THE MONEY MARKET.

New Zealand Herald, Volume XLV, Issue 13744, 8 May 1908, Page 6

THE MONEY MARKET.

• DEPOSITS AND LOANS. INCIDENCE OF PUBLIC BORROWING, j For gome short time past- <?igns. of a slight , stringency in. the' New Zealand money., market. "as compared with the extreme j buoyancy of the pa«t few years, have been | spoken of by those who keep a careful 'fin- '■ gor on the financial pulse. Th* returns in '[ ! connections with the banks of issue, .for j the first quartet of this .'.year, in compari- j son with the corresponding period of last year, which have recently been published. > j would. stem to indicate that there ha«> been ; | some justification for the occasional warn- j ing -notes'that have been sounded. An in- J I crease in advances of £2.990,763, and the j decrease of £146,817 in the fixed deposits [ are the most striking facta brought- out by these returns. There are other circumstances and figures, however, that should be taken ,

into account in considering the question j of any. shortage of money, apparent or j real. One point is the large and increas- j ing business being done by the Govern- i merit through the .Post Office .Saving?! Bank, and the other is the policy of local j borrowing for public purposes in {'refer- 1 ence to the raising of leans on the London market. The deposits in the Post Office Savings Bank have of late, shown a. very marked advance, they having increased

from £6.350.013 in 1901 to £9.953.266 in j 1906. In the latter year, which is the last I 12 months for which the official returns j are available, the excess of deposits over I withdrawals was no leas than £1.000,050, j as compared with £631 559 lor 1905. and j £171,769 for 1904. The deposits with the. private savings banks have also shown & j steady advance. The . funds of the Post | Office Bank are mainly invested in Government and other public debentures, and apart from these deposits a large amount of the people's savings is being utilised by the Government and the loud bodies in connection with their loans. The shrinkage disclosed in the returns of the business of the j banks of issue may thus not unreasonably be taken to be due'more to the fact/that the money is being diverted into other channels than to a shortage or the cjreulat- j ing medium, notwithstanding the influence j that the recent, fall in the prices of some of mil staple products has admittedly had in the latter direction, f Mr. Maseey, in his speech at- Gisbornc, on Tuesday night, referred to the question of the Government borrowing/in. the Dominion, and urged that 1 the /State should go to the Loudon market. He also stated that by people being encouraged to invest their money in' short-dated debentures, the man on the land was being compelled to pay more for his money. This view was endorsed by a number nl representative commercial men in Auckland, who wore eeen on the subject by a Hkkau> representative yesterday. "It is imperative," was the remark of one gentleman well versed in financial matters, '"'that both the Government, and the 'loco.' bodies should keep on" the local market,; and go to London'. J do not say there it a stringency, but if the Government, am/ the local authorities keep. on raising their loane in the Dominion there i« boa'nd to be a stringency."

Another authority expressed «■ similar view, and said thfre was no doubt Unit the large amount of public borrowing iu {he Dominion had i tendency to check laud values, and thus to react upon the farmers who desired s/tivances. The decrease of the bank depottte, notwithstanding the recent increase-' of a-half per cent, in the interest on ji'nc and two years' deposits, must have stoic effect on the lending powers of • the Janks." There seemed, Ijc said, to be a tendency on the part of the banks to'discourage- application for advances, particularly iiv speculative purpose*, and any new'■■'business that viae accepted was taken at higher. s rates than those which have previously ruled. He did not regard th. position as .one warranting any alarm, but if money was being applied to, one purpose, it could not, of course, be. available for another! The Government, and' the local bodies also, frequently professed to tee a virtue in thii policy of borrowing from local institutions, and Belling their debentures "over/the counter," bat when there was a tendency for such a policy to penalise the* men ■oil the land, who are the backbone/of the country, the virtue was of a Veir questionable quality.