BANKING AND POLITICS.

New Zealand Herald, Volume LXIX, Issue 21099, 5 February 1932, Page 8

BANKING AND POLITICS.

An assertion thai, there is a division of opinion among bankers in New Zealand regarding the proposal of artificial inflation of exchange rates has been answered in positive terms by Sir Harold Beauchamp, whose authority to speak for the bankers of the Dominion cannot be questioned. He states that dissension has been introduced by a visiting banker from Australia, who, with (he assistance of a professor from Melbourne, have been carrying on "missionary work" in the Dominion for several weeks, and that while they may have impressed selected audiences, they have not converted the executive officers of the other Hanks trading in New Zealand. The recent announcement by the chairman of the associated banks is equally emphatic in ils denial of disagreement among the banks and its rejection of the theory that has been so vigorously expounded. To the general public, the activities of Mr. Davidson and Professor Copland must lie perplexing. There is good reason for the assumption that hanking operations" are conducted upon principles established by generations of practical experience, / and that the problems they encounter are, best Solved by dispassionate consultation among experts of the profession. The proposition that such essentially technical questions as the rates of exchange and the management of currency should he determined by mobilising, political influences in support of a highly controversial experiment is too revolutionary to be accepted. Dogmatic assertions that similar palliatives

have already produced salutary results in Australia and should therefore be equally beneficial in New Zealand are not confirmed by the review of the Australian situation presented by Mr. Lyons to,the Loan Council last week. His address was punctuated with grave warnings. Already the Governments of Australia have unfunded debts in London to the amount of £37,825,000 and in Australia of £-11,00] ,000, a total of £78,826,000—the amount having been more than doubled in nine months. They are relying upon the banks to finance £18,060,000 of Budget deficits in the current financial year, and have asked them also to finance loan and other expenditure amounting to £13,030,000. Is it surprising that Mr. Lyons should have warned his colleagues that unless public budgets are balanced in a comparatively brief period there is a risk that "the whole plan will break down" and that "to lean on continual increases of internal bank credits would be fatal to the stability of our currency"? New Zealand's difficulties arc serious, but before any rash experiments arc made, it would lie wise to await more convincing results of their application in Australia.