FUTURE OF BANKS

New Zealand Herald, Volume LXXIV, Issue 22818, 27 August 1937, Page 7

FUTURE OF BANKS

EEACS IN AUSTRALIA v

COMMISSION'S PROPOSALS INCONSISTENCY OF REPORT The principal question at present agitating Australian financial circles is the future of banks in the Commonwealth. Another contribution has been added to the discussion by the publication of a circular by the Bank of New South Wales on "The report of the Royal Commission on Banking." The bank shows that it is seriously concerned over the implications of the report. Although the commissioners expressly repudiate nationalisation of banking, says the bank, "the character of their recommendations is such as to expose tlie whole banking system to political interference of a most dangerous type." Central Bank's Status This most dangerous result seems to arise from u fundamental inconsistency between the text of the report and the recommendations with which it concludes, states the circular. In the last resort any government which has a working majority in both Houses of Parliament and is willing to pass the necessary legislation can make its will effective on its central bank.

It is precisely because this is true that it has been found essential to protect the central bank by giving it certain statutory rights and obligations. If it has to advise a government not to embark upon a certain financial policy for fear of its undesirable economic consequences, it can refer to j its own statutory obligations, because to pursue the policy would force it to J break the law as it now stands. Faced i with this fact the Government must' then decide whether it wishes to take the consequences of its own policy and change the law. j Safeguards Swept Aside I All this' is recognised by the commissioners in the text of their report. But when they come to their recom- j mendations thev sweep away all these j safeguards. Thev suggest that the Com-1 nionwealth Bank should be relieved of its obligations. No longer would theiv be a reserve hold against the note issue, nor indeed a statutory reserve of any kind. Moreover, the report is silent on that other usual obligation to buy and sell sterling exchange at fixed and known prices. Worse, they suggest that the note issue should be capable of increase with the permission of the Treasurer (the Australian Minister for Finance). Here, says the Bank of New South Wales, "a vital and indispensable safeguard for the central bank is swept, away." In the event of a dispute between himself and the Commonwealth Bank, the Treasurer will not need to resort to legislation. The borrower, the Treasurer, would have no need to refer to Parliament to authorise his actions in advance. The bank points out that if this recommendation of the commissioners is adopted as it stands, "the position of the Commonwealth Bank will be well nigh intolerable." The bank recognises that Australian institutions are in a most important and delicate phase of development. It clearly visualises Australia's great financial institutions playing an increasing role in serving the community in newer and wider spheres. But it fears that they will be unable to do this "if they are to be confined by legislation intended to soothe growing pains, but in practice destructive of growth itself."

HIGHER COST ,OF LIME

EXPLANATION TO FARMERS

INDUSTRY IN THE SOUTH [by telegraph—OWN correspondent] CHRISTCHURCII, Thursday A statoincnt by the manager of a Canterbury limeworks on the present, price of liine to farmers was placed before the North Canterbury executive of the New Zealand Farmers' Union, as a reply to criticisms of the present price which had recently been made bv branches of the union. Mr. H. M Carr, who represented the lime companies, told the meeting that costs in the industry had increased tremendously, and he thought the increase in the price of lime must be regarded as moderate compared with the rise in production costs. Wages had risen by 50 per cent, lid said, and as an example one man who had worked lont; hours oil ;i recent Sunday had been paid £4 13s for his day's work. He instanced other rises in costs, and compared Canterbury rates with those in the North Island, Some northern companies were charging 21s Gd, he said, compared with 16s in Canterbury.

Mr. Carr promised to forward an estimate of the total rise in production costs for each ton produced.

CORROSION PROBLEM

CABLES AND WATER PIPES CONFERENCE IN WASHINGTON To attend a world conference on soil corrosion in Washington this year Mr. C. M. Longfield, research engineer, of the Victorian electrolysis committee, will leave Sydney by the Aorangi on September 30. The electrolysis committee consists of representatives of the Postmaster-General's Department, the Victorian Railways Commissioners, the Melbourne and Metropolitan Board of Works, the Melbourne and Metropolitan Tramways Board, the City Council, the Metropolitan Gas Company, and the State Electricity Commission. Corrosion of underground pipes and cables has already cost Melbourne authorities many thousands of pounds. •Technical methods, some of which are said to be unique, have been evolved to combat the problem, but replacements are still costing several thousand pounds a year. In some cases the corrosion has Been so great that pipes and cables have become useless within a few months. The cause of the corrosion has been traced directly to electric rail and tram services. Most of the current supplied from overhead wires is returned to the power houses through the rails, but some of the current leaves the rails and returns through the earth. By a natural process, opposite to that employed commercially for electroplating, the metal of pipes and cables- in the path of f the currents is gradually e.aten away. The result is often a serious leakage of gas or water, or dislocation of the telephone or electricity service.

GOLD AND SILVER QUOTATIONS IN LONDON LONDON, August 25 Fine gold is quoted to-day at £6 19s GJtl an oa., compared with £(3 19s 4}d yesterday. Silver is quoted at 19 13-16 cl an o z., spot and forward, compared with 19 15-16 d both positions yesterday. The quotation for silver at per fine 07,. is 21 gd, compared with ,21 Mou yesterday.