RESERVE BANK’S POSITION

Nelson Evening Mail, Volume LXX, 16 June 1936, Page 4

RESERVE BANK’S POSITION

“IT will be seen that the Government has taken very full powers indeed to regulate and control credit and currency in New Zealand,” said the chairman of the Bank of New Zealand last week in his annual address, when referring briefly to the amendments made to the Reserve Bank Act. It seems inevitable that the Government in pursuance of its policy will make heavy demands upon the Reserve Bank. After its first, and last, year of operation when operated partly by private share capital, the Bank was able to disclose a strong position. It made a profit of over £98,000, of which the Government received £73,000. It must not be overlooked that the Bank has since become a State institution. Although the State derived a profit, it is losing approximately £250,000 (annually) which the trading banks used to pay as bank-note-tax, which was at the rate of 41 per cent, on the banks’ average circulation, calculated quarterly. The sole right of note issue now rests with the Reserve Bank. The

annual report just published, would J have been, in ordinary circumstances under the old legislation, presented to and discussed by shareholders. Now ■ it goes to the Minister—who has power to dictate the main financial p o li cy —and will only be discussed by Parliament at his pleasure. We do not suggest that he would attempt to hinder or stifle discussion. As a matter of fact the Bank, as we have | said, is strongly placed at present. I Moreover, there is every indication | that economic conditions are improving. The Bank’s report is not very illuminating in regard to detail, but in the main it discloses a satisfactory position, and reveals “easy money conditions” which did not warrant; either expansion or contraction of j central bank credit. This position is j reassuring; the future will depend upon the prudence and care shown : by the Government in its administration of the very wide powers it has assumed in many directions.