RESERVE BANK

Timaru Herald, Volume CLVIII, Issue 23318, 29 September 1945, Page 4

RESERVE BANK

Profit Of £549,636 High Receipts From Exports Note of Caution Sounded 1F.0.P.R.) WELLINGTON, Sept. 28 The net profit of the Reserve Bank of New Zealand for the year ended March 31 last, after making provision for depreciation and contingencies amounted to £549,686. states the annual report of the board of directors of the bank, which was presented in the House of Representatives to-day. This amount has been paid into the public account to the credit of the Consolidated Fund. The report states that during the year sterling exchange'receipts, particularly (.hose arising from exports, had been high in comparison with the previous year. This factor, in conjunction with a decrease of approximately £3,000,000 (N.Z.) in outgoing of exchange, had effected a steady increase in the Reserve Bank’s holding- of sterling exchange which moved from £27,963,000 (N.Z.) at March 31, 1944. to £48,125,000 (N.Z.) at March 31, 1945, a net increase of approximately £20.000,000 (N.Z.) Discussing the advances to the Marketing Department, the report states that the Marketing Department maintains several accounts with the Reserve Bark, and the’ decrease of £427,000 (N.Z.) between March 31, 1944, and 1945 represented .the net movement in aggregate advances outstanding in those accounts which were overdrawn at those dates. The Department's accommodation requirements for its marketing operations had been on a much lower level during the year than in previous years and over the major portion of the year advances made to individual accounts had berth more than counterbalanced by credit balances in other accounts maintained by tlie Department. Volume of Money The report states that the chief single factor in the increase of £92,200,000 (N.Z.) in the volume of money since 1939 had been the receipt of overseas income in excess of overseas expenditure. As a result the net overseas assets of the banking system had

reached a record high level. When these, funds were drawn on to meet overseas deot commitments and to provide payment for capital equipment and other imports as they became available, a considerable reduction in the surplus money in circulation should occur. During the period 1939-45 the net expansion in bank credit for all purposes was £37,900,000 (N.Z.), of which the increase in the Reserve Bank’s advances and investments accounted for £17,000,000 (N.Z.). This expansion caused practically all the remainder of the increase in the supply of money. "The increase has been substantial." says the report, “but it must be recognised that during abnormal wartime conditions of rapidly accelerating State expenditure it is extremely difficult, if not entirely impracticable, to avoid some expansion of bank credit. The amount of expansioh which has taken place for all purposes should be considered in relation to the fact that the total war and civil expenditure of the State for the some period of six years has amounted to more than £800,000,000 (N.Z.). The extent to which it has been found possible to rely on noninflationary sources of war finance has been due to the fact that, in addition to meeting the necessarily heavy demands of taxation, the people of this Dominion have readily responded to appeals for the war loans and national savings. Bank Credit “It is customary for the amount of central bank credit availed of by the State to fluctuate during the year as the proceeds of taxation and war loans are received and expended, but after allowing for these periodic changes it is the view of the board that, under present conditions, any material net addition to bank credit would detrimentally affect the financial and economic strength of the country. On the other hand, universal public support of a policy designed to safeguard the community from monetary inflation and its consequences will contribute greatly to a smooth and effective change-over from war to peacetime activities.”