PROFITS OF BANKING.

New Zealand Herald, Volume LIX, Issue 18275, 16 December 1922, Page 11

PROFITS OF BANKING.

ELECTIONEERING CRITICISM.

REPLY BY MR. G. ELLIOT. [BT TELEGRAPH. OWN CORRESPONDENT.]

WELLINGTON. Friday.

Reference was made by the chairman of the Bank of New Zealand, Mr. George Elliot, at the half-yearly meeting to-day. to criticism during the election campaign of the. bank's operations. Recalling that the large profits earned by the bank during the last few years were, to a considerable extent, made outside New Zealand, Mr. Elliot explained that the bank's funds in London at the end of 1919 had mounted up to over £20,000,000, and it was practically impossible to transfer any large portion of the surplus to New Zealand or to Australia Fortunately, exceptionally high interest rates ruled in London, British Treasury bills yielding as much as 64 per cent." while the Bank of England" discount rate went to 7 per cent., so that the funds in London yielded unusually eood returns. The bank's exceptional* profits wero due, therefore, to an abnormal set of circumstances. During that period its borrowing customers in the Dominion were charged a lower rate of interest than the bank obtained in London on the most-gilt-edged and liquid securities in the world. The present year has again witnessed a sudden change in the London interest and exchange rates, but this time the change is adverse. The bank's funds have once more mounted up in London much in excess of requirements, but interest rates there are exceptionally low, Treasury bills bringing in 2j per cent, or less.

Inexperienced Criticism. Referring to the " unfair criticism " by candidates who advocated a State bank, Mr. Elliot said: "We recognise that the ramifications of finance are so extensive and far-reaching in their results as not to be easily understandable by those who have not the opportunity of acquainting themselves at first-hand" with the real position of affairs. It would be well for the public to remember that the criticism of inexperience is necessarily of little value, and it should therefore be largely discounted. " We do not resent fair criticism, but we do object to wilful misrepresentation through the suppression of known facts, which, if stated, would put an entirely different complexion on the position. For instance, it is well known that the banks in this Dominion are far more heavily taxed than are any other taxpayers in the country, or even in the Empire. It is simply wilful misrepresentation to compare the interest rate in the banks here with those ruling elsewhere, without taking into account the much more favourable conditions existing outside tha Dominion —more especially in the. case of the State Bank of a neighbouring territory which, makes no contribution whatever to the Federal or State Governments bv way of income tax and land tax, and pays no rates to the local authorities. ; 'Ab a matter of literal truth, every person in Australia has to bear a greater proportion of taxation because the Commonwealth Bank pay no taxes whatever. "It is true the Commonwealth Bank has, during the ten years of its existence, made large profits; it no doubt makes fewer losses than other competing banks, for it takes fewer risks. The extent to which in a time, of stress the Bank of New Zealand fulfilled its obligations to its customers and to the country is revealed in our balance-sheet of March 31, 1921. and we are content to rest on the position therein disclosed. State Enterprises. " Many State industries have been tried in various parts of the globe, and havo | proved disastrous financial failures," said | Mr. Elliot. " There is, unfortunately, a growing inclination to look to the. Government to start all kinds of enterprises and to regulate everything by Statute Paternalism in Government has a malign influence on the minds and thoughts of the people; it warps the individual judgment, kills initiative, and destroys that sturdy independence and self-reliance which is necessary to build up a free and independent people. Laws which spring from this tendency of mind clog and obstruct; they lower the power of productivity in individuals, and increase the cost of everything produced. They put sand in the bearings of the industrial and ecouomic machine, and they increase the cost of living enormously. " Carried to an extreme, they lead to conditions similar to those now ruling in . Russia, where a great tragedy is being enacted; where a whole, nation is in The throes of misery, crime, disease, starvation and death; and where, for a pittance, men and women are forced to work 12 hours a day at the point of the bayonet. It has indeed truly been said that the least governed nation is the best governed nation."