BANK OF NEW ZEALAND.

Wairarapa Age, 11 December 1920, Page 3

BANK OF NEW ZEALAND.

CHAIRMAN'S ADDRESS. In the course of his address.at I.ho hall-yearly meeting of shareliolders of the Bank of Now Zealand, held in Wellington yesterday, Mr Harold Boauchamp said:— "it is, I Uiinfc. dosirahle thai I should nnike some reference to a mat- ' Lor connected with dniikiiiii which has, ' during the last low mouths, hooh at- ' trading an amount of attention from j * L!it? commercial- community, and from the public generally, which is not usually bestowed upon it. I refer to the lvc'change position between this country and Britain. '''For many years, exchange between Australasia and Great Britain has perhaps boon more stable—subject lo lower and .smaller fluctuations- -than the exchange between any other countries separated by anything like such a lone; distance. Indeed, it has usually fluctuated less, and within narrower limits, than the exchanges between most countries which arc comj pnrativel.v short- distances from each i other. If people here had Bills on L London to sell, or if they desired t<i buy bills on London, they could always rely niton the willingness and ' ability of their bankers to carry the transaction through at a rale very close to the face value of the bills. This was ensured by the fact tluu it has been the practice of Australasian Banks to hold large resources both in London and in the Dominions. «o that thev wore always in a position either to buy oi- to sell Bills. The needs of the community, for the financing of its import and export trade, were; thus always met without difliculfy. "Many'of you have become aware—the foot has been mentioned by writers in Australian and New Zealand " papers, and lias oven been the subject of a question in the House of Commons—that, during (lie last low months, many importers in these Dominions, and other persons who wished lo remit money to London, have had an unusual experience, as they have met with difficulty in obtaining the drafts which they i dod to make their payments, although they possess- - od abundant money I'm- the purpose. The, causes of this are not far to seek. I-They are written with the utmost plainness in the trade (inures which f shall (|iioto later. Wo have liitd to pay out in London many millions moro than wo have been providing there, 1 "Similar conditions have been oxpenVicixl. sn the trade of Australia ; during tiie present year. Large imj ports have had to bo paid for, while the produce of various .kinds sent abroad to effect the payment has decreased very greatly. (i Tn addition to this adverse trade balance which has had to bo met out of funds which had acepmiihited in Loudon up lo (he end .of hist year, several large pa,vmonliß have recently had to he made in London on Australian account; and the result has been that the resources available there have been so fully drawn upon that most of the Banks have had to place great restrictions upon their operations in (lie sale of London exchange by telegraph or by drafts at short currencies, or —what amounts to the same thing—the purchases which they wore willing to make in London of bills upon the colonies. "'This is the explanation of the dilll,eulty which, many traders have been experiencing in making remittances to Britain, or elsewhere abroad, to meet the liabilities which they had incurred i:i those distant places. "I nm pleased to say thai the resources of the Bank of New Zealand have proved sufficient for all the requirements of its customers in this direction. "The position wiVI not be effectively relieved until fhere is a very great diminution in the value of imports and until this season's produce begins to reach Britain in considerable, quantities and finds a market there. Except as regards butter, we are not now receiving payment in Loudon for our produce as soon as it is ready for shipment, as was the case during the years of the 'commandeer.' "It is most evident that the prinei- j

