CENTRAL BANK PLAN

New Zealand Herald, Volume LXIX, Issue 21328, 1 November 1932, Page 13

CENTRAL BANK PLAN

CASE FOR AND AGAINST DR. BELSHAW'S VIEWS AN ADVOCATE OF DELAY In the opinion of Professor H. Belshaw, of Auckland University Coliege, New Zealand should benefit in the long run from the establishment of a central bank. But he expressed the view in his address to tho Dominion executive of the I'aimers Union in Wellington last week that it would be better if the establishment of such a central bank were delayed until economic conditions had become more stable. Tho case for a central bank, Professoi Belshaw said, rested fundamentally upon tho need for having a single responsible authority to control credit and currency in the interests of the community. Commercial banks, 011 tho other hand, were profit-making institutions. Moreover, even if the commercial banks adopted a policy desirable from the community point of view, they were more likely to be subject to strong public criticism, and to hesitate to put such a policy into effect. The interests and viewpoints of the commercial banks might sometimes conflict, and result in a compromise. A single central institution would not have the same difficulty, besides being less likely to exercise direct or indirect pressure on the Government, as well as being more willing to put into, effect tho policy dictated by the Government. Case Against Establishment The main limitations, however, on tho power and influence of a central bank in New Zealand were, firstly, the absence of a short-term money market similar to that which existed in tho financial centres; and, secondly, the difficulty of obtaining sufficiently experienced governors. Nevertheless, Professor Belshaw believed that in the long run New Zealand should benefit from the establishment of a central bank. Professor Belshaw said that his main reasons for suggesting delay were, in the first place, that conditions were changing so rapidly that views 011 the constitution and appropriate policy and technique of central banks were still in a state of flux. A delay would enable New Zealand to profit from the experience of the rest of the world. Next, it seemed very likely that the policy of a central bank would be very largely dictated by the Bank of England. It was more than probable, he said, that the first governor would be the nominee of the Bank of England, because New Zealand had 110 ono with tho experience necessary to direct a central bank. Various Suggestions At a time of great monetary uncertainty, New Zealand should not bo prepared to sacrifice her monetary policy to the Bank of England. " The position is more serious," he said, " because it would appear that the City of London does not appreciate tlio problems of New Zealand. Tho danger is all the more real because the proposal of the Niemeyer report is to tic our currency to sterling." If tho Government decided to establish a central bank, Professor Belshaw said, he would suggest first of all that tho bank should be recognised as a national institution and the profits should be strictly limited. Secondly, while detailed Parliamentary interference should be avoided, the ultimate authority of Parliament on monetary and banking policy should be recognised. Professor Belshaw suggested that if the Government decided to establish a central bank it should submit a draft of the constitution to independent authorities outside New Zealand, other than Sir Otto Niemeyer, Professor Gregory, or any of those connected with the Bank of England. It should obtain the opinions of such authorities and give them its earnest consideration. Ho thought that Mr. J. M. Keynes was one to whom such a draft might be profitably submitted. BILL DEFINITE THIS SESSION INTRODUCTION SHORTLY [llY TEI.EGRAPH- —SPEC! AT, REPORTER] WELLIXGTO.V, Monday "The Central Reserve Bank Bill is now taking practical shape," said the Prime AJii lister, Mr. Forbes. "It is definitely intended to proceed with the bill this session, and we hope to introduce it within tho next week or two. However, the second reading stage will probably be delayed until Mr. Downio Stewart returns on November 23."