CENTRAL BANKS IN DOMINIONS

Southland Times, Issue 23647, 24 October 1938, Page 8

CENTRAL BANKS IN DOMINIONS

DEVELOPMENT SINCE GREAT WAR CURRENCY CONTROL SEES GREAT CHANGES LONDON, September 13. The establishment of central banks in various parts of the Empire has been a feature of the post-war years. An attempt by 'a writer in the current issue of The Midland Bank Monthly Review to summarize the cardinal changes which have occurred or have been taken under active consideration in respect of monetary control in various pails of the Empire is to be commended. It is pointed out that: “The variety of the measures adopted in evolving a sound yet progressive system of monetary management is well illustrated by the fact that in New Zealand and Canada changes of Government have led to changes, similar in direction, but widely different in immediate significance, in the constitution of newly-established central banks. In Australia and Eire, political factors have been in part responsible for the formulation of plans, novz under governmental consideration, for altering the system of monetary control in more or less important respects.” Dealing with central banking as a whole, it is mentioned that in each country basic or transient economic conditions have played a part in determining the course of events. NEW ZEALAND AND CANADA Some emphasis is laid on the striking changes in New Zealand. For example, the primary duty of the Reserve Bank was originally defined as “exercising control over monetary circulation and credit in New Zealand to the end that the economic welfare of the Dominion may be promoted and maintained.” In the amending Act, however, the general function of the bank was defined as being “to give effect to the monetary policy of the Government.” The powers of the bank were also extended, enabling it to give greater financial assistance to the Government.

In Canada the changes in Hie banking system have been less far-reaching, though they have mostly been in the direction of increased Government control. Developments in India have been interesting, although there have been no actual legislative changes in the position of the Reserve Bank during the first three years and a-half of its existence. Recently, however, the bank had its first experience of a drain on its external cash resources. SOUTH AFRICA AND AUSTRALIA In South Africa the Reserve Bank was established ih 1921, and conditions since have been favourable for the exercise of its functions. In 1931 it was granted power to buy the entire gold output of the country, and the exercise of that power has tended to increase the bank’s influerce over exchange rates. Starting with the expanding functions of the Commonwealth Bank of Australia, there have been numerous changes and developments in Australia. Just recently attention has been concentrated on the report of the commission on monetary and banking systems. In this, among other findings, it was suggested that the Central Bank should carry out the Government’s policy, the latter accepting the full onus of defending such policy. Similarly, regarding banking currency and credit in Eire, it was recently recommended that the Currency Commission in Eire should be transformed into a central bank. Concerning this The Midland Review says: “The reconstitution of the Currency Commission as nominallv a central bank—and there has never been a true central bank in the modern sense, in Ireland —would involve in practice little enlargement of its functions. The main purpose of the proposals would appear to give the central monetary authority greater prestige and a position more closely comparable with that of parallel authorities elsewhere."