ABNORMAL POSITION

Taranaki Daily News, 26 March 1932, Page 9

ABNORMAL POSITION

AUSTRALIAN MONEY MARKET.

EFFECT OF HIGH EXCHANGE.

An abnormal position has been creatin the Australian money market by Se high rtte of exchange, which has | focked up funds which otherwise would Sve been remitted abroad, states the Sourne Argus. Much of this money has been offered to the banks on fixed deposit. Deposits also have creased by money which normally wouS hav-found its way ness, or have been invested in mortoao'es or other forms of security. S Traders who usually work on overdrafts at the banks have been realising stocks, and they are now working with credit balances, and some are to place funds on fixed deposit. This 6 - rplus of funds has been, the cause of the steady reduction of T de ß° which has occurred since June. f -e anxious that the money should flow back into industry. Legislation which has reduced rates of interest.on Gov eminent loans, mortgages and other fixed interest-bearing securities to*® been partly responsible for the surplus of deposit funds, but .now the rates quot ed P by the banks may be low enough to induce depositors to sek other a\emuch monev will be diverted from the banks, however, as holders will wish to transfer it abroad at the first opportunity, and they may desire to keep their money free from the risk of market fluctuations, even if the r ®’ t ® of earned is low. It is probable that the lower deposit rates will cause some appreciation in prices quoted for Government securities, and the fall in prices which has taken place on the Stock Ex-

change recently should be checked. Lower rates of interest generally are of advantage to trade. The ultimate ef- • feet of the low rates quoted by the banks, and the small returns available from investment in first-class securP ties, should be to promote interest in industry and commerce as investors seek more profitable employment fot. their funds. -- —- “