MONEY AND BUSINESS AFFAIRS.

Manawatu Standard, Volume LVII, Issue 155, 2 June 1937, Page 4

MONEY AND BUSINESS AFFAIRS.

(By Ifc lias been frequently urged that Britain should throw open her inpney market to foreign borrowers, but it is doubtful whether, at present, Britain has surplus funds for: investment abroad. A compilation of balances of international payments suggests that large surpluses:' are unlikely in the, immediate future. In 1936, so far as Great Britain is concerned,, there was an actual debit in payments to and receipts from abroad. The excess of merchandise imports was £347,000,000, but against this debit were certain credits, namely £95.000,000 on account of shipping; £195,000.000 from investments, and £38,000,000 from

, other items. 11l 1935 there was a credit of £33,000,000; in 1934 the debit was £7.000.000. For each of three years prior to 1931 the account showed a credit exceeding £100,000,000. The debit balance of last year was due'to an increase of imports outstripping the increase in exports, as well as the increased earnings of foreign investments, and of shipping and other services. With an industrial country importing raw materials there is- a time lag in the export of the resultant manufactures, hilt it has also to be remembered that the demand for manufactured products is retarded by continued exchange stringency, by the obstruction arising from unduly heavy international debts. The record of the Midland Bank .points out that in 1936 Australia, New_ Zealand, and Argentina, countries in which the production of agricultural products remains dominant, Exhibited a similar trend in their trade. Each of them recorded a phenomenal expansion of exports, due partly to higher prices and partly to a greater volume of oversea sales, While imports did not show a correspondingly great movement. When a primary producing country finds its ex- ; port surplus increasing, three courses , are open to it. First, it can import , more goods, chiefly manufactured pro- ■, duets, and to this end can lower ini- |

port duties, increase import quotas if in force, or allow free access for importers to the exchange resources accruing from exports. Secondly, if it is in partial or complete default on external debt, it pan resume the service of some or all’ of them. Thirdly, it Can build up its monetary reserves in gold Or foreign exchanges. The pursuit of the third course, however necessary it may be, has no direct effect on the export trade of an industrial country; the second, while it adds to the oversea inpome of a creditor country and therefore strengthens its international account, likewise restricts the growth of merchandise exports from industrial countries. The extent to which the first is followed in the early stages of recovery is thus limited. Therefore there can be no spectacular growth of British exports in- the near future, though some expansion is thought likely, and this, along with larger receipts on capital invested abroad, may offset the growth of Britain’s total payments for imports. Further recovery to a point at which Great Britain may conceivably again have a large current surplus for new investment overseas will take time; if, indeed, the basic changes in world economic relations do riot render it unlikely even with the lapse of years, ! observes the review. BANK OF ENGLAND.

The Bank of England return for the week ended Wednesday, May 26, shbws the beginning of the. end of the Coronation festivities; that is to say, a great many of the, overseas visitors to London have departed. On May 19, the note circulation amounted to £481,400,000, while on Wednesday last it had. fallen to a shrinkage of £6,200.000 in the course of a week. The gold holding at £321,200,000 shows no change on the previous week. The total note issue for the week was £521,200,000, but only £475,200,000 was in circulation, the balance being held in the banking department, thus increasing the proportion of reserve to liabilities from 26.10 per cent, to 30.51 per cent. The money market continues very easy in London; day to day loans are being done at l per cent., while call money in New York is 1 per cent. There is little prospect of the money markets getting dearer for some time to come; hut in neither city are foreign borrowers likely to be encouraged lust at present. All countries are spending money very freely and, although commodity prices have risen; they are not causing much inconvenience. While internal trade in Britain is brisk, that cannot be said for international trade. SURPLUS AND TAXES.

The State accounts for the past year closed, with a surplus of £472,000, and in the opinion of many people there should be a reduction of taxation. The commitments of the Government would seem to make that impossible, and, indeed, an. increase in taxation seems very probable, if not inevitable. The Government this year w-ill have to face a full year's increase of salaries and wages of civil servants, while in the past financial year it was only for six months and even less that provision

had to be made. The 40-hour week has necessitated employing more in the Civil Service, and all this has to be provided for. Then there is the loss oil guaranteed prices, and the subsidies to various production industries such as fruit, flax, etc. But there is also the social legislation of pensions for all, and health insurance, legislation in respect of which n to be passed during the next session., National defence will call for a big expenditure. This question has been discussed at the Imperial Conference and the fullest information given to the representatives of the Dominion.