BANKS AND MONEY

Waipa Post, Volume 41, Issue 3185, 7 August 1930, Page 8

BANKS AND MONEY

POST OFFICE WITHDRAWALS. The proposed banknote duty and the fact that withdrawals from the Post Office Savings Bank exceed deposits by £1,000,000 in the June quarter, drew comment from Mr M. J. Savage (Lab., Auckland West) in the House of Representatives on Tuesday. "The banknote duty will drive the banks in the direction they want to go—toward deflation," Mr Savage said. "Here I agree with the Minister of Railways that deflation may be as bad as inflation. During any period of deflation the great mass of the people has suffered. It seems to me that the higher we put the tax on banknotes, the miore reason we would have for thinking that when we meet here again there woud be fewer banknotes in circulation. lam not saying the banks are paying everything they might in the way of taxation. But I do say that certain taxes imposed might have a quite different effect from the one we think." Discussing the Post Office Savings Bank, Mr Savage said that for the June quarter withdrawals were stated to be greater than deposits by £l,000,000 —almost a record. It seemed that this bank was heading for the same position in which it found itself in 1928, when withdrawals exceeded deposits by £3,000,000. Deposits were being withdrawn because people had greater encouragement to go elsewhere. The position was one warranting the Government's serious consideration.

It might well consider increasing the total amount on which interest would be paid. It might be said that there might be a run on the bank and that in such an event the Government would not have sufficient liquid assets to meet its liabilities. This argument had been advanced before, but Mr Savage said he had yet to learn that any run on the savings bank had taken place, because deposits up to £SOOO were made interest bearing. In addition there was no reason to believe that the Government could not find money in a hurry.