banks, added to which it Had the handling c-f the loan moneys upon which it was not called to pay interest. It had no capital of its own to work upon and the five millions or so, represented by its capital and reserve fund, are made up of its accumulated profits for the 16 years covered by its operations to the date for which the figures are quoted in this article, viz., June 30, 1927. And those profits had averaged some £32,6,000 per annum, mostly accumulated in its dealings with the Federal Government. There

will doubtless be a good d,eal pf controversy before the Central Reserve Bank Bill gets on the Statute Book, providing always that it gets there. ( >