THE RESERVE BANK.

Taranaki Daily News, 27 July 1934, Page 4

THE RESERVE BANK.

The chief point of interest in the Finance Bill introduced in the House of Representatives on Wednesday is that discussion of it drew from the Minister of Finance, the Rt. Hon. J. G. Coates, a statement in regard to the cost of exchange manipulation. Mr. Coates repeated his former assertions that there was no reason to believe that there was likely to be a loss to the Dominion on that manipulation in the long run, but he stated that the cost of indemnifying the banks’ had been approximately £1,650,000. When to that sum is added the increased cost to local authorities in meeting interest upon oversea loans it can be seen that the Dominion has paid and is paying a fairly considerable price for the “benefits” of the high exchange rate if only community payments are taken into account. The cost in other directions is indicated by the continuous drop in imports and the slowness with which confidence in commercial enterprises is returning. However, the policy having been decided upon, and the Reserve Bank prepared for its continuance, any legislative amendment required for the better functioning of that institution must be accepted accordingly. The provision suggested in the new Bill that the Gov-ernor-General-in-Council shall have permanent authority to fix the rates of interest on deposits with savings banks deserves full consideration. As an emergency measure there was something to be said for such control, even if only to prevent undue competition between local and the Post Office savings banks. But to make the control permanent is quite another matter. Everyone hopes that the present financial stress will be overcome before long, and when normal conditions return there is something to be said for the stimulus of competition even among savings banks. The number of local savings banks in the Dominion is not large. They are well managed, and have contributed considerably to the advancement of the districts they serve. There seems no good reason, therefore, why control of rates of interest paid by savings banks should not be treated as in the case of deposits with building or investment societies. Control in the latter case is to continue until March 31, 1937, and by that time it should be easier to judge whether the control system is still necessary and to what extent it should be applied.