STATE BANK.

Wanganui Herald, Volume LIII, Issue 160725, 11 August 1920, Page 4

STATE BANK.

FAVOURED BY' WATTOTAEA COUNTY COUNCIL. At the monthly meeting of the Waitotara County Council yesterday, Cr. Burnet moved the following motion: “That a remit be sent to the Counties’ Conference urging the Government to establish a State Bank.” In support of the motion Cr. Burnet said that progressive bodies are often dependent on the bank for capital, and notwithstanding the quality of the security, which in our case is the rate of the VVaitotara County Council, owing to the close association of banks trading in tho Dominion public bodies are treated most unfairly in the matter of interest. At present all such bodies are paying interest at the rate of 6 per cent. Should they run several accounts, as the majority of them do, the balances on accounts in credit are not set off against the general account, which may be and generally is overdrawn before the end of the financial year. So the position actually occurs of some public bodies having a balance to the good, while paying interest at 6 per cent, on their working account overdrawn. The security of such business is generally, of the highest quality, being in our case the year’s rates of one of the most prosperous communities in the Dominion. As you are all aware, the Bank of New Zealand has given ns notice of an increase of interest to 6 per cent. While this may be a fair charge in some cases, it certainly is not in ours. We have something like half a dozen accounts with our bankers, only one of which is a dbbtor account. The rest are all in credit to the extent of over j£2COO, so that we are in the extraordinary position of paying ,£l2O interest per annum on our own money. I know of other public bodies whose accounts, take in total, are and always have been in credit, and yet have to pay interest at 6 per cent, on their own money. This was not always so. At one time the Borough of Wanganui did its business with tho Bank of New South Wales, who set off the credit balances against the general account, which was chronically a debtor account. A former Mayor shifted the account to the Bank of New Zealand, who refused to do this. This shifting of the account cost the Borough of Wanganui many thousands of pounds. The State Bank is not a new thing. For some years a State Bank has existed in the Commonwealth of Australia, and is an exceedingly useful and very prosperous institution, though I do not think it quite pays the dividends that the Bank of New Zealand does. It has been as great a success as the Public Trust Office and our Government Insurance Departments have been in this country from the very start. The banks trading in the Dominion last year paid huge dividends, from 14 per cent, to 174 percent. Not satisfied with these profits, they propose to increase their rate of interest by another half per cent., while, so far, they make no movement in the direction of increasing interest on fixed deposits, which remain at the old pre-war rates. Unfixed deposits (non-interest-paying money have never been so great as they are to-day. In June last the excess of deposits overadvances was <£19,808,511, nearly twenty millions—icing easrly a record. In spite of this plentitude of money, the banks want more interest. It is said that, to make the scandal look a little more respectable, the biggest dividend payer proposes to water its stock to a considerable extent. Unemployed capital has never been so plentiful in the Dominion. Compared with the quarterly returns of June, 1914, the deposits to-day show an increase of 114 per cent., while the advances have only increased 47 per cent. Tho explanation, of course, is that the accumulated wealth has not had opportunity for employment, and •yet the banks are increasing their rate of interest to local bodies. This is to the distinct disadvantage of such oodies as the Waitotara County Council, who, now that tho war is over, wish to turn their attention to long-neglected roads and bridges. Every financial help in this direction should be given, and if the private banking institutions are not willing to give it the Government should provide a State Bank. The Chairman stated that he had advocated a State Bank for some time. He considered this should not be a party question, and he thought the majority of members of Parliament would favour a State Bank. He quoted figures to show the progress made by the Commonwealth State Bank since its inception in 1912. The bank made a small beginning, and in 1918 the profits amounted to <£775,000. He thought the people of the Dominion should derive some benefit from the profits now made by shareholders of New Zealand banks who were residing in other countries. There was no reason why the outside shareholders in the Bank of New Zealand should not be made to turn over their stares to the Government at fair compensation. Ci. Ross said he was not going to vote for the State Bank, for the reason that only one side of the question had been shown. There was a reason for tho increase in the rate of interest. They could not take much notice of Australian figures, as the finance there had been going back for the past seven years. In New Zealand wages and everything else had gone up, and why should not the interest go up also? The banks had to pay higher wages and more for buildings, etc. The only thing that had been kept down in New Zealand was the interest on- money, and -hat was due to the commandeer of our produce. This year matters would be on a different basis, and they would have to go to the banks for advances against produce. He did not think that 6 per cent, was an unreasonable rate of interest. He thought, also, that bank shareholders who were game to buy shares years ago, when worth practically nothing, were entitled now to some benefit. An increase of half per cent, in five or six years was hot very much. When produce drops, land will also drop, and then the bank securities may not be so good. Mr Massey had told them that if they had a State

Bank they would not be so well off. This was borne out by the fact that various other affairs controlled by the .'Government had been a failure. The only institution that the Government had mad- a success of was the Public Trust. If the State Bank could give more interest the public would patronise it, but if not then they would go to the other banks. He considered that private. individuals could manage their affairs better than the Government, and there was too much appealing to the latter source nowadays. Cr. Burnet said it was not a matter of 6 per coni., but 8 per cent., as the Council was paying interest on a lot of its own money. He considered the Bank of New Zealand was responsible for a lot of the trouble, and he was going tc move later, by way of protest, that the Council move its account to some other bank. Many private people had two accounts, and the credit of one was set off against the other, and ho failed to see why the banks could not do this with local bodies. Cr. Ross said be would favour the articles of the hank being altered. The motion was then carried.