BANK OF N.S.W.

Southland Times, Issue 22188, 2 December 1933, Page 10

BANK OF N.S.W.

ANNUAL MEETING THE PRESIDENTS ADDRESS. The annual meeting of shareholders of the Bank of New South Wales was held at the head office, Sydney, on November 28. In the course of his address the chairman, Mr Thomas Buckland, gave a comprehensive review of the bank’s business for the year and of economic and financial conditions, particularly as they affected Australia and New Zealand. The following extracts will be read with interest: The balance of the year’s profit stands at £439,616, showing a small decrease on last year. This represents a return of 2.9 per cent, on shareholders’ funds as compared with 3.05 per cent, for last year, 4.07 per cent, for 1931, 5.26 per cent, for 1930 and 7.11 per cent, in 1929. These results are further conclusive evidence that the banks are standing with their customers in the depression. The directors appreciate that it is still necessary to devote our energies towards a restoration of prosperity throughout the communities we serve. In that _ prosperity the bank will share, as it has done in the misfortunes of its customers during periods of depression. The directors recommend the payment of the fourth and final quarterly dividend at the rate of 5/- per share in Australian currency. This will make the rate of dividend for the full year 5 per cent. New Zealand Central Bank. “The most important piece of legislation in New Zealand during theyeai, as far as this bank is concerned, has been the proposed establishment of the Reserve Bank of New Zealand. The development of central banking has been one of the outstanding features of recent years, and this bank has strongly supported the development of the Commonwealth Bank of Australia towards a central bank and the establishment of a central reserve institution in New Zealand. But there has been some controversy between the New Zealand Government and the Associated Banks of New Zealand over the actual Reserve Bank Bill presented to Parliament. Unlike this bank, all the New Zealand banks did not support the proposal when it was ib’sf made. It was not this, however, that led to the controversy. The Bill has several objectionable features, including provisions which may lead to undue Government influence, but the most objectionable feature is the price at which’the Reserve Bank is to takeover the gold holdings of the trading banks. It was agreed that all the gold in New Zealand "should be centralized in the Reserve Bank, so as to enable it to function efficiently. But the Government proposes taking over the trading banks’ gold at £3 17/101d per standard ounce, the old fixed mint price, and placing any profits,, so-called,- which would arise from this sale of gold in the open market, to the public account. The banks consider that this proposal amounts to nothing less than confiscation of property. The gold is the private property of the banks and the amount held is far in excess of the legal requirements for note issue reserves, as the banks have not been allowed to export gold coin. The Government, however, is persisting in its attitude to take the gold over at the mint price, and if it carries out these intentions, the step will inevitably be linked with the desperate financial position of the Government. Taxation in the form of confiscation is not countenanced either in Great Britain oi Australia. In both these countries the central bank purchases gold at market value. The New Zealand proposal, if carried out, must damage the credit of the Government in London, as there is nothing to guarantee that future governments of that country will not follow the example and confiscate other property at pre-determined prices. Investment in New Zealand Government securities under such circumstances will be risky and uninviting. Already the New Zealand credit in’ the London market has been damaged by the Government permitting local bodies to meet their interest payments in New Zealand currency instead of sterling, and if the New Zealand Government caps this doubtful procedure with the confiscation of gold, New Zealand cannot maintain her position in the eyes of the world. . Nor has the Government of the Dominion taken the same steps towards making ends meet in the public accounts as the Australian Governments. The Dominion Government is still showing increasing deficits, and even these do not show the whole seriousness of the position, since they have been kept down only by allowing some deterioration of the capital position. New Zealand has been living on reserves for some years past, and has in spite of this shown deficits. The deficit budgeted for this year was £4,500,000, but the present position indicates that this may be doubled, and points to the necessity of New Zealand adopting a plan similar to the Premiers’ Plan in Australia in order to regain control of its finances. The Exchange Rate. “The question of the exchange rate is so vital to the Australian economic problem that I cannot omit it from a general review of the Australian position. The aim of all Government and financial policy in Australia should be to provide a stable money; to provide a currency unit enabling the organizer to enter upon the expansion of existing businesses and the development of new ones in the full confidence that his calculations and estimates will not be upset by marked changes in its purchasing power, or, in other words, in the Australian price level. We should therefore look forward to the management of the exchange rate being directed to this end. There should be no alteration in that rate unless and until there has been such a marked and general alteration, not only in sterling but in gold prices for our exportable products, as to restore all our efficient enterprises to a profitable basis. On the other hand, should world affairs take a renewed turn for the worse and further falls in prices occur, bringing us back face to face with a falling off in business and employment, we should expect a movement upward to protect the Australian economy from another experience .of the distress brought about by falling prices. The recent developments in the United States dollar exchange position also point to the need of keeping our exporting industries in a competitive position in the markets of the world. This applies particularly to our wheat industry and the markets of the Far East. Those who at the present juncture are advocating a reduction in the exchange rate overlook the fact that the rate affects the gross, turnovers and revenues of all businesses throughout Australia, as well as Government revenues. To reduce the exchange rate at the present time .would have the effect of making an immediate and corresponding cut in the gross turnovers of all Australian businesses with disastrous effects on net returns. Exports Vital.

“There are two outstanding features of two countries’ positions to be kept in mind—the dependence of Australia and New Zealand upon their exporting industries and, as a corollary to that, their dependence upon the seasons. The latter is an influence beyond our control, but much that is within our control can be done to shield our exporting industries from the blighting blasts of the storms still raging over the fields of international trade, finance, and production. The development of restrictive policies in those markets in which we have been accustomed to sell our products will make it necessary for us to put in the forefront of all our

plans the need of trade treaties with other countries in order to develop new markets for our products to offset the restricted capacity of old markets. In all negotiations for such treaties there should be the objective not only of maintaining and developing our own exporting industries, but. of going further than that and making some contribution to a renewed expansion of international trade. Throughout the years of depression Australia has been blessed by a continuance of favourable seasons and the promises that our experience will be the same for the current crop year. Seasonal conditions throughout Australia and New Zealand may be said to have been favourable since our last review and are reflected in the output during the year of our primary products which, though smaller in volume, are still substantial. There must, of course, in such a widespread area be variable conditions, but we have been fortunate generally and are hopeful, now that the early summer rains are in evidence, that a continuance of good average seasons may be assured. This is essential to recovery, more particularly in Australia, where the vicissitudes of climate tend to the more extreme.”