A NOTE OF CAUTION

Poverty Bay Herald, Volume LXIII, Issue 19141, 9 October 1936, Page 8

A NOTE OF CAUTION

N.Z. AND THE INVESTOR "ECONOMIST'S" VI KW 1,, ;,. note headnd "Now Zealand and the Investor," the Stock Kxchnnge section of the Economist of August £1 savF.: — i.i The reactions of the London market to the R.t. Hon. JVI. J. Savage's rapid pro gramme of legislation have not, sn iar. been significant, either for gootl or ail It is (rue that New Zealand stocks wen scriouslv affected by the "feelers ' put out at the beginning of July., which sag nested the possibility that New Zealaiii would seek a reduction of interest, de spite the fact that there are no real op port unifies for conversion, on the Australian scale, during the next decade Sir Austin Harris, chairman of tlv National Bank of New Zealand, acted a the mouthpiece through which these suggestions were withdrawn, and the bondshave recovered their losses. The effects of the Government on in ternal conditions in New Zealand, how ever were recently discussed by Sir ■George Elliott at the Bank of New Zealand meeting. We hope to consider Sir George's, remarks at length on anothei occasion. For the investor, clearly, great importance attaches to the new forms of State control which have been introduced by •Mr. Savage. The Reserve Bank is now in complete control of credit and currency, and the private shareholders have been' bought out. The hank has power to advance the full amount of estimated revenue to the Government, and may acquire unlimited amounts of long-dated New Zealand loans. DAIRY PRODUCE TRANSACTIONS The trading banks, which have hitherto derived much of their London exchange and a significant part of their profit from handling dairy produce transactions, will lose this business to the Reserve Bank, under the .Primary Products Marketing Act. This Act, which is now in operation' for butter and cheese, introduces guaranteed prices for dairy and other primary produce. State intervention on this scale may be successful while prices are rising, while exports are increasing, and while recovery produces, a buoyant revenue. Whether, on a long view, it would encounter difficulties which might affect the Dominion's credit is open to argument. But the past history of guaranteed price schemes, and the complete backing of these particular .schemes through the medium of the Reserve Bank, suggests that, the Government may have awkward problems to solve if, and when, depression returns to the shores of New Zealand. In that event, comparison of t lie- New Zealand 5 per cent stock, 1946, now quoted at 111 with, say, the Australian 5 per cent ■ lock. 1845-75, which stands at 110. might not prove so favourable to New Zealand.