The Wanganui Chronicle. TUESDAY, APRIL 16, 1929. DIAGNOSIS.

Wanganui Chronicle, Volume 72, Issue 90, 16 April 1929, Page 6

The Wanganui Chronicle. TUESDAY, APRIL 16, 1929. DIAGNOSIS.

is wrong with the Dominion to-day? Obviously something radical. A study of the financial situation as revealed by the banking returns for the March quarter may be helpful to discover what that radical wrong is. The Government fixed and free deposits with the banks total £58,209,934, a total only once exceeded for this period of the year, and that was in 1920, when io the peak of the postwar boom the quarterly deposits totalled £59,408,136. The banks therefore are holding within half a million of the maximum they have ever held.

Those who hold cash funds, however, are increasingly prone to place their money on fixed deposit with the banks. This has been going steadily on and now the fixed deposits have increased by £9,500,000 since 1925, while during the same period the free deposits have decreased by £4,000,000. The only explanation for this is that the public prefer to accept current bank interest rates with the security which the banks afford rather than shoulder the responsibility of investing themselves. When the banks lend money out they must, perforce, add to the interest they pay to depositors further interest charges to cover the cost of doing the business and to give them a margin of profit on the transaction, thereby recompensing themselves for the risks run. The present procedure, therefore, results in a higher interest rate being charged to borrowers than would rule were investors possessed of sufficient confidence to make their own investments. In fine, what is lacking to-day is confidence on the part of investors. The fall in land values and the consequent instability of broad acres as a reasonably safe mortgage security has resulted in a declining interest in farm mortgages. For a time town properties benefited by this withdrawal of financial support for the country, but now the building operations of recent years have overshot the demand for town properties and a temporary lull prevails. Broad acres, however, have not yet regained public confidence despite the increased production from the land. Confidence can only be regained by maintaining a continuously increasing output by the use of better farming methods. The secondary industries, too, have suffered a loss of favour and a casual glance at the statistics supplies at least one reason for it. The number of establishments has increased too rapidly, as is revealed by the following table :

The population increase during the period reviewed does not warrant the setting up of so many new establishments. The business must, of necessity be more cut up than formerly and each of the factories has less orders to fill to carry the same overhead. Under such conditions the secondary industries are hardly likely to attract fresh capital, and the position is accentuated by the manufacturers themselves proclaiming with organised vociferation their inability to make profits, in their endeavours to get further protective tariffs imposed for their own benefit. They cannot have their current cry and their credit too. Under such conditions the investor cannot be blamed for not risking his money in industries which are badly organised and consistently talked down by the people engaged in them. Another factor has seriously affected the situation, and that is the continuance of so much State interference in industry. The difficulties created by baaurocratic interference are distressing, adding to the already heavy load of worry for the manufacturers and traders while the ever increasing wages eost in production completes the picture of pessimism which presents itself to the would-be industrialist. What then is wrong with present conditions wherein capital is available for investment and labour seeks being hired: Yet both can find no outlet? The root wrong to-day is that there is no encouragement for anyone to invest his money. Enterprise is not encouraged. It is a sin to succeed. What is needed to-day is encouragement for the investor. He should be given a reasonable chance of profit, some stability of conditions so that he may estimate the future prospects of success, without undue governmental interference, changes in labour conditions and tariff alterations. In short, give capital the liberty to function and an improvement in conditions would be immediately made manifest. The capital is in the Dominion. It is waiting its opportunity to operate and employ people.

Industry. No. of Establishments. 1920 1923 1927 Furniture making 225 269 337 Boot making .. 64 80 81 Clothing & Waterproofing .. . 161 224 229 Printing, etc .. 247 280 344 Biscuit & Confectionery .. , . .. 49 60 79 Hosiery 8 11 19