THE MONEY MARKET.

Nelson Evening Mail, Volume XLIII, Issue XLIII, 16 April 1909, Page 2

THE MONEY MARKET.

CAPITAL DRIVEN" AWAY. EFFECT OF MORTGAGE TAX. STRONG REMARKS BY BUSINESS MEN. Mr N. Kettle, one of the Napier delegates at the Conference of Chambers of Commerce, last Tuesday, says tne "Dominion," made some remarkabla telling observations on the effects of the mortgage tax ami the graduated land tax, especially the former. The stringency in the money market, said Mr Kettle, was entirely owing to the large amount of money that had been withdrawn from' the country — the result of low rates of interest and the mortgage tax of 6s 3d in the £, and also the tax that had been paid by all investing companies, that had led to the withdrawal of a large number of them. In Hawke's Bay a number of companies investing money from the Old Country had been withdrawn. The money had been taken away," and it had not been replaced, by, any foreign capital coming in. Then there was the question of internal borrowing— Government debentures, and by public bodies. All this had brought about ths present stringency . No money had been brought in to take the place of the foreign capital that had been sent away. The question of the withdrawal of the mortgage tax should be brought before Parliament next session. ; BANKS' ADVANCES. He would point out that in the financial state of New Zealand our banks in 1902, and up till the end of 1906 had from two to three millions surplus, between deposits and advances. At the end of 1907 that surplus was, reduced to £800,000, and- at the end of December, 1908, the sufplusof^wo' millions was exhausted—that was, the banks showed a; deficiency or had advanced two millions odd more than their deposits— showing a difference in the position of. the banks from the end of 1906 to 1908 of nearly fivo millions of money. The banks practically had paid out of surpluses, to keep things going, those two or three millions of surplus, and had actually gone to nearly two and a half millions to the bad. If they referred to any of the statistics of the banks for the year endine 1908 th^y would see the figures he had stated. " The banks had increased their advances from 1902 to 1908 by eisrhl millions. They had only received three millions to do it with— which pave the balance he had mentioned. That was the position of the banking institutions ; and no wonder the banks were calline in money. They could not help it. The wonder was that the management of' the banks had allowed such oiiormnns advances to continue when They Had been carried to a point of havin? actually exhausted what they inieht rail their reserve fund, end had to fall back on their own capital. INTERNAL BORROWING. Now, as to internal borrowing, hecould not make out how much the Government had borrowed locally. _ Our public bodies had borrowed six millions up to the end of 1907. He had not got the figures up to the end of 1908. In 1804 they had only borrowed three millions," so that practically the local bodies had borrowed in four years three millions of money belonging to the people of the country. The harbour boards and borough councils had all been borrowing internally. Where had all the " money gone to They had had the most prosperous times the country had ever known. He had been in business since 1869, and during all his experience in New Zealand he had never known such prosperous times as during the last six or sev?n years. Wool had been afc phenomenal prices. Butter, cheese, and hemp had brought good prices. Where had the money gone to which had been made? No country had made enoroious sums of money during those years. They were now face to face with the fact that there was no money for business purposes. "NO MONEY." No financial instutition at the present time could lend any money. The A.M. P., Post Office, and Government Life Insurance all made the same reply to applications — namely, they had got no money, and could not lend any no matter what the security was. And the banks were in the same position — they had got no money to lend. The Advances to Settlers Department had got no money to lend. That was their reply. He though the time had come when the business men of New v Zealand should raise their voice, and ask the Government to rescind the mortgage tax. No doubt some newspapers and some persons would say that ho (Mr Kettle) was voicing the views of the moneyed man. He was doing nothing of th? kind. If they wanted cheap money they ought to take all restrictions possible off money in order to get cheap rates. When he was in Australia in October last he made inquiries, and found that there was any quantity of money at 4J per cent. He said, "We want some over in New Zealand," and they said, "We cannot send any over there." He asked why, and they said. "You have got a mortgage fax." The question was whether the Government could be induced to relieve the position by withdrawing the mortgage tax? It might be said that it was questionable whether even the withdrawal of the mortgage tax would mean the influx of fresh capital. But if that obstacle was removed it might help to induce the British investors to send their money back to this country. GRADUATED TAX. There was another question that deserved attention, and that was the'graduated tax on capital invested in shares in public companies. It had been brought to his notice, lately that a man holding shares in a company had to pay his proportion of the value of the company's property— simply because he ' held a few shares. It was never intended that tha graduated tax was to get at capital . invested in business premises. The object was to prevent land-owners holding large tracts of land — to burst up- large estates. He proposed that the attention of the Government be drawn to the matter, with a request that it be altered. II was never intended that the mortgage tax should be a charge on business properties. He concluded by moving the following resolutions : — "That whereas the mortgage tax has been found to be the cause of a large amount of capital being withdrawn from New Zealand and to retsirct the influx ol capital for investment, and to create financial stringency in obtaining loans required for the legitimate development of the country's natural resources, the attention of the Government be called to the position, and it is suggested that the mortgage tax be abolish, cd. Further, that in lieu thereof all income derived from the investment of capital be made subject to the income tux. "That the incidence of the graduated tax on land generally, and especially as affecting the interests of private individuals in companies, be carefully reconsidered, with a yew to such tax boing- wholly or partially abolished." The Premier's reply to this speech, wMch was received through tße Press Association was published in yesterday's issue.