Western Star WALLACE COUNTY GAZETTE. TUESDAY, JUNE 11, 1935. THE RESERVE BANK.

Western Star, 11 June 1935, Page 2

Western Star WALLACE COUNTY GAZETTE. TUESDAY, JUNE 11, 1935. THE RESERVE BANK.

In a clear and comprehensive way Mr Leslie Lefeaux, governor of New Zealand's Central Bank, recently explained the position in regard to this '[newlyestablished institution. The occasion was the first ordinary general meeting, bo that interest was naturally keen to see what progress had been made. In 1930 Sir Otto Niemeyer, an official' of th© Bank of England, went to Australia, to advise the Commonwealth Government upon financial and economic policy.. The New Zealand Cabinet took advantage of the opportunity and invited him to come to this dominion and report upon its banking and currency system. Among other things, he rocominended the creation of a central or reserve bank. Its aim would be to manage the note issue, accept responsibility for the rat« of exchange, hold the reserve balances of the trading banks, and, keep the Government account. The! report declared also that it would be able to exercise a gradually increasing influence over the credit situation in New Zealand, and by timely action minimise tho disturbances which are liable to arise out of an unregulated or) imperfectly regulated market. The Government was favourably impressed! with the report, and in a time of dis, tracting economic conditions, and in the' face of considerable opposition, itt pressed the matter to a successful con-< elusion by the establishment of the Reserve Bank. It was argued by its opponents that New Zealand's financial transactions were not sufficient to warrant th© establishment of such a bank. Its advocates claimed that the result would be an institution having; a national policy and affording independence in the financial market of the dominion. One effect of the establishment of tb« Reserve Rank was explained by the Acting Minister of Finance a few days ago. Mr Hamilton remarked that dur?ne the vear all operations under the* Ranks Indemnity (Exchange) Apt were confided. the s"S«ense account wis *~+: r;r it<,i.*,| nnd -11 t>».o T-easury b'lls nr-nn e ~,'ff[ were nnid off. As n res"lt the o"blic debt decreased during the ve*.r bv over £20.000.000. In his ad,}rfii=s \r r T>fpinx said he recanted it' .-is TrVblv desimWe in the dominion's interests, now that the bank was in operation, that all controversy regard- '

ing its establishment should he dropped, and that efforts should be direct-* ed to making it a complete Buccess. This is wise counsel that will no doubt b e generally accepted. Mr Lefeaux sounds a word of caution against undue* optimism about the Central Bank's capabilities. He put the position in a nutshell when he said there was a definite limit to what could be achieved by monetary action alone. It was a reminder that this country's prosperity in the ultimate depends upon successful production and marketing overseas. What the Reserve Bank wants to do is to help in this matter by a sound monetary policy framed in accordance with the highest modern banking principles. Mr Lefeaux dissipates the idea that has been advanced that th e institution is subject to pressure or influence from the Bank of England. He also countered any suggestion of political bias, remarking : "The objective of the Reserve Bank is the promotion and maintenance of the economic welfare of the dominion as a whole, and not merely the sectional interests of any one particular class or group."