STATE AND RESERVE BANK

New Zealand Herald, Volume LXXIV, Issue 22847, 30 September 1937, Page 10

STATE AND RESERVE BANK

The annual report of the Reserve Bank, presented to Parliament on the same night as the Budget, deals with its affairs only up to the end of last financial year, on March 31. The statement shows that business done with the State up to that time could not have been conducted on more orthodox lines by the Bank of England itself. The export of dairy produce had been financed by overdraft, the total advanced in this way having been £16,220,520, reduced to £6,225,908, as returns from sales, amounting to £9,994,612, came to hand. This was the position in the middle of an export season. The advances appearing in the weekly returns as "for other purposes" had totalled £1,800,000 by March 31 — £IOO,OOO for housing, £700,000 toward repayment of a loan taken over by the Government from the Southland Power Board, and £1,000,000 for general purposes, a phrase which can be fairly interpreted as meaning in anticipation of revenue. Against all these amounts Treasury bills were issued, just as they were when the Government used to go to the trading banks and the departments for similar temporary accommodation before the Reserve Bank had been established. The bills for the million borrowed for general purposes were paid off before the financial year closed, just as they used to be. The others, it is indicated in the report, were renewed as they matured, remaining as tangible pledges that the Treasury would repay what it had borrowed. Incidentally the discount on all these bills is mentioned as one factor in producing a greater profit than in previous years. Here was no costless credit. It is similarly shown that when the Government's cash and conversion loan issue of October last year fell short of requirements by £2,490,650, the deficiency was made up by placing Treasury bills with the trading banks and the departments, and renewing those the Reserve Bank had discounted. Again the transactions answered . every requirement of orthodoxy.