MONETARY REPORT

Waikato Independent, Volume XXXIV, Issue 3207, 15 September 1934, Page 5

MONETARY REPORT

STATEMENT BY COMMITTEE FORMER BANKING CEITICISED (By Telegraph —Press Association) WELLINGTON, To-day. The Parliamentary Monetary Committee presented its report to Parliament yesterday, signed by six out of the 11 members, including Mr F. Lye, ( M.P, fop j Waikato.. . The Hon. W. Downic Stewart declined to sign and put in ag explanatory statement, lhe threo Labour members and Mr H. M. Eushworth. appended a minority report. The majority report, criticises the former banking system of the Dominion, but welcomes tho establishment of tho Ecscrvc Bank. It expresses the opinion that the State should be supreme in monetary matters and that the national well-being, rather than private profit-making, should be the basis of the banking system.

Tho permanent devaluation rif the New Zealand pound is suggested at the present rate of £125, New Zealand, equalling £IOO sterling. Tho proposal is made that the Dominion’s gold reserves should bo exported to London and converted into liquid interest-earning assets. Lower overdraft rates are proposed, and it is also suggested that the financial operations of stock and station agents should bo under Ecserve Bank control. Douglas social credit proposals arc roundly condemned. In Favour of the Reserve Bank The report gives strong arguments supporting the establishment of a Reserve Bank. The position existing before the establishment of the Reserve Bank is considered by the committee tto have been summed up by the Minister of Finance, Mr Coates, when he said: “The Reservo Bank will, for the first time in the history of this Dominion, bring the control of our cicdit and currency into tho hands of a New' Zealand board of directors controlled by New Zealanders.” Private banks were criticised in that their main aim was the making of profits. An example is given of what is described as an “exorbitant” rate being charged for Government borrowing on Treasury bills, when it is contended the banks could have lent at half what they had charged and still have made r. profit. “These exhorbitant interest rates will, of course, be altered by the Reserve Bank, w'hich will work in close co-operation with the Government.” ; Evidence was also given alleging that the banks had not always cooperated with the Government. It was not generally known that tho Govern ment’s internal loan conversion could have been purely voluntary if the banks had accepted the first Government plan. -v Other examples of the lack of cd-" operation between tho Government and the banks aro given in the report —the banks’ opposition to the raising of the rate of exchange, the hard bargain driven by the banks in connection with tho Banks Indemnity (Exchange) Act, and the opposition of the Bank of New Zealand to the Government’s proposal to establish the Reserve Bank. Devaluing of Pound “Wo recommend that, as a definite contribution to stability in international exchanges, and as the best possible exchange policy for New Zealand to pursue, the Dominion’s parity should bo £125 New Zealand to £IOO sterling,” states the report of the Monetary Committee. “We would also advise that the devaluation should be at the demand rate of 125, making it identical with that of Australia. Plan for Public Works Tho forward planning of certain public w T orks by a special advisory borird is advocated by the Monetary Committee in its report. Reference is made to several schemes, put forward by witnesses, for utilising public works as an adjunct to monetary control during periods of depression, but it is held that, as a cure for economic difficulties, a large army on public works would obviously be futile. Mortgage Board The establishment of a unified Government Mortgage Board to take over the loans administered by the Lands Department, the State Advances Office and the Rural Intermediate Credit Board is among the recommendations contained in the Monetary Committee’s report.