BANK OF NEW ZEALAND.

Taranaki Herald, Volume LXV, Issue 146002, 7 December 1917, Page 6

BANK OF NEW ZEALAND.

HALF-YEARLY MEETING. 'ADDRESS BY CHAIRMAN. Following is a report of the proceedings at the half-yearly general meeting of the Bank of Now Zealand, held today, at tho head office of the hank, Lambton Quay, Wellington, Air. Harold Beauchamp, chairman of directors, presiding ; The chairman said :

There are, as you arc aware, no accounts to submit at this our half-year general mooting. The business is limited to the election of one of your representatives on the board, and to the declaration of an interim dividend. Before proceeding to deal with these formal matters, I will, in accordance with my usual custom, take a brief review of tho general situation and ontlook, and of tho financial position in particular. The war situation of course claims first attention.

Wo have boon in a state of wax for tlirco years and four months, and still the end is not definitely in sight. _ Germany, with practically the whole civilised world arrayed against her, with her import and export trade crippled through her shipping being either destroyed. interned or bottled up in her own' ports, with the pressure of internal distress as a consequence of scarcity of food and clothing resulting from the rigorous blockade of her ports by the Allied fleets, would long ore this have been forced to capitulate, had her organisation and preparations for war been less complete and had she not been able to add enormously to her own resources by drawing supplies from neighbouring neutral countries, from her confederates, and from the territory conquered and now occupied by her. From Belgium a'nd North-Eastern France have been taken invaluable raw material, from Galicia oil arid food products, from Turkey cotton, and from Boumania grain and meat. Notwithstanding her disabilities, she continues still as a mighty fighting force, taxing the military powers and financial resources of Great Britain and her Allies to thonttermost.

The discipline and organisation of her people have indeed stood Germany in good stead in this great conflict. Inmarked contrast is Russia, from which, with her vast population, so much was expected by the Allies in the early and later stages of the war. Since the revolution that occurred in Alarch last, wc have witnessed a scries of kaleidoscopic social and political changes almost unparalleled in history. Without discipline or organisation, and with internecine war raging in some parts of tho Empire, her value to-day, ns a fighting force, is practically a negligible quantity. It looks as if nothing short of a. miracle will succeed in evolving order out of tho chaos now existing in that unhappy country. Had Russia been able to prosecute a vigorous campaign on the Eastern frontior_ during tho past nine months I think it probable that tho war might have been brought to a satisfactory conclusion tins year. At a. time when tho British and; French offensives were being conducted with great success, our Ally. Italy, has been brought very near to disaster. A powerful and unexpected blow by the enemy has robbed Italy of the whole fruits of her two years arduous and gallant efforts. The set-back is a serious one. It has imposed a heavy trial on the Italian people, and has been a keen disappointment to their Allies. The failure of Russia is, to a. large extent, responsible for the Italian reverse. Fortunately. Russian impotence will he more than compensated by the assistance and co-operation of the United States, which is now actively mobilising all its forces in men, money and munitions.

It has pleased tlie German Government to belittle the significance of the United States’ accession to tlio Allied side. I doubt the honesty of the effort, and am disposed to credit it to vapourin gs of a leader who is at heart apprehensive concerning, the American action, and seeks to encourage himself and the German nation by disparaging references to the capabilities of tin oil" adversaries. A writer in a leading English financial journal has expressed the opinions that “the Americans, like the English, will greatlv astonish the Germans before they have finished with them,” and with that view of the American influence on the future of hostilities I am in entire agreement. The summing up of the position from the American viewpoint was eloonently and clearly stated hv President Wilson at the American Flag-day celebration on June 14. in a speech which well repays full perusal. He said;

“In the United States, where we are accustomed to deal with facts and not with sophistries, the great fact that stands out above all the rest is that tills is a people’s war, -a war for freedom and justice and self-governnmnt among all the nations of the world, a war to make the world safe for the peoples who live upon it and have made it their own, the Gorman people themselves included : and that with us rests the choice to break through all these hypoerises and patent cheats and masks'(if brute force, and help set the world free, or else stand aside, and lot it he dominated a long age through by sheer weight of arms and tho arbitrary choices of self-constituted masters, by the nation which can maintain tho biggest armies and the most irresistible armaments—a power to which tho world has afforded no parallel and in the face of which political freedom must wither and perish. “For ns there is but one choice. We have made it. Woe he to the man or group of men that seeks to stand in onr way in this day of high resolution, when every principle we hold clearest is to be vindicated and made secure for the salvation of the nations. Wo are ready to plead at the bar of historv, and our flag shall wear a new lustre. Once more we shall make good with our lives and fortunes tho great faith to which we were born and a new glory shall shine in the face of our people.”

