The Wanganui Chronicle WEDNESDAY, OCTOBER 14, 1931. THE BANKING RETURNS.

Wanganui Chronicle, Volume 74, Issue 243, 14 October 1931, Page 6

The Wanganui Chronicle WEDNESDAY, OCTOBER 14, 1931. THE BANKING RETURNS.

JTIE quarterly banking returns reveal no unexpected feature

The adverse exchange situation and the low prices brought by the sale of our primary products have reduced the quantity of business to be done within the Dominion while lower prices have also been a contributing factor. It is not surprising, under these circumstances, therefore, to find a contraction in the note issue, a decline in the free deposits and a contraction in borrowings from the banks, both in the form of loans and in the discounting of bills. Comparing the quarterly averages, ending September 30 of this year, with the averages of last year the following decreases are registered. £ Free Deposits decreased by 4,212,510 Advances, decreased by 1,175,836 Note Circulation decreased by 454,633 Discounts decreased by 397,508 The decline in discounts is but a reflex of the decline in importations, which dropped from £29,637,230 during the eight months ending August 1930 to £16,963,547 during the corresponding period of this year. The contraction of the note circulation can be regarded in part as an index of the lessened spending power of the public; but it must also be borne in mind that the reduction in prices gives less money more power, and there is in consequence a. lessened need to spend as much for the consumption of a year ago to be maintained. The note circulation fell from £6,039,175 in September 1930 to £5,584,542 this September, a decline of approximately 8J per cent, whereas the all-groups combined retail price index fell from 980 in August 1930 to 892 in August of this year, again a decline of about 8| per cent. The current note circulation, therefore, is sufficient to sustain the same degree of consumption as the larger note issue of a year ago . The free deposits have declined from £20,803,171 last year to £16,590,661, a decline of £4,212,510, or roughly 20 per cent. This percentage of decline does not bear the near relationship which exists between price levels and the note circulation as revealed above. This, however, is understandable in that the cheque transactions are likely to contract considerably owing to the increase made in banking charges during the year, which no doubt, has resulted in the closing of many current accounts. The chief cause of the decline in the total of cheque transactions however, is to be found in the decline in the property market. There are fewer transactions in shares, real estate, or mortage advances, and repayments. These transactions are, of course, settled by cheque. The decrease in advances from £51,399,840 last year to £50,244,004, a shrinkage of £1,175,836, is a very healthy sign. The falling off of business generally, naturally accounts for this in some measure, hut it indicates that a more solid basis obtains to-day than was th« case a year ago. The period of liquidations is drawing to a close, and although the farming community may require even further assistance, yet the fact that advances have declined by over a million sterling reveals that the banks have the credit situation more in hand than a year ago. The fixed deposits have again shown an advance which again is not surprising. Fixed dcsposits have moved from £31,747,268 last year to £34,180,556 this year, an increase of £2,433,288. The unwillingness of overseas merchants to withdraw their funds from the Dominion while the present adverse exchange rate prevails doubtless accounts for some of this increase. The disturbed state of the industrial and political situation are also factors which induce resident investors to place their money on fixed deposit, rather than in other directions. When it becomes apparent, however, that prices have ceased to fall and a greater degree of stability is present, these fixed deposits are likely to be withdrawn and placed in industry and commerce of a more venturesome nature.