DOMINION'S OUTLOOK.

New Zealand Herald, Volume LXVII, Issue 20537, 11 April 1930, Page 14

DOMINION'S OUTLOOK.

LONDON BANKER'S SURVEY.

HiNTS FOR PUBLIC POLICY.

" RESOLUTION AND PRUDENCE."

LESS EXPENDITURE ADVISED. Economic conditions in New Zealand are surveyed by tho Hon. W. Pember Reeves, chairman of the National Bank of New Zealand, in tho banking review issued by tho London Financial News on February 24. Remarking that tho year began with a now Government in office, with "a programme containing liberal promises," Mr. Reeves says "it cannot bo said that the year has entirely fulfilled the anticipations of optimists during its opening months, Throughout most of it tho country might be described as fairly prosperous in a quiet way, though businoss could scarcely, be termed lively or enterprise very manifest."

Discussing public and private finance, Mr. Reeves says: "So long us the Governmcnt borrows as freely as it has beon doing for the lust 20 years, that, in a comparatively small community, must affect general finance. This is very directly tho case when the public borrowing is internal as it has been to a very substantial extent during tho year under notice. The Government has been selling bonds 'over the counter' steadily for many months at 5 I B per cent., and latterly 5| per cent, (tho rate is per cent.). As there are no expenses of. issue and as the lenders have to pay Now Zealand income tax tho rates arc not unsatisfactory to the Treasury as rates go nowadays. Competition With Banks.

"But (ho competition on Ilio deposits oE the trading banks cannot be overlooked. There is very seldom any great surplus of deposit money in tlic country, and so long as the highest rate tho hanks can afford to pay is or 5 per cent. I hero is not likely to ho such a surplus. Furthermore, tho Government savings bank, by paying good rates of interest and allowing its customers to keep as much as £2OOO each with it, has attracted no loss than £49,000,000 into that institution. This is a tine evidenco of national thrift; but es nearly the whole of tho money is lent to tho Treasury it is not available for trading finance. Finally, it may bo pointed out that the State system of lending several millions every year to farmers anil very largo sums to tho smaller sort <>f would-be for building dwellings—soundly managed as it Jiitlierlo has been—has effects on the private finance of the country." Mention is made of tlie investment of Now Zealand capital in Australia. "During the last 18 months New Zealand stockbrokers and investing companies have been complaining that funds which ought to be used in developing the islands have been transferred to the continent by tho attraction of higher rates," Mr. Reeves remarks. "This tendency must be admitted. It has not, however, been in any way tho work of tho banks. It is only fair to the four Australian banks doing business in New Zealand to say that they lend their .Vow Zealand deposits very freely indeed in the country that provides them. Tho outflow of money to Australia has been almost wholly spontaneous investment by individuals or firms."

Trading Balance Inadequate. Attention is directed to the increase in imports during 1029, with the result that the excess of exports, which was £11,302,000 in 1928, shrank to £6,382,000. "This would be satisfactory enough were it not, lhut, New Zealand being a debtor countny on a somewhat large scale, it is desirable that the trade balance in her favour should not ho less than £9,000,000," Mr. Peeves remarks. "It, is pleasanter to be able to point out that the. smallness of tho diminution of exports in tho face of a. general tendency toward lower prices is a tribute to the industry of the producers. . . . "Tho large advance in imports—made public at a juncture when the consumers of the Dominion are fairly awake to the, fact that they are in for a, season of lower prices—is by no means the first example during recent, years of n certain inability on the part of importers to anticipate a year of depression among tho producers, and, therefore, to some extent at least, throughout tho community generally. This is the second or third time since J921 that tho same position Has been revealed and has resulted in the banks having to come to the assistance of overloaded mercantile clients. In 1921. the calls upon them were far heavier than it was convenient to meet. Fortunately, tho load now seenia much lighter than in 1021-22, and there should bo little difficulty in arran\ng to carry it. .lust now the banks, or some of them, are short of money in London, and their operations during the calendar year now beginning will call for skill as well as some caution.

Prospects Surveyed. "But they have had their difficulties in tho year just ended, and 1 see no reason why,-so far as New Zealand is concerned, these should lm materially greater during tho next 12 months than during the. past. There is likely lo be a further fall in the total returns of exports, ami a. contraction of imports is overdue, but tho banks aro forewarned of both lliese contingencies and will make their arrangements accordingly, "There is nothing of exceptional clifllculty in tho financial outlook," says Mr. Reeves in conclusion. "It requires resolution and prudence, but those will be forthcoming tho moment the electorate calls for tlieni. Hates and taxes amounting to £l6 ajiead of population tiro very heavy, but the standard of comfort is high, and if rather more revenue should be asked for, it could easily be furnished. It would seem, on tho whole, more judicious to curtail expenditure in a moderate degree next year, ami one is not without hope that this expedient may be quietly tried. The Government has suecess(jilly carried out tho conversion of tho heavy amount of external loans maturing last year, and for many years lo come will merely liavo internal maturities <o deal with. These, though substantial in size, will not be largo enough lo make their icnewal at fairly reasonable rates iit all troublesome."