The Wanganui Chronicle. MONDAY, NOVEMBER 28, 1932. THE BANK OF NEW ZEALAND’S DECISION

Wanganui Chronicle, Volume 75, Issue 281, 28 November 1932, Page 6

The Wanganui Chronicle. MONDAY, NOVEMBER 28, 1932. THE BANK OF NEW ZEALAND’S DECISION

pH E directors of the Bank of New Zealand are to be eon

gratulated upon their decision not to misuse the exchange rate to clumsily confer benefit upon exporters of primary produce. The bank directors have refused to depart from sound banking principles even under pressure and in doing this they have done a real service to the Dominion. It is a fallacy to believe that the banks can prosper as the community becomes impoverished. Banks make their profits in good times and their losses are increased by bad times. These institutions, more than any others, are bound to the commonweal and banking interest and common interest cannot revolve in opposite directions. In their deliberations therefore, the directors of the Bank of New Zealand must be regarded as custodians not only of the bank’s interests but also of the interests of the community as a whole. The community interest is safeguarded in the case of the Bank of New Zealand in a more than usual degree because the majority of its directors are appointed, not by the shareholders, but by the Government. The bank’s decision in the matter of the exchange rate, therefore, must not be considered as purely opinion of a private concern, but that of preponderatingly a quasi public body. It will occasion no surprise that the bank’s board has addressed itself to the wider subject than purely the question of the rate of exchange. It is recognised that the primary producers of the Dominion do need assistance at the present time, and the board has come to the same conclusion as the Chronicle that this could better be provided by a bounty method. The objections to the bounty schemes have been pointed out in these columns recently and these are real objections, and the Government’s decision not to initiate a straight-out bounty or bonus scheme for the exporters can be appreciated. The alternative scheme which the bank has advanced, namely, to pay the local rates of all farmers to local bodies for the coming year and to waive its claim for land tax is a proposal which merits full consideration. Indeed, in view of the willingness of the Bank of New Zealand to find the sum of £2,000,000 which it considers would be involved, almost makes the proposal certain of acceptance. The advantages of this latter proposal may be set forth as follows: 1. The total cost involved can be estimated fairly closely. 2. The cost of collecting the money in the first instance is nil. There are no services to be performed by Government officials as in the case of an export tax, nor by the distributors of goods as would be the case were an artificial exchange rate adopted. 3. The distribution of the bonus could be effected with a minimum of friction or cost. 4. The recipients of the bonus would be fa.irly equably treated among themselves, in that as interest burden and local body rates and land tax comprise the major load which the farming community is carrying, and the farmer with the largest amount of land, measured in value, is to-day in the position of needing the most assistance. These remissions will relieve the pressure where the shoe pinches the hardest. 5. The help proposed dovetails in with the relief which is being granted by the Mortgagors’ Relief Commissions. These commissions ensure that the man on the land has sufficient of the farm’s income allocated to him for the purpose of keeping the land in good heart. The commissioners first enquire what sum is being spent on fertiliser, how much on fencing, and how much is being spent on grubbing and gorse-cutting, and they make sure that the provision is adequate against the deterioration of the farms as producing units. It is recognised, however, that something more needs to be done for the farmers. Illis something more, which the banks propose, is a direct benefit to the farmer and need not be passed on to sections of the community for which the benefit, was not intended. Its directness is its main virtue. That the scheme is a bonus scheme cannot be denied, and it still has the disadvantage of holding up the liquidation of non-economic propositions. It should not. therefore, be entertained as a proposition which shall last for any considerable time. Its duration should be fixed definitely so that, its temporary nature shall be apparent from the inception, and that liquidations, where necessary, shall not be held up. The bank’s opinion evidently is that the scheme of relief in this regard should be limited to one season only, and there is very good reason for this, because it is an eating up of capital as though it were income. The fact that all of these bonus schemes involve the consumption of capital and thereby leave the Dominion poorer must be kept steadily in view.