RESERVE BANK OVERDRAFT

Southland Times, Issue 24460, 13 June 1941, Page 6

RESERVE BANK OVERDRAFT

MR LEE CRITICIZES REDUCTION “DEFLATIONARY POLICY” (Special) WELLINGTON, June 12. The reduction of the Reserve Bank overdraft by £10,000,000 was criticized by Mr J. A. Lee (Democratic Labour, Grey Lynn) in the Imprest Supply Bill debate in the House of Representatives today. The Government, he said, was engaged in a deflationary policy that had no parallel anywhere else in the Empire. “Since September 1940 we have paid about £10,000,000 off the Reserve Bank overdraft,” said Mr Lee. “When the taxation screw was given another turn last year and we taxed to a lower level of income than anywhere in the Empire we were led to believe that the money was needed to equip the armed forces. We have squeezed £10,000,000 out of industry that needs to be expended and out of homes that could consume more food. The sum of £10,000,000 has been taken from the people of this country, not for war expenditure, but to pay off the Reserve Bank indebtedness.” Mr H. G. Dickie CNat., Patea): Don’t you believe in paying off debts? “I do not believe in paying off £10,000,000 of an overdraft at the expense of women and children who are not getting sufficient to pay for food. That is redundant,” said Mr Lee. “There is no inflation about giving people an aboundance of food that is produced in this country. Vie are expanding the form of indebtedness the Labour Party has fought against for years and contracting unnecessarily the very form of credit that we said we would use to the maximum extent.” REPAYMENT FROM REVENUE In a subsequent reply the Minister of Finance, the Hon. W. Nash, said that there had been something like £250,000,000 in the way of what might be called overdraft at the Reserve Bank, secured by Treasury bills. When the revenue came in at the normal time a portion was paid back. Mr Lee: Out of the 5 per cent, wages Mr Nash: Not a penny. That goes into the War Expenses Account. The Minister also mentioned that £4,500,000 was due to the United Kingdom in connection with the war. That had not yet been paid and it could not be paid with Reserve Bank credit. The only way to pay it was to refrain from getting goods from overseas. No date had been fixed for repayment, although about £1,600,000 had been paid off war expenses already. Mr Nash said the sooner the money could be paid the better and he would pay it tomorrow if it could be done without hardship. It was not right to suggest that the United Kingdom should carry New Zealand’s loan a minute longer than necessary.