The Daily News FRIDAY, AUGUST 8, 1930. AUSTRALIAN FINANCE.

Taranaki Daily News, 8 August 1930, Page 8

The Daily News FRIDAY, AUGUST 8, 1930. AUSTRALIAN FINANCE.

' Although the select committee appointed to investigate the Australian proposal to create a Central Reserve Bank is convinced that no good purpose can be served by such a bank, but that considerable harm could'result from its establishment, it is just as well the investigation was made in order to ascertain the opinions of financial, business, and other men qualified to consider such a scheme in all its bearings. Even the average layman was able to place his finger upon the weak spot of the project when it was first promulgated, therefore no surprise can be felt at the overwhelming volume of testimony opposed to any drastic change at the present critical period, nor can there be any doubt as to the wisdom of the recommendation to defer the prosecution of the Bill till next year. That decision, however, in view of the urgency relative to meeting the obligations of the Commonwealth promptly, naturally accentuated the existing difficulties very seriously, but the Loan Council at a vital meeting on Tuesday adopted the only practical plan available for tiding over the situation, namely, the mobilisation of Australian credit in London in order to attain the end in view. The real obstacles to the reserve bank scheme were the danger of undue political influence and the fear that the powers proposed to be conferred on the bank might lead to unsound practices. That is not to say the alleged scandAls which have created no little sensations in the past are part of a system that has taken root in the Commonwealth, but the temptation is strong, and human nature in some cases is unstable, so that when it is a matter of upholding national credit there should be no loophole for malversation or abuse of political power by State appointed controllers of any banking system. The difference between the proposed Central Reserve Bank of Australia and the Bank of England is immense, though not so much because the Bank of England can boast a history longer, more continuous and more distinguished in the part it has played in the general financial activities of the world than any other bank. Rather is it the spirit which has inspired that bank for 4centuries, and continues to show undiminished vitality, that gives it that distinction. of which all Englishmen should be proud. The Bank of England has the exclusive custody of the entire banking reserve of the country, all bankers keeping accounts with it. It is the duty of the Bank of England to take special measures to protect this reserve and be always ready to meet all demands. Although it acts as banker to the Government, administers the service of the Government debt, pays dividends, redeems capital, makes advances to the Treasury and transacts other Government business, yet it is absolutely free from political influence of any kind. Moreover," the governor of this great financial institution enjoys the confidence an exceptional degree of other central banks, foi* he has always’ shown a great willingness to assist them and to co-operate with them in affairs of common . advantage. It may be there was some idea on the part of those .■ who took the initiative in the i movement for establishing a Federal Reserve Bank for Australia, ] that one of the advantages might J < be that enjoyed by other central < banks in being able to rely upon ; assistance from the Bank of Eng- ■ land. Whether or not that was . the ease is not material. The point <

that matters is that the consideration given to the Federal project has probably been of material service, not so much to Australia, as to the Empire in general. It has emphasised the danger of political influence in banking affairs; it has stressed the imperative necessity for strict supervision over national and State expenditure, and it acts as a writing on the wall against the evil of unlimited borrowing. The day of reckoning has a habit of happening at an adverse moment. It is therefore to be hoped that out of the acute troubles of our sister Dominion and nearest neighbour there may arise a new national conscience capable of enforcing the principles of strict political economy. In the past it has been necessary to borrow extensively, but as the process was easy it led to extravagance, and now is the time to profit from the lessons that are 1o be observed on all sides.