CENTRAL BANK.

Waikato Times, Volume 110, Issue 18394, 30 July 1931, Page 7

CENTRAL BANK.

NIEMEYER REPORT. PROBLEM OF EXCHANGE. A GOLD STANDARD. (Special to Times.) WELLINGTON, Wednesday. The establishment of a central reserve bank and a gold exchange standard are the main recommendations of the report submitted to the Government by Sir Otto Niemeyer, financial adviser to the Bank of England, as a result of his investigation of banking and currency problems of the Dominion. The report Is a comparatively short one, and' It is understood that Sir Otto recommends that in the establishment of the central bank New Zealand should follow the procedure adopted by South Africa, where great success had been attained. The proposed hank, unlike the Commonwealth Bank of Australia, would not compete with the trading hanks, but, after the manner of the 'Bank of England, would act as a clearing house, and have sole control of the exchange position. It Is understood that the report recommends 'that New Zealand adopt a gold exchange standard. This would practically mean that the present gold reserves held by the commercial banks In New Zealand will be transferred to London, where they will be drawn upon by traders should the exchange rate move beyond the gold points. This transfer would also mean ‘that the £6,600,000 In gold reserves at present held in New Zealand would he lodged to the Dominion’s credit in the Bank of England and would, of course, be interest bearing. Furthermore, the effect would be immunity from any adverse Australian economic influences.

An important function of the bank would be represented in its sole right of note issue and its power to control the volume of credit generally. It would also be responsible for the keeping of the Government accounts, which are at present in the hands of the Bank of New Zealand. As In other countries, the central bank would be free from political control, although It would be a State institution. The report incorporates the dralt of legislation necessary to give effect to the proposals, but it has already been indicated by the Prime Minister that legislation on the subject will not be presented to Parliament this session. However, Mr Forbes may have reconsidered the question since making the statement referred to, and no doubt the Financial Statement to he presented to Parliament to-mor-row night will make pertinent refeience to the point.