These are words of strength and determination. expressing the will of a nation which is conscious that it possesses the power to give to that will full force and effect. They form a striking reply to the depreciatory comments of the German Chancellor regarding the effect of American intervention.

WAB EXPENDITURE AND FINANCE. \ Outlay in connection with the war continues to mount up steadily. That of the British alone is now at the rate of approximately £7,000,000 a day. The. total war expenditure of the British Treasury from -August 1, 1914, to September 22, 1917, amounted to £5,534,527,000, of which £4,210,384,000 was provided by Joan and £1,324,143,000 by revenue. This expenditure includes loans to the Allies and the Dominions amounting, at July 21, 1917, to £1,171,000,000. Before the entry of the United States into the war, she had raised" loans for the Allies aggregating over £470,000,000 (of which £226.300,000 was to Britain), and shortly after her declaration of war on April 6, 1917, a AVar Finance Bill was passed authorising the raising of loans for 7,000,000,000 dollars (£1,400.000,000), provision being made that 3,000,000,000 (£600,0000,000) of this money should be available for loans to the Allies. Subsequently a further authorisation for a large amount was made, including additional loans to the Allies. Huge votes for the building of aeroplanes and ships of war and merchantmen have been passed by Congress, and the programme of war expenditure so far outlined, including loans to th« Allies, provides for an 1 aggregate of close on 22,000,000,000 dollars (£4.400,000,000). The first Liberty Loan for 2,000,000,000 dollars (£400,000,000) at 31 per cent, was issued in June, and was largely over-subscribed. The second Liberty Loan, proposed originally for 3,000,000,000 dollars (£600,000,000) at 4 per cent, was offered in October last. Limitation of the amount was then removed. the United States Treasury expressing the hope that the 5.000,'000.000 dollar mark (£1,000,000,000) would be reached. According to press telegrams, this has been nearly achieved. ■Whatever may have been thought or said concerning* America’s tardiness in taking up arms, there can be no question that, since her declaration of war, she has thrown herself into the struggle in such a whole-hearted, systematic and well organised wav. that 'is augurs well for the future of the Allied cause, inasmuch as itpmplies a grim determination on America’s part to see the war, at all costs, to a victorious conclusion without unnecessary loss of time. In the early stages of the conflict the cost of it all am apod and bewildered ns. Now we have grown accustomed to the outlay. We have learnt, financially speaking, to think in millions. and we somehow view the hugely swelling figures of the national debts with feelings akin to indifference. We have to win the war whatever the cost. It is the price of freedom from German domination, and the’worth of such freedom is incalculable.

In New Zealand we are pursuing a self-reliant financial policy. AVc have largely provided for all our war and other expenditure, since hostilities commenced, out of locally raised loans or revenue. The total loan authorisations during the period have amounted to £68,185,000, viz: £ For Wav purposes ... 57,000,000 For other purposes ... 11,185,000 . £68,185,000 These authorisations are estimated to provide for all requirements..up to July, 1918. " A total of over £51,000,000 in all has been raised, of which about £24,000,000 has been provided by public subscription in the Dominion, and probably £10,000,000 by loans from the Post Office. Sa-vii, v. Bank. The net public indebtedness at March 31, 1,914, after allowing for sinking funds, was £91,<"59.535; at March 31, 191/, it was £110.572,515, an increase of £33,882.680. to which must be added loans raised since the latter date. Revenue and expenditure for the same periods compare as follows:—Year ended March 31, 1014, revenue £12,239,661, expenditure £11.825,864, surplus £403,797; year ended March 31, 1917, revenue £18,367,547. expenditure £14,058,770, surplus £4,308,777. The increased cost of living has necessitated an adjustment in the scale of old age, Maori w T ar, and widows’ pensions. The amount paid away under this head for the year ended March, 31, .last was £563,918. Provision for increases estimated to absorb over £120,000 has since been made, which will bring up the total of these pensions to probably over £700,000 per annum. The liability for military pensions in connection with the present war, it is estimated, will be over £1,000,000 per annum in twelve months’ time, and al- . lowances to soldiers’ dependents (exclusive of pay) are expected to amount to a further £2,000,000. War expenses and pensions, added to the increased cost of education and other items coming under the head of civil expenditure, are creating a heavy permanent charge on the Dominion’s finances, and the incubus of taxation has already grown to somewhat unwieldy and staggering proportions. So far, thanks to the high prices paid for our produce, we have been able to bear these financial burdens, and will probably continue able to bear them, provided that reasonably good prices are maintained and that shipping facilities are afforded to exporters and to the Government, which has commandeered such a large proportion of our products. At present, owing to the absence of shipping facilities, it is estimated that fully \ £6,000,000 worth of last season’s pro- (

duce is still held up. Of this, frozen meat and wool comprise the major portion. . The shipping difficulty, both inwards and outwards, affects the trade figures of the Dominion to such a degree that the imports and exports have lost, to a groat extent, their significance as an indication of the Dominion's trade position. I propose, therefore, on this occasion, to omit giving the usual comparisons! of these items. Practically the whole of tho ion’s products is now either directly commandeered or subject to Government control in the matter of realisation.

