THE RESERVE BANK

Otago Daily Times, Issue 22326, 28 July 1934, Page 12

THE RESERVE BANK

The House of Representatives would have taken a retrograde step if it had accepted the proposal of the Leader of the Opposition to convert the Reserve Bank into what he called a State institution by placing the appointment of the Governor and Deputy-governor in the hands of the Government of the day. Under the law as it stands the Governor and the Deputy-governor have been appointed for a period of seven years. On the expiry of this term they will be appointed by the Government on the recommendation of the directors, and by this time the directors appointed by the votes of the shareholders will be a majority of the members of the board. The existing provision of the law offers a safeguard against the danger of the exercise of political influence upon the board of the bank, and it is important that this safeguard should be maintained. The argument that a Reserve Bank should be free not merely, from the fact, but also from the suspicion, of political control is one that is of convincing weight. It has been well put in an authority on the subject. “Just because the decisions of the bank react bn every aspect of the economic activities of the country, it is essential that its direction should be as unbiased' as is humanly practicable and as continuous as possible. But clearly if the bank is under State control continuity of policy cannot be guaranteed with changing Governments, nor can freedom from political bias in its administration be assured.” The Labour Party’s aim, to bring the bank under State control, is, of course, consistent with its whole policy. Public ownership of the Bank of England is the policy of the Labour Party, of the United Kingdom. An extension of the scope and powers of the Commonwealth Bank until complete control of banking and credit is in the hands of the State is the policy of the Labour Partyin Australia. And one of the members of that party in the Commonwealth has confided to the public what the meaning of this policy is, that within six months of the Labour Party coming into power not one of the trading banks in Australia would be open. The purpose which the Labour Party, both here and in Australia, has in view is disclosed in this burst of confidence on the part of this exponent of its policy. It is simply that the savings of all the people would be taken over by the Government for use in financing the socialistic schemes that are included in the party’s programme. The existence, in the interest of all those who have savings at stake, of a safeguard against the exploitation of the banking system for political purposes should be obvious. One such safeguard is furnished in the provision of the Reserve Bank Bill which the Labour Party,

aided by some so-called Independent members, sought to break down by means of the amendment that was defeated yesterday morning.