THE BANK STATEMENTS.

New Zealand Herald, Volume LXVII, Issue 20538, 12 April 1930, Page 10

THE BANK STATEMENTS.

The abnormal state of trade is strikingly reflected in the hanking returns for the March quarter,especially in the exceptionally high figure of advances. The total of £53,676,778 is not only an absolute record for this period of the year, but the reduction of only £130,000 in comparison with the amount, in December is also characteristic of stagnation in the marketing of commodities. A combination of adverse circumstances has produced this situation. On the onp hand, importations have been continued in large volume, owing to delay in adjustment to the decline in the value of the major products of the country; on the other, there has not only been a severe contraction in the recorded value of exports, but a larger proportion than usual of the season's produce has not been marketed. Stocks have accumulated both within the Dominion and overseas. Moreover, to a very large extent, these stocks have not passed into second hands, since the present conditions do not encourage speculative trading. The result is that both producers and merchants have drawn heavily upon the banks for accommodation. That assistance has not been stinted is evident from the fact that advances have been made to within £3-26,000 of deposits. On other occasions, notably in 1926 and 1027, the returns at this season showed advances greatly in excess of deposits, but the Australian banks were then able to use external funds to relieve the situation ; at present, the demand must be met by domestic resources, and these are being fully taxed by the banks in their efforts to mitigate the difficulties of their customers. It is perhaps too early to expect any substantial reflection in the returns, which represent averages for the quarter, of the increase in interest rates introduced on February 1. There was undoubtedly abundant justification for that action to check the demand for advances and also to prevent the depletion of deposits. A year ago, public deposits increased from December to March by £3,681,000; this year, the gain has been only £647,000. A more significant fact is that the amount of fixed deposits, which had risen every quarter since March, 1027, to last December, has now declined by £630,000, in spite of the higher rates of interest offered during the last two months ; indeed, the weekly returns show that up to March 17 tho decline had brought the total below £30,000,000. Economic conditions have taken an unfavourable turn, of which premonitory signs have been visible for many months. In such conditions, the banks require all the available resources to help the producers and the commercial community, and it is extremely unfortunate that at the moment when their needs were greatest tho Government, entered into competition with them, diverting funds required for the financing of tho country's trade into improvident expenditure on ill-advised undertakings.