MONEY AND BUSINESS AFFAIRS.

Manawatu Standard, Volume LX, Issue 124, 24 April 1940, Page 5

MONEY AND BUSINESS AFFAIRS.

POST OFFICE SAVINGS BANK. (By “H.J.K.”) It is not generally known that for tho past eighteen months there has been a steady withdrawal of funds from the Post Office Savings Bank; that is to say, depositors have withdrawn more than they have deposited with the bank. This is said to be attributed to an expression current during the last election campaign with the Labour Party. It was to the effect that tho Government would use the savings of the people to create assets for the State. Depositors put their own interpretation on this, but as a matter of fact there was nothing new in the statement. What was new was the novel way in which the legitimate function of the Government was stated. The Post Office Savings Bank accepts deposits from all and sundry and guarantees a certain rate of interest. The Government lias control of the deposits and invests the funds as it deems desirable. Naturally, the investments are made in the enterprises of the Government; it may bo in the building of railways, of roads, bridges, public buildings, and so forth, which maybe termed assets of the State, so that the expression referred to_ was in no way a new thing. Nevertheless, some depositors thought otherwise. The election, it will be remembered, was held in mid-October. The jxisition of the Post Office Savings Bank on September 30, 1938, that is, for the sixmonths of the financial year, was: Deposits, £16,701,905; withdrawals, £16.029.751; excess of deposits. £672,157. At the end of October it was as under: Deposits, £18,967,355; withdrawals, £19.841.318; excess oi withdrawals, £873,963. In the course of a single month over £1.500,000 was taken out of the Post Office Savings Bank. It did not stop there, for by tho end of December. 1938, the excess of withdrawals had risen to £2,925,503. Three months later, at March 31, 1939, it had risen to as much as £4.103,417. In the years preceding 1938 39 the deposits exceeded the withdrawals; this excess for the year ended March 31, 1938. amounted to £3,412.098. The depositors, of course, had no difficulty in obtaining their money, lor the Government made use of ils ‘‘money service,” otherwise the Deserve Bank, and so met the demands of the depositors. The position of the Post Office Savings Bank, like all other banks and financial institutions, rests on confidence. Some members of the Lalrour Party, as well as ex-members, insist that the partv should take over the Bank of New Zealand. The country does not desire a banking crisis now or at any time and it is to bo hoped that short-sighted politicians who advocate the State should take over this bank will realise the effect of their proposal. FINANCING THE AVAR. The financial side of the war efforts of both Australia and New Zealand is naturally a matter of great interest to hankers, and the chairman of the Bank of Australasia, at the annual meeting of shareholders in London, referred to it. He pointed out that both countries should increase their London balances' through the sale ol produce to the British Government. On the other hand the payments to troops overseas woidd make heavy demands on those balances which woidd greatly reduce any gain from the sale of produce. The chairman pointed out also that the New Zealand Government’s policy of paying high wages and spending large sums on public works and social services had resulted in a big increase in expenditure within New Zealand. It may be pointed out that this abnormal spending power is the main cause lor the depletion or London funds. Our spending power is greater than our export income, and us much of our expenditure is on imported consumer goods the restriction of imports forces up the prices of such consumer goods. As Professor Tocker, of Canterbury College, has said, “In the long run we can consume only to the extent that wo produce; whatever tho Government spends the people must pay for, and the purchasing power of the people is limited by the goods and services produced and marketed, and is not increased bv_ any increase of money. There is relatively plenty of money in the pockets of the people, and yet the ' people cannot spend more than the export income, for it is out of the export, income that we pay for imports. We find now that our export income will not cover tho demands upon the country lor the

debt service, or for the payment of our soldiers • overseas, and therefore, although sterling funds have increased substantially, they are still below requirements, and the Government has been obliged to further restrict imports. Tin's in return forces up prices and the money "pumped" into the pockets of the people is now; found to be insufficient to maintain the standard oP living. Jlence there is a demand for a general increase in wages, which if granted must further force lip prices. Moreover, the restriction of imports is reducing tile Customs revenue and the income from the sales tax, and as the Government cannot maintain the finance without these revenues, it is* crystal clear that in the coming session there will be further taxation imposed, unless the interest-free loans already secured by the Government are sufficient to carry on for the balance of the financial year. J?ut whether there is more taxation this year or not, more taxation will ultimately he necessary, and the state of the national finance may call for drastic economies.