FINANCE AND TRADE

Southland Times, Issue 19393, 6 November 1924, Page 6

FINANCE AND TRADE

MORTGAGE ASSOCIATIONS POST OFFICE SAVINGS BANK (From our Financial Correspondent. WELLINGTON, November 6. The Prime Minister has acted wisely in holding over the Farm Law Mortgage Associations’ Bill until next session, for this will give the public ample time for considering the matter in all its bearings. It must be admitted that on its introduction it caused a good deal of nervousness amongst business people in Wellington, and had the Bill not been withdrawn it was probable that a deputation of commercial men would have waited on the Prime Minister to urge the postponement of the meas.The Bill fails to please those whom it is intended to benefit, for the Dominion Executive of the Farmers’ Union has condemned the Bill as being valueless to the farmers owing to the small amount proposed to be advanced by the Government. The rights proposed to be given the Associations to raise funds by the sale of 51 per cent debentures, and by the acceptance of fixed deposits at 5 per cent, interest are quite in order, nor can any very strong objection be taken to the Government lending the Associations up to £2OOO, for establishment expenses for there is precedent for that in the Dairy Industry Act. Although there is precedent for this, it does not follow that it is correct procedure, or that it is justified. The worst feature of the measure is the proposed advance of £50,000 to each of the respective Associations with a limit of £150,000. This money is to be advanced free of interest for a period of ten to twenty years, and as there is no security for the advance, it becomes a gift or a donation to the Associations. This money is to be advanced from the Consolidated Fund, and it is this proposed advance that is indefensible, for there can be no justification in giving the money of all the taxpayers to a section of the community. This will be characterised as class legislation, but the political aspect of the matter does not come within the scope of this article. The proposal for gifting money from the Consolidated Fund, as disclosed in the Farm Land Mortgage Associations’ Bill, would never have been seriously suggested had we inculcated in our politicians a respect for the fiduciary character of the Consolidated Fund. This fund has been created and is being maintained mainly, if not entirely, by the contributions of taxpayers. Into the Consolidated Fund is paid the income tax, the land tax, Customs duties, stamp duties, and other taxes, which are extracted from the pockets of the people. We must pay for law and order, and the protection of life and property, and the State has a right to tax the people for this purpose. The Consolidated Fund is really a trust fund, and should be safeguarded and administered with the same scrupulous care that is expected of trustees administering a private estate. In recent years the Consolidated Fund appears to have been deprived of its fiduciary character, for successive Governments have viewed it as a sort of Pandora’s Box to be dipped into at will. Besides being drawn upon to provide gifts and donations of one kind and another, the Consolidated Fund has had to provide for many years past large sums for capital expenditure, and at the close of the last financial year £1,000,000 was diverted from the Consolidated Fund to the Public Works Fund. The mere fact that there was that large sum available was in itself an indication that the people were over-taxed to provide that sum. Applying the proceeds of taxes for capital expenditure violates the fundamental principles of Government, and since this has become a regular system with successive Governments the taxpayers are deliberately over-taxed to provide funds for capital expenditure, and other unwarranted expenditure. It is safe to assume that, the people know best what to do with their mbney, and if the million sterling that was transferred to the Public Works Fund had remained in the pockets of the taxpayers they would have used it to better advantage than the politicians, and the expenditure by the taxpayers would have had far-reaching results of a generally beneficial character. It may be asked what is to be done with a surplus when there happens to be one? The answer is that such surplus should pass automatically to the extinction of debt, for that is the only honest way of dealing with a surplus. This is a matter of sound financing, and it is a question that requires to be considered by the business men through their Chambers of Commerce and other similar organisations. Unfortunately, such organisations are far too prone to shirk their obligations in this respect and to shelter themselves behind the weak excuse that politics do not come within the scope of their activities. To endeavour to bring about a sound system of financing in the public accounts is not politics but the obvious duty of every taxpayer. We are over-taxed, and have been over-taxed for years, and will continue to be over-taxed until the Government of the day and the Governments that may follow, are made to realise that the Consolidated Fund is a trust fund, and cannot, and must not be raided at the pleasure of Ministers to provide for capital expenditure or for other extraneous purposes. POST OFFICE SAVINGS BANK. Since October 1, the Post Office Savings Bank, has been Issuing Post Office Investment certificates with five-year, and tenyear maturities. These certificates are just a variation of the War Certificates that the Department issued during the War period. The reason for the issue of these investment certificates can be readily seen by the returns of the Post Office Savings Bank. For the past three years the witlv drawals from this institution have exceeded the deposits, and this is shown in the table appended which covers the period for years ended September 30: —

In the three years the withdrawals have exceeded the deposits by the huge sum of £2,585,086, and there must be some very good reasons for this. The people who make use of the Post Office Savings Bank would not be affected by trading losses, but a trade depression involving unemployment would affect them. It cannot be said that there has been much unemployment during the past three years, and we must therefore look in other directions for the cause or causes. The housing shortage has obviously been a contributing factor, for many people have been forced to put their little savings into house property to keep a roof over their heads. But the amount so invested is probably comparatively small, at all events not sufficient to account for the heavy withdrawals from the Post Office Savings Bank. It is most, likely that the bulk of the money withdrawn has been invested in the debentures issued by local bodies, and many joint stock companies. The Savings Bank has been losing deposits, because depositors have been able to find more remunerative investments, and the issue of Investment Certificates is the method adopted by the Post Office for holding its funds, but this is not likely to have the desired effect because small investors can do better by employing other channels of investment. There is now a very strong demand for funds, and the tendency is for rates to harden because the supply of funds is not equal to the demand. It is doubtful whether' the savings that are being made now are on the same scale as say five years ago. Local bodies are finding it increasingly difficult to get their debentures sold, and this should cause no wonder, because these new issue are at par while previous issue are procurable at adiscount. There is, however, a marked dullness on the Stock Exchange in respect to business in local bodies’ debentures.

THE BUTTER MARKET.

London quotations for imported butters continue very high, but the high prices are for the finest grades only, inferior sorts being reported to be fully 20/- and more lower. The position is likely to remain firm until supplies from the Southern Hemisphere begin to arrive in volume, and this cannot be until towards the end of the year. A good rainfall in Australia has made the outlook for dairying there extremely promising, and a big output of butter is anticipated. In August the Commonwealth exported to the United Kingdom 55,281 boxes of butter, and in September 109,868 boxes, which shows a big increase. New Zealand shipments cannot have any effect on the market until about January, and the exports from the Dominion should be large. Argentine is also likely to contribute an increase this season. The current high prices is checking business, for buyers are nervous and are operating from. hand to mouth. Apparently no sales have been made, at all events none have been reported, and factories have been warned to be careful in respect to advances. The outlook for dairy produce appears to be very good, but it is an uncertain and fluctuating market, and the immediate future may turn out to be very different from what is anticipated.

Year. Excess of Deposits. Withdrawals W’drawals. £ £. £ 1922 . 26,918,643 28,323,679 1,404,036 1923 . 27,490,811 27,860,401 369,590 1924 . 30,075,673 30,887,133 811,460 £84,485,127 £87,070,213 £2,585,086