RESERVE BANK

New Zealand Herald, Volume LXXIII, Issue 22399, 21 April 1936, Page 5

RESERVE BANK

EFFECT OF LEGISLATION FINANCIAL POLICY AWAITED PROFESSOR TOCKER'S COMMENT "Jn the absence of definite knowledge of the Government's financial policy, it is impossible to say what tho full effects of the Reserve Bank legislation will be," said Professor A. H. Tocker, professor of economics at Canterbury University College, in an interview last week. "The removal of lending limits places the responsibility of managing the assets of the bank on the management, where it rightly belongs. If this responsibility is exercised wisely there is nothing to fear from the change that has been made; but whether the Government will borrow, and what is more important will spend, wisely, is a question that can bo answered only when the Government's policy is fully knoAvn. "Apart from the change in ownership of the control of the bank, the importance of which is the use made of . that control, tlio most significant features of the amendment bill aro provisions, first, for giving tho bank control over exchange funds held abroad, and second, for removing restrictions on the bank's powers of lending. It is not clear from the amendment bill," said Professor Tocker, "whether the bank is expected to take over thQ whole of the exchange reserves held at present by the trading banks, but it appears likely that exchange reserves now divided between tho Reserve Bank and trading banks will be pooled in a greater measure than before. If this is so it' should result in moro economy and moro effective uso of these reserves." ,

The original of the Reserve Bank Act confined the bank's lending powers within narrow channels, said Professor Tocker. Tho object of the most recent central bank legislation was to maintain soundness and liquidity of tho Central Bank's assets. With trading banks it was usual to provido no such restricting legislation, but to leave tho disposal of assets and maintenance of sums and liquidity to the discretion of the bankers concerned. There appeared to bo no good reason for believing that central bankers were less capable of managing assets than trading bankers The change made in New Zealand, while removing the limits on Government borrowing, placed the responsibility of keeping loans made within proper limits on the Reserve Bank itself.

Under tho original legislation, the Reserve Bank made no loans other than small investments, and exercised little of that influence in tho money market generally expected of a central bank and usually implied through its lending policy. The new conditions allowed a greater flexibility to the bank, and if it lent fairly freely to the Government it would create by its loans the necessary instrument of market control. Bank funds in New Zealand were so abundant at present that there was ample room for lending. While such lending should bo spread over tho market as a whole rather than confined to the Reserve Bank alone, the bank could safely lend several millions and still keep well within the limits of liquidity required. TIMBER CUTTING SCIENTIFIC SYSTEM URGED METHOD IN BRITISH COLUMBIA The methods used to obtain timber from tho forests of British Columbia and the need for scientific logging in order to assist conservation, were described by Colonel W. B. Clayton, of Duncan, Vancouver Island, in an address to members of the Auckland Rotary Club yesterday. Colonel Clayton said timber was such an important commercial product of Canada that it was the chief export of British Columbia and went to all the markets of the world in various forms. There were 80,000 men employed in the woods of British Columbia, and the industry meant a very great deal to a young country. Timber operators had sadly neglected a scientific system of logging. The present system destroyed practically every vestige of the surrounding timber, but operators still claimed that they could not meet world conditions and world markets unless thev used that system. "The time is not far distant when force of circumstances, and tho lack of marketable timber, will compel us to ' adopt some method of conserving our forests," said Colonel Clayton, Sciontific logging would give operators choice timber and conserve the remaining trees, and wotdd also prevent floods, slips and erosion by allowing moisture to run off evenly. Colonel Clavton referred to New Zealand's svstem of afforestation, and said that Canada might profitably take a leaf out of Its book in that dnectiou. TRADE OF SAMOA LARGE INCREASE SHOWN HIGH EXCESS OF EXPORTS [from our own correspondent] APIA, April G Trade conditions of Samoa for 1935 show a substantial increase over thoso of 1934. The value of imports increased by £42,973, while exports were £61,181 higher. Tho total excess of the_valuo of exports over imports was £53,541, and is tho highest since 1928, when it amounted to -£95,622. For the past year the imports wero £135,757, against £92,784 for 1934, while exports were £189,298, against £] 28,117. During last year copra exports totalled 12,501 tons, compared with 8948 tons in the previous year. Cocoa beans, however, declined from 1027 tons to 576 tons. Exports of bananas amounted to 109,624 cases against 96,225. The increased price for copra, which at the beginning of the year c.i.f. London, compared wi'th £9 7s Gd for the corresponding period in 1934, was responsible for increased production and at present there aro about 4000 tons awaiting shipment. Tho market for Samoa cocoa is very unsatisfac-" tory ranging from £4O to £45 a ton for prime washed beans, with lower grades going at from £3O to £35 a ton. Ihe banana trade is healthy, the growers getting 4s Gd a case delivered at the Apia wharf. The export duty on copra is 30s a ton, while cocoa beans are shipped free. The recent hurricane did a considerable amount of damage to banana plantations, and it will be several months before a recovery is made. With brighter prospects, the future of Samoa looks more pleasing than it has done for some time, and with the increased shipping facilities, which will be provided by the Union Steam Ship Company's new steamer in June, the trade will get a decided uplift.".