pal relief, as far :»s exchange is concorned, will have lo mine from a reduction of imports—especially in tho cessation of the import of costly luxuries. Unless there is a great rcduc-' fioti in tho value of goods brought from abroad, the present difficulty with regard to exchange is not likely to pass. "A Very groat change in the economic conditions has developed within the past U'\v months, and the outlook gonorally is not so favourable as it 'was. There is an increasing demand for loans on the part of the (Jovornment, also by many local bodies and. ilarge joint stock companies. The Co-, vornnieut issued a t'2,( 100,000 loan for public works in April last, and the interest- rate was :•; per cent subject to income tax. There is now being o I Cored to the public a ~i!, per coin loan of 1T),00().0()0. This "loan, which is also .subject to income tax. is intended to provide for the repatriation of soldiers, and subscriptions lojl are compulsory on the pari of ihoso who pay land and income tax. Local bodies have obtained authority to borrow, in the aggregate, about. CIi.UUO.OOn, and such of them as managed to appeal 1c the market early in the year, secured their loans; the majority of them have, so far, not been able to arrange their finances. There are probably two reasons for this: Cl') that the rale of interest is lower I ban niosi investors now expect to receive, and (2) tho average investor is overloaded with such securities. This dillicully on the part of local bodies in raising money may not be without its advantages, for it mttsl bo obvious thai many of them wore inlhienced by a desire lo carry out too ambitious programmes in respect to municipal enterprises. A groat modification in the views of those in control of boroughs, county councils, etc.. must: result from this difficulty in borrowing. This, however, may prove a blessing in disguise, for when money is again available at a more modoraie rate of interest, industrial conditions may then be more favourable, and ihe projected public undertakings will in that case cost much less than they would if put in hand now. Many joint stock companies have raised capital bv the issue of preference shares and debentures, and while, earlier in Ihe year, 0 and C] per cent were considered sufficient, higher interest is now demanded by investors. "A check to over-importation is being applied now by the operation of the law of supply and demand, as well as by the restrictive policy pursued by this and other banks in tin Dominion. In normal times there are available four principal means for the settlement of trading differences. They comprise shipment of goods lor goods thai is, equalising the value of imports by (hose of exports; the shipment of gold; the raising of loans: and the selling of securities. In I ho past, loans lloatod in London always gave lo New Zealand a fair amount , of credit with which to Nuance purchases of merchandise, and interest, on loans, hut credit cannot be so readily obtained in London just now because the British money market is not able lo meet all the demands that are ■being made on it. even at high rales of interest. The raising of loans in London therefore is just now out of tin l question. Neu- Zealand lias not yet become, lo any considerable extent, an investor in the securities of other countries, so that the sale of securities hold abroad is not a practicable method of remittance. Tho after-war conditions which slill exist render impossible those movements of gold coin which wore formerly common banking transactions. The only movonieni.s of gold al present: are the shipments which are regularly made ol the bullion produced from the mines of the "Dominion, and which are properly included in the export figures already quoted. The value of (he gold oxporfed in the nine mouths ended Muih September last was 1050..'t71. as compared with :C033.S 12 in Ihe corresponding form of I!) 10. i would i mphasise the point thai, lo preserve, our financial equilibrium, it is imperative that we should slimulaie production, expand exports by every means in our power, and cuHail imports. The need for increasing [he

volume of onr exports becomes more urgent in view of the substantial do-j eline in value, of most oi our primary profruels, "During the first three or loin months of the current year file wool outlook was satisfactory, but in May there was a sudden change. At the sales at Antwerp, held ou May '2lst, l.'_'.'>,OnO bales of colonial wool wer< _ offered and prices declined from 10 to' 15 per cent. About the same time ,5,.-><;:> bales - mostly merinos and other line grades-- were offered in | 'New York on behalf of the British /Covernmenl. and prices suffered a decline of from ID la 20 per cent. Since these sales the market has been depressed, and while line wools are in demand at reasonable prices, medium aud coarse i-rossbrods "nave slumped appreciably. "The only ray of hope, visible at present is in poverty-stricken Europe, chief among the countries being Hermans'. But Kurope, unfortunately, has not the cash or ihe credit to pay for wool, and it would appear desirable that New Zealand should adopt sonic scheme of extending to Continental buyers of wool long credits. Tin 1 Argentine scheme is designed to give foreign buyers two years in which to pay for iheir purchases of wool, and New Zealand might (iiul it advantageous to arrange similar terms, hi any case it must bo evident that nothing like the prices obtained under the British commandeer can be expected for this country's free wool. In the twelve months ended September HOtb last lOo.<S2l,oOSlbs of wool, valued at L'l'J,;iol ,3i)(i were exported from New Zealand. For a similar weight of wool now wo should get probably about 17,000.000, ami a good doafof that money will be owing to the country for some time, especially if sales arc made- to foreigners on long term credits. To assist growers who desire to hold their wool, the Government has obtained authority to guarantee l advances, and it is probably that many will take advantage of this privilege If so. that will moan tin; creation of :\ ■ considerable additional amount of banking credit, which will bo locked up in comparatively long-term investment. Such advances would naturally tend |o curtail credit in other directions. "Willi the exception of lamb and lighl-Neight mutton, the market lor this product is in a similar position to wool; but there is a prospect that a certain amount of lamb and lightweight mutton will lie marketed in the Tinted States, to which country large quantities of such meat linrft already boon shipped and, it is anticipated, further lug shipments will be sent. Still, it would be unwise to place much faith in the American market, because if the wool growers succeed in having an embargo placed on foreign wool, thou those handling domestic mutton and lamb are certain Li receive similar consideration. "ft is, T am sure, a matter for much congratulation that the butter output of the Dominion, available for export up to 31st "March next, has boon bought by the imperial Government at: l'nOs per owl—the highest price ever realised for this product "Payment for butter will ho made I'our--1 Icon days after it has been passed by t.iic Government grader."