MONEY MARKET.

Timaru Herald, Volume XCVIII, Issue 18084, 23 June 1924, Page 4

MONEY MARKET.

DISCUSSED BY BANKER

(Special to the Herald). WELLINGTON, June 20

In the course of his address at ’ ho annual meeting of proprietors ul I lie Bank of New Zealand to-day, tho act ing-chairman discussed the money market. “Issues oi loans by local bodies in New Zealand during tlio last twelve months,’’ Mr Watson said, “have been on an unusually heavy scale-, the total amount approved ly the Government being £'6,096, 193. Whilst admitting that in most instances the money raised is being used for the advantage of ratepayers, and often for works of a more or loss pressing nature, it. is to be regretted that suc-h great expenditure is being incurred when the interest rates and tiro cost of the relative works arc so excessively high. “It should never be forgotten that, as* Now Zealand is an exporting country, the, capital expenditure of the Government and local bodies should he -nost carefully watched, for the burden of rates and taxes will become oppressive if values of our products fall. Expenditure as the present rate cannot be kept up for any long period, and when it eases off considerably the Dominion may be faced with the problem of unemployment. With but few' exceptions, local bodies have to pay G per cent', for ' their loan requirement's;'indeed, it. is not. easy for any but local bodies of the four chief centres in the Dominion to get money at or below that rate. The heavy ,- ost of transferring proceeds of loans from London has militated against borrowing in that market, but a recent im provemont in monetary conditions there has enabled several issues to be made at a net cost to the borrowei of about 5f per cent. The issue ol loans .of local bodies has adversely affected the increase of fixed deposits with tlio Banks, and. coupled with ;ho competition of the Past Office Ravings Bank and Companies for deposit, i lie lending resources of the Banks do not expand as it is desirable they should do. Several of the most, important oi the Farmers’ Co-operative trading -.iganisations have taken advantage oi tlio legislation passed in 1922 to arrange with their depositors and bond holders; for a postponement over a period of years of payment of theii relative indebtedness. There is little reason to doubt that those creditors will be paid in full, and, in the meantime. receive interest, whilst tlio postponement of payment of principal will enable the companies to give such of their debtors who are at present unablo to meet their liabilities reasonable time to work out their own salvation. “The average rate earned on short loans in London was.£2 3s 3d per cent., and on 3-monlhs’ Treasury Bills £2 8s 7d per cent. These low rates tell against our profits, inasmuch ns we. ahvavs have considerable sums ■■ mplovecl in these most liquid and safe investments. The Bank of England tiscount rate has remained steady at 1 per cent, since sth July, 1923; _ luit the overdraft rate in Great Britain Is 5 per cent, or more. In Afay, 1933, the Government of New Zealand issued- a 4 per cent, loan of £4,000,0c0 in London at £92 per cent. In Alay.oi this year . they also floated a loan in London of T'n.OOfkOOO, bearing interest at the rate of 41 per cent,., at £95, 'both flotations being very satisfactory, fn the North Island money is now varelv .obtainable on mortgage at less than 6J- per cent. Conditions arc -'"sier in' the South, v.-hero the rulin'*, rate for -first-class mortgages is 6 pen cent

"The Banks have been in a position

to meet tlie proper banking requirement, 'of their customers, but nuieti business is offered which does not .couro within that category, and, consequently, has to be refused. The Advances" to Settlers Department of rhe Government has lent an exceedingly large amount during the year, tue figures for BFIO if 6,205,680) being i'b. r()-l,‘36S in excess of those for the previous year. There are many complaints that, in individual eases, tiic Department is not lending a reasonable amount From what wo know of the activities of the Department, it seems to us that- only on adequate margin of safety is being insisted upon. _ Ap parently quite a large number of borrowers fail to recognise tuat land should be valued on the basis of what if can produce, and that a mortgagee s estimate of value is invariably and pro perly less than that of a vendor.