CREDIT SYSTEM

Otago Daily Times, Issue 26582, 3 October 1947, Page 6

CREDIT SYSTEM

AID TO BUSINESS TRANSITION i PEACE-TIME BASIS BANKS’ IMPORTANT ROLE Special to the Daily Times. ' WELLINGTON, Oct. 2. Recording advances at £39,728,494, an increase v of £6,872,429 for the year, the annual report o‘f the directors of the Bank of New Zealand states that this increase was expected and is symptomatic of the return of business to peace-time conditions. “ Importations of trade goods instead of munitions of war,” trfe report says, “the change-over of factories from the making of goods for the use of the armed forces to the making of goods for civilian use, the restocking, of warehouses, factories, and shops, etc., have all meant increased demands for overdraft accommodation. A further cause is the rise of costs and prices. Every rise in wages and every increase in the price of goods causes more pressure on the working capital of business and is frequently reflected in an increase in bank advances. Delay in completion of jobs, due to shortage of materials, industrial disturbance, or any other cause, has also the same result. Assistance to Importers' s “ Shipping delays, both in New Zealand and overseas, also increase the pressure. Owing to these shipping delays, overseas manufacturers and 'exporters frequently require a cash payment as soon as goods are ready for shipment, as against the ordinary method, of payment against shipping documents. This means that the New Zealand importer has to stand out of his money much longer, with resultant pressure on his bank account. The fact that business can readily avail itself of bank credit to meet conditions which often arise quite unexpectedly enables the economy of the country to be carried! on much more smoothly than would otherwise be the case, and it,is very desirable that the banking system should be maintained in a strong and flexible condition so that it can shoulder an,y demands without undue strain. Fortunately, this is the position to-day. “The Reserve Bank of New Zealand has laid down certain principles governing the advance policy of all the banks in New Zealand with the object of restricting the use of bank credit for purposes which would more suitably be financed by either share capital or by borrowing outside the banking system. In past years a good deal of the capital required for development of both primary and secondary industry was provided by the banks, and .this assisted the economy of the country enormously at a period when the country’s early growth was hampered by the lack of capital. • At present, with the increase of the money supply resulting from the necessities of war finance, there is ample capital seeking investment, as evidenced by the over-, subscription of all recent share issues. Analysis of Advances “The following figures relating to the bank’s New Zealand business show the analysis of the advances as at March under the various headings for statistical purposes and for 'comparison the figures for the previous year* are added. For this purpose the figures have been reduced to percentages of the total advances for each of the two

‘ “These figures,” the report continues,” show clearly that, apart from the all-round increase due to higher prices and higher costs and l increased turnover, there has been a very marked increase in the requirements of the wholesale and retail trades, which to- " gether accounted for 14.43 per cent, of the total advances at March last, as against 9.43 per cent, in the previous year. The reasons for this increase have been indicated above—principally restocking at higher prices.

years:— March March 26,1946 26,1947 P.C. P.C. Farmers 39.10 34.11 Industries allied to primary production. 14.72 15.75 Manufacturing' and pro- * ductive industries 10.31 10.15 Merchants, wholesalers 4.24 8.15 Retailers 5.19 6.28 Transport 1.43 1.54 Local bodies, etc. .. ‘ .. 1.77 1.73 Stock and station agents 1.15 1.33 Hotels and restaurants, etc 3.42 3.61 Entertainment concerns 0.50 0.39 Financial companies, etc. 1.56 1.35 Religious and charitable 0.35 0.39 Professional 1.96 1.82 Private individuals 10.04 9.05 Miscellaneous 4.26 4.35