THE MONEY MARKET. Advances against unshipped produce are reflected in the bank returns for the Quarter ended September 30, 191 i . The total advances, as therein nJiowft, were at that date, £28,415,450— at September, 1916, they were £24,677,964. The 1917 figures constitute a record for the Dominion. . In spite of the high rates ruling for money in other parts of the world, the banks in this country have not, since the declaration of war, increased the rates of interest charged for overdrafts or discounting of bills. On the other hand, since the passing of the last Finance Act, which provides for such heavy additions to land and income tax, other lendiiig institutions and private individuals have been compelled to substantially increase their rates for lending on mortgage. The heavy borrowings by the Government within the Dominion have naturally absorbed a substantial proportion of the savings of the people. As a consequence, the reserves of floating capital are being depleted and a period of dearer money must be expected. THE LOCAL LOAN OF £12,000,000. The Minister of Einance is to be cordially congratulated upon the success of the last internal loan. In the early stages of last session, he obtained statutory authority to raise £24,000,000 for war purposes at 4J per cent, free of income tax. Of this loan, £12.000,000 was offered in September, and the whole amount has been subscribed by the public. There is no doubt that the Minister of Finance, in this financial operation, was materially assisted by the banks, which offered their customers attractive facilities to enable them to subscribe to the Joan, which facilities were largely availed of. It is, I think, a great financial feat for a small country such as this is, to have provided from its own resources j£34,000,000 for war purposes and public works during the currency of the war, and it speaks well for the financial stability of the Dominion and for the patriotism of its people. It is to be hoped that when the next instalment of the loan is placed on the market in, say, March next, the Minister of Finance will be equally successful and that he will be able to then raise from the 'public, by voluntary subscription, the whole amount that he requires, and not be compelled to adopt the alternative of enforcing the provisions of section 40 of the “Finance Act, 1917,” relating to compulsory subscription to the War Purposes Loan. TAXATION. I have already referred briefly to the growing burden of taxation. 1 wish now to remark upon it a little more in detail. To meet the increased war expenditure and the heavy additional interest payable in respect to loans raised for war purposes, it was imperative, during the late session of Parliament, to provide for extra revenue, and this was done by substantially increasing the land and income tax, by disallowing deductions for mortgages on land over and above the sum of £6OOO, and by slightly recasting the Customs tariff. Under the new scale, companies and individuals, with incomes of £6400 and upwards, will pay 7s 6d in the £, or 37. V per cent. As this rate will fall heavily upon Joint Stock Companies, strong efforts were made to induce the Minister to alter the present method of collecting the company tax and, in lieu of taxing the companies, make the tax payable by the individual shareholders, who would he subject to the graduated scale. The Minister could not see his way to accede to this request, but ho made provision for a refund to shareholders (whose dividend does not exceed 6 per cent, upon the paid-up amount of their shares) of a relative proportion of the tax paid by the company, provided that the shareholder’s income, from all sources, does not exceed £4OO per annum. * To give you an idea of what the increase in New Zealand income tax means to us, I may mention that, on its assessed income of last year, this bank will contribute about £216,500 to the Exchequer, or an advance of £121,830 on the amount we paid last year. The former sum is equivalent to 12.37 per cent, of the total paid-up capital of the bank; in other words, if the present rate of taxation were to he continued, an amount equal to the whole of your capital would, in eight years time, be paid to the Government in the shape of New Zealand, income tax. Then, in addition, our land tax will amount to about £17,000, and our contribution to the revenue in the shape of note tax will probably be considerably in excess of £75,000 for the year. . . We fully recognise the necessity tor all classes of the community to pay in proportion to their means. At the same time, to use a platitude, there ought to be true “equality of sacrifice.” At present this does not obtain, as the banks are taxed upon a higher scale than any other trading corporations or individuals in the country, because they are taxed upon an income larger than that they actually earn. ' It has been suggested that, if further imposts are placed on land and it come, the result may be disastrous to the trade and industry of this Dominion. Judging by two of his late public utterances on the question of taxation, our Minister of Finance is apparently fully alive to that possibility. - } Bearing on this subject, I think it r ay interest you if I quote a few figures iccenUy published in a local trade and financial journal. The writer says:— “W’e give below particulars of the amount of taxation derived from the different sources during the last four years ending with March 31. , 1916-17. 1915-16. 1914-15. 1913-14. £ £ £ £ Customs—--4,037,628 3,524,063 3,294,943 3,553,785 Land Tax—--713,118 1,048,356 799,641 767,451 Income Tax—--4,262,126 1,392,119 540,318 554,271 Death Duties—--570,040 610,350 796,232 613,751 Others—--966,742 692,078 449,677 428,776 10,549,654 7,266,966 5,880,811 5,918,034 “The percentage under each heading to the total amount collected for the last four years compares as follows with years and ten years previous:—

“The proportions for the latest year show considerable changes. Tho share of Customs duties (including excise) continues on a steady downward grade, and takes second place for the first time on record, although the actual total shows increase. Income tax now takes first place, with 40 per cent., as compared with 6 per cent, in 1903-4; this is partly due to the tax on mortgages being changed from tho heading of land tax to income tax, and consequently land tax shows a heavy decline. “The total shows an increase of £3,282,688, or 45 per cent., and the average per head is £9 11s lid as compared with £6 12s Id in the previous year, and £4 5s 6d in 1909-10. which was the lightest average in the last ten years. “These figures are for taxation by the General Government only, and do not include taxation by various local bodies, which amounted to £2.542,220, or 48s per head, in 1915-16 1916-17 figures arc not available at present.” I think tho figures given clearly indicate that when further revenue is wanted, ivc can rcasona Vy, look to the Customs to find a largo share, seeing the heavy drop, on a percentage basis, that has occurred between the years 1903-4 and 1916-17. This fall, you will note, amounts to no less than 35J per cent. Recognising its incquitablencss. Parliament, on the recommendation of the Minister of Finance, promptly repealed last session the tax on excess profits, which had been in existence for only twelve months.

LONDON BOARD. It is my sad duty to report tho death of tiro oldest member of the London Board—Mr. W r . T. Holmes. Mr. Holmes was general manager of the bank during the troubled years from 1890 to 1894. At the end of 1894 he retired and accepted a seat on the London Board, which seat he held continuously until his death on June 23 last. Tire knowledge he had acquired of the details of the bank’s colonial business, while acting as chief executive officer in New Zealand, made him a specially qualified and useful member of tho London directorate, and his loss is greatly regretted. The selection of a suitable successor to fill the vacancy is under consideration, but no decision has yet been come to.

STAFF. The drain on onr working staff for military service goes steadily on. At present we have 370 officers absent on duty connected with tho war. Twentynine have returned and resumed duty, hut as against this, 21 are under orders to join the colours, and 182 more are liable for service as members of the second division. The number of onr killed has, I regret to .say, increased to 39 and our wounded to 101. 'With the bereaved families and with the injured men, wo have to express iur heartfelt sympathy. We have now 297 women clerks in the bank’s employ, and it appears probable that our circumstances will necessitate a further increase. Our whole staff, male and female, are doing good work and acquitting themselves creditably. ELECTION OF DIRECTORS.

Mr. R.. W. Kane, who was elected at our last meeting to fill tho vacancy caused by the, death of the late Mr. Martin Kennedy, is the retiring director on this occasion, his former election being for only the nnexpired term of the late Mr.' Kennedy’s appointment. That term expires on March 31 next. Mr. Kane has given duo notice of his candidature, and. as no other notices have been received, he is the only candidate, and I have pleasure in accordingly declaring him duly elected. INTERIM DIVIDEND. The earnings of the hank during the half-year have been sufficient to justify payment of the usual interim dividend. A dividend of 6 per cent, is acordmgly now declared on both preference and ordinary shares. It will be payable at Wellington to-morrow, Bth inst., and at branches on receipt of advice. Mr. R. W. Kane said.—Tho circumstances which render it necessary that ,1 should again submit myself for election as a director of the bank have already been referred to by the chairman, and ‘were also explained by mo in the remarks I made at tho ordinary general meeting in June last when you did me the honour of confirming tho board’s choice of me as your representative, and it only remains for me now to express my thanks to you for reelected me, unopposed, to the position. The chairman has so fully reviewed the present financial situation that there is little for me to add. The position is one calling for constant watchfulness and demanding that a cautions policy should he consistently adhered to. I take this opportunity of renewing tho assurance given you a year ago regarding the performance of tho work devolving upon me as one of your representatives. My best efforts_ have been, and will continue to ho, given to the discharge of the duties of the trust which yon have reposed in mo. and to the welfare of the hank with which for over half a century I have been so closely associated.

S o -D c O O u c3 i 6 5 fi o 19X6-17 38J 6i *iOJ Si 9 1915-16 484 144 19 84 94 1914-15 56 138 9 13| 7| 1913-14 60 13 94 104 74 190S-9 66j 132 7i 6 6i 1903-4 .74 9 6 4 1