DOMINION’S POSITION

Wanganui Chronicle, Volume 74, Issue 197, 21 August 1931, Page 12

DOMINION’S POSITION

BANK CHAIRMAN’S REVIEW

DEMORALISED EXCHANGE THUMBSCREW OF TAXATION LONDON, July 16. Some interesting observations on con ditions in New Zealand were made by the Hon. W. Pember Reeves, chairman of the National Bank of New Zealand, in his address at the annual meeting on July 14. He said tho directors' reasons for reducing the dividend were all traceable to “the serious position’’ m New Zealand. “To the effects of heavy falls in the price of almost every important article of export have been added those of a disastrous earthquake, a demoralised rate of exchange, and the exaction of further taxation by an embarrassed Government,” he said. “The resulting sharp contraction of trade has brought down imports and exports by many millions and depressed every branch of internal commerce. Restriction of Advances “These conditions have been reflected in our turnover, added to which the rates of exchange between New Zealand and London and New Zealand and Australia have complicated business and have been a source of much trouble and some anxiety. We are glad to say that we have been able to supply all our customers’ exchange requirements, and have no reason at present to suppose that we shall not be able to continue to do so. Prudence in face of the plight of the country forced us to restrict advances; indeed, the marked shrinking in the free deposits of all the banks would alone have dictated this course. The widespread difficulties with which our clients, in common with other New Zealanders, are contending, have made concessions to many of them needful, and obliged us to take pre- i cautions in the face of a very uncertain outlook. “You may call this a pessimistic recital. It is not. It is a plain list of hard facts. You will admit, I think, that they justify a policy of more than ordinary caution.” Taxation of Banks “Tho financial troubles of the New 1 Zealand Treasury led the Government last year to make serious increases in taxation,” Mr Reeves continued. “A very heavy hand was laid on the banks; their license fee was increased; their so-called income tax raised by 10 per cent.; and the profits of their note issue, of which tho Treasury was already taking more than half, were virtually confiscated. For the present, the banks continue to provide the currency and have done nothing in answer to the new tax except to reduce the number of 10s notes and to increase their charge for keeping accounts. “Certain people have talked as though the banks had contrived to pass their additional burdens on to the pub lie. This is certainly not the case o far as we are concerned. By far the greater part of the £22,000 additional tax paid by us this year in New Zea land is a net loss to us. When I tell you that the rates ana taxes paid by us in New Zealand amounted this year, to £137.553, you will comprehend the; thoroughgoing fashion in which author-! ity at the antipodes is applying thej thumbscrew.” Government Retrenchment Mr Reeves reviewed the latest bank i ing statistics, remarking that the de 1 cline in free deposits and the increase ( in fixed deposits, some of which have very high interest, explained the bank’s i hesitation to cut down the advance < rate. “A Government that imposes t almost penal taxation on banks and at the same time keeps up the deposit , rate by borrowing huge sums internally ( it 51 per cent.,” he said, “cannot fairly ask the banks in a year when their profits are heavily diminished to make further concessions to the public.” f Referring to the Government's finan j cial programme, Mr Reeves said: —“In r nearly every case the methods adopted f by Mr Forbes’ Government in the way ( of economy, retrenchment and taxation arc faithful copies of those of the Ministries which held office in New Zealand in tho years of depression between 1879 and 1891. They include ■ the transfer of the State railways from . the Government department to a board of control, though the composition of the two bodies then and now is rather different. In each case the old chief manager has been carried on . . . Remembering as I do the effects of retrenchment, taxation and wage reduction in New Zealand between 1879 and 1891, I think we may hope that the result of the process now going on in New Zealand will be to enable the Government to pay its way, and will

also be. of service to many manufac turers and traders, though it will benefit the smaller and middle-cliuss fannervery little. Its first effects may be to depress detail business, and it. will not restore prosperity; nothing but a ri ■ in export prices can do that.” Air Reeves, who has been chairman of the National Bank since 1917, was a member of the New Zealand Parliament from 1887 to 189 fl and Minister of Education, Labour and Justice in the last five years of that period. He resigned to go to London as AgentGeneral, and subsequently was High Commissioner from 1905 to 1908.