Manawatu Evening Standard. WEDNESDAY, APRIL 8, 1936. RESERVE BANK BILL.

Manawatu Standard, Volume LVI, Issue 109, 8 April 1936, Page 8

Manawatu Evening Standard. WEDNESDAY, APRIL 8, 1936. RESERVE BANK BILL.

In spite of a proper protest from the Opposition, me Government passeu its Reserve Bank Amendment Bill at one sitting. It now only remains for the .Legislative Council to complete tne legislation to make tne Bank a State institution. The Reserve, Bank was constituted as one of an Empire chain so that the. economic welfare of this Dominion might be promoted. The Labour ideal and pew charter for the Bank is that it will “give- effect to the monetary , policy of the Government,” to tlie end that the economic welfare of tlie Dominion may be promoted. In other words, to quote the Minister for Finance, the measure gives effect to the Government policy of controlling the currency and credit of the Dominion. With Labour implementing its policy tlie Dominion is on the eve of vast changes in finance, and members of the Opposition rightly questioned the wisdom of Parliament being- asked to force such an important measure through at one sitting. Acting together the Bank and the Government will exercise control, and this fact has been responsible for a good deal of nervousness in business. “The transfer of money to or from New Zealand” is to be regulated by the Bank as one of its general functions, and such an authority suggests absolute control of overseas trade and capital movements. In future the directors will be Government nominees, holding office for a maximum of five years during its pleasure. They may be reappointed, but the wording of the Bill leaves no room- to doubt-that if they are antagonistic to the Government’s policy they may be removed at will. The Bank will provide the Government’s financial accommodation. Loans can be underwritten, an overdraft granted to finance the guaranteed price plan and produce bills discounted for the same purposes, and by borrowing on Treasury bills the year’s revenue may be anticipated. All this and more the Minister for Finance may do, and even though there is this qualification in many clauses, it is not to be presumed that he will always be bound by it. Mr Forbes, as Leader of the Opposition, during the second reading debate very properly reminded the Government that Sir Otto Niemeyer, upon Avhose report the Bank was founded, had laid it down that a reserve bank should be free from the actual fact and also from the fear of political influence. The Government is flying in the face of this cardinal principle, and the “country will have to wait until mis- 1 takes are made to see what evils result from the change.” The Opposition Leader’s speech all

through was a most reasoned review _oi the legislation, and to the Prime Minister’s statement that the country is going “onward and upward and with the brakes oh,’’ Mr Forbes correctly replied that the “slippery slope of inflation is a downhill slope and travelling on it with the brakes off would be exceedingly dangerous.” Notable too was the speech of Mr AV. J. Poison. Himself a believer in State control of a central bank, lie pointed out that the Bill made for political, not State, control. That means Government control of the banking system, and Mr Poison pointed to the y danger that the “funds and credit of New Zealand can be used for any party or political purpose.” It was _not suggested that the Labour Government would do so, but the weakness of which Mr Poison spoke exists in the Bill. The reply of the Minister for Finance was to some extent at least reassuring. He definitely said that if the Bank’s directors gave sound, solid, and legitimate reasons why a policy should not be carried out then it would not be adopted.' But at the same time he stated that the Governor of the Bank would support the Government in carrying out its policy, “although he had made it clear that he was not in agreement with that policy” ; and nothing could be more disturbing for it suggests that the Governor, a most experienced banker, does not regard the Government’s policy as sound banking practice. The Labour Party’s strength in Parliament enables it to force its platform upon the country, and it can only be hoped that in the exercise of the tremendously wide powers it has taken under the amendment to the Reserve Bank Act nothing will be done to stay the definite progress of recent months.