BANKING FIGURES

Otago Daily Times, Issue 22422, 17 November 1934, Page 12

BANKING FIGURES

The weekly returns of the assets and liabilities of the Reserve Bank of New Zealand furnish an instructive and valuable reflection of the financial position of the Dominion. They also provide illumination, at desirably frequent intervals, upon other points. Among the respects in which the information furnished in them has been of direct interest to the general community is that relating to the bank’s holding of gold. The transfer from the trading banks of their gold coin or bullion to the Reserve Bank was to be completed within three months from the opening of the latter

institution. The transfer was actually effected in less than half this time. On July 31 the trading banks held gold coin or bullion to the value of £4,351,727 in New Zealand currency. The Reserve Bank began operations without any gold. By September 10 the position was wholly reversed. The Reserve Bank held gold to the value of £4,351,727 in New Zealand currency. The trading banks then held none. They had in compliance with the law transferred their holdings at the mint value of £3 17s 10M per ounce. Since that time the Reserve Bank has been reducing its holding. By October 1 the value of the gold held by it was reduced by £500,000; within the next fortnight it was further reduced by £250,000; in another week it was reduced to the additional value of £400,000; and the earliest of this month’s returns showed a fresh reduction of £200,000. Altogether the hold- 1 ing was brought down from #J4,351,727 j at the middle of September to £3,001,727 in the beginning of November —a difference of £1,350,000 in New Zealand currency. The reasonable assumption is that the gold with which the Reserve Bank has thus parted has been sold at the market price in London. In this event a very handsome profit will have, been made on the transaction and, as the legislation provides, it will be paid into the public account. It will represent a windfall to the Minister of Finance, who, as a matter of fact," made no allowance for it in his estimate of re 3 venue for the year. Another point of interest concerning which the gazetted weekly returns of the Reserve Bank are instructive has reference to the note circulation of the Dominion. On July 30 the trading banks’ note circulation was £6,220,241. Their right of note issue ceased on August 1, when the Reserve Bank opened its doors. On September 24 their note circulation had dropped to £2,716,064. By that date the Reserve Bank’s circulation had been gradually developed until it reached a total of £8,664,802. This week’s return shows that it amounts to £9,052,974. Irrespective altogether of the notes of the trading banks that are still in circulation, this indicates that the note circulation has been increased by nearly 50 per cent, since the Reserve Bank came into existence. The Minister of Finance quoted, at the conference of the New Zealand Manufacturers’ Federation this week, figures covering a wide range that showed an expansion of business activity in the. Dominion. The increase in the note circulation affords gratifying evidence in confirmation of the conclusion which Mr Coates drew.