BANKING FUNDS

Poverty Bay Herald, Volume LXIV, Issue 19315, 4 May 1937, Page 2

BANKING FUNDS

INCREASE EOOOD BXPQBT SEASON^ MUCH BRIGHTER OUTLOOK For the first time since early in 1034 the liquid resources. Jn Australia of lift 10 trading.banks-show a definite and substantial increase. The .March Quarter aggregates of the banks' Australian business indicate that the expJJJrt season has resulted in the repFenishment of cash holdings and a substantial rise in deposits. The banking position, as a result, is now much easier than at any time during thn past two years and a-half. Compared with returns for the December quarter, fl.x'ed deposits with t tie, banks have increased by and current accounts by itMJ.872,743. Both increases are due primarily to the lift in export income. Tho movement in current accounts in thjp export season is always a reflex off"primary producers' returns, and it is'probable that a, great deal of the addition to interest-bearing deposits has come from the same source.

£Tlie cash j:esou.rces of the; banks impose certain limits upon -their,, ability ts£ lend. The fall in cash items has cwused a good deal of concern,' and t.Ce combination of a decline in cash ajfd an increase in advances led to some- restrict ion of- bunk-ins-- activities. The position lias been improving for some months, and the quarter's figures fjtiVP the banks a much'brighter outlook. Gash ■ has increased and advances have been repaid, and although deposits have risen, the ratio of caslr and Treasury bills to deposit liabilities has increased from 18.69 per cent in the December quarter to 20.71 per cent in the March quarter. The- movements mentioned are, of course, largely seasonal. During the current quarter, when export receipts ebb and the demand for accommodation increases, there may be some alteration. But, at the moment, it may bo said that the lending ability of the Australian banking system has received a decided impetus. The increase in liquidity and the general easing of tension in the banking system should encourage those who feared a further hardening of interest rates. It justifies to some extent the opinion expressed by the Commonwealth Bank board that there does not now appear to he any necessity for a continued upward movement of interest rates. It may also bo held- to justify the slightly lower rate offered on the new Commonwealth loan.