The Taranaki Herald. DAILY EVENING. TUESDAY, JUNE 22, 1915. NEW ZEALAND AND THE WAR.

Taranaki Herald, Volume LXIII, Issue 144712, 22 June 1915, Page 2

The Taranaki Herald. DAILY EVENING. TUESDAY, JUNE 22, 1915. NEW ZEALAND AND THE WAR.

In the report presented to the shareholders of the Bank of New Zealand on • Friday last Mr. Beauchamp naturally had something to say about the effect of the war on New Zealand and its trade. He thinks we may look for a continuance of good trade and that the Dominion is still bound to find an outlet at remunerative prices for her staple products, though it would be unreasonable to expect the abnormal rates at present ruling. At the same time he seems to have some misgivings about the financial position. “Financial ease,” he says, “is apparent, but it is ease whicK, like the calm before the storm, may presage strain and stress later on.” He regards the accumulations in the banks as due to apprehension with regard to the future and a desire on the part of the depositors to be prepared for possible eventualities. This is clear, he thinks, from the facts that the increases in deposits are principally in the non-interest-bearing class, i.e., the current accounts, and he looks upon this as a discouraging feature because it indicates, to some extent, commercial and industrial inactivity. Mr. Beauchamp, of course, has greater opportunities of gauging the situation than we have, because he has information, through the bank, from all parts of the Dominion, but so far as our more limited opportunities enable us to form an opinion we think he is a little pessimistic. In Taranaki the accumulations in the banks are due partly to the fact that the farming community, whether having wool, meat, or dairy produce to dispose of, has generally speaking had a larger income than usual as a result of the past season’s operations, and naturally this income has gene into the current accounts. In the ordinary course these credits in current accounts will be appreciably reduced during the next three months, for there will be little coming in, but wo believe the average farmer is in a better position to-day to effect improvements on his farm, in the way of felling bush, enlarging his homestead, breaking up new land, strengthening his herd, and so on, than he has ever been, and that ho will have the enterprise to do this, with the result that nest year he will be able to increase his production. The trading community stands better with the banks probably because, while the customers have'been in a position to pay more promptly, the traders have not had so many bills to meet for the simple reason that their imports have been curtailed or delayed owing to the war; hence their current accounts at the bank are healthier. Again there are doubtless many capitalists, large and small, who have, on account of the war, kept a larger balance at call than usual, instead of finding investments. If our surmises are correct it does not follow that there will be strain and stress later on. Indeed the strengthening of current accounts ought to go far to prevent any great strain which might otherwise result from the war, and for that reason it should be regarded as an encouraging and reassuring feature of the financial position. New Zealand has had to undertake a heavy liability to the Mpther-Country/om accounfeof'Tts

war expenditure, but the great excess of our exports over imports last-year resulted in a substantial reduction of the Dominion’s ordinary indebtedness to the outside world, and there is every prospect of_ a similar if not greater excess this year. The community is-in the same position as an individual. If the hitter is trading to a large extent on borrowed capital, and in a given period is able to sell what he has to dispose of at abnormally high prices and at the same time is forced to spend less than usual he must be strengthening his position, either by reducing his liabilities or by accumulating cash. New Zealand appears to lie doing both, and if it can continue to do so it will be very favourably situated when the war is over, and able either to carry on without borrowing" much from abroad, if money is dear, or to stand any depression arising from lower prices or a reduced demand for its products, if these should follow on the war. There is every probability, however, that our chief products will continue in heavy demand for a long time at prices not a very great deal lower than at present. Building and industrial activity may be quiet just now, but as soon as the end of the war is in sight we feel sure 1 there will be a revival, as well as in more speculative undertakings. Hence the accumulation of cash and credit in the banks may be regarded as a satisfactory feature, since it will be ready for use as soon as confidence is fully